Just like an economy faces both boom and recession, the business does the same. Whether you have recently stepped into the business world or you are a bigwig, dynamic nature of the business can come in the way of growth.
It feels good when cash is coming in, investments are growing, and you are building a brand, but not all days are the same. Sometimes business goes downhill. Debt quickly adds up, you start losing the demand for your product, and your company begins to run on empty.
If it continues to happen and you do not take the lead as quickly as possible, your business will come on the verge of failure. More than 50% of companies, especially start-ups, collapse before they reach even the breakeven point as they fail to detect the warning signs lurking like a cloud. If they identify them in time, they fail to take effective solutions to avoid losing ground.
Here are some warning signs and the solution.
Your cash flow stream is very thin
Cash is king to run any business smoothly. As long as you have enough money to meet all your expenses, including debts, your business is in a good state.
However, this flow can be fragile in small organisations. Many start-ups in their first year struggle to maintain cash flows because most of their revenues go in settlement of loans for unemployed with bad credit that they take out to invest in the business after leaving a full-time job.
Operation overheads are generally high for any company irrespective of the size, and it is essential to have enough cash to keep it smooth.
- Prepare cash flow forecast sheet to understand what to receive and what to pay.
- Ask your clients to pay back as it will affect cash flow. If you receive on time, you will be able to pay your suppliers on time.
- Do not take out a loan if you do not need it. Think carefully about the outcome before investing money.
The retention ratio is low
Since most entrepreneurs consider only the cash factor to determine the growth of a business, they overlook the need for talented people.
Every other day new entrepreneurs are joining the market, making the competition cutthroat. It would be best if you have a staff of highly talented people who have the potential to brainstorm new ideas to streak ahead. If best employees are losing your company, it means that they are depressed and unmotivated, and it is the sign that your business is going downhill.
- Understand the needs of your employees. Make sure that you are accessible when they need you.
- Encourage your team to disclose workplace grievances so that they do not feel neglected.
- Introduce fun activities to uplift their mood. For instance, some big companies offer welcoming drinks to employees in the morning before starting work and fun activities on the last working day of the week.
The demand for your product is falling
Customer satisfaction is one of the most significant factors to focus on if you want to retain them, and this is what will lead to maintaining the demand for your product. It means that as long as customers are happy with your product or service, they will keep buying it.
If you are losing customers more than you are gaining, you will see a massive drop in your revenues. Factors that can affect the decline in demand for your product are:
- You are failing to meet customer expectations.
- Poor customer services
- They are getting more affordable deals somewhere else.
- Offer round the clock customer service. Make sure that you immediately resolve their grievances and doubts.
- Study the market before setting a reasonable price for your product or service.
- Keep investing your product by introducing advanced features.
You are not clear with your goals
One of the significant reasons to have a business failure is you do not have clarity of your goals. Once you have set a goal, you need to make efforts into achieving it, but sometimes entrepreneurs set unrealistic goals that lead nothing but disappointment.
- Involve other executives and managers and set business goals. Make sure that every employee knows the destination as well as the direction.
- Set supportive goals, for instance, boost sales by 10% by the end of the first quarter to achieve primary goals.
- Track your performance to see how close you are to your goals.
The bottom line
If you observe any of the warning signs mentioned above, you should immediately take the appropriate steps to get back it on the track. Since things quickly happen, make sure that you get it everything in control before it is too late. Suggestions mentioned above can help you improve the current situation of your business.