All businesses start with a lot of excitement and expectation on the part of the owner and partners. However, it’s not feasible to depend on hopes and speculation on the long run. A good number of startups and small businesses do fail. This is not necessarily because the idea begging the business is bad, but is mostly due to bad management and terrible financial decisions. If your business runs out of money, your company is done. On the positive side (yes, there is one), you can tell in advance if your business is about to run out of money. Here are five indicators you should keep an eye out for:
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1. Small Returns for Sizeable Investments
Have you spent thousands of dollars on new equipment or software only to see returns in measly hundreds of dollars? If you are spending more money and seeing only a fraction of that as returns, that’s a good indication your business is in bad shape. Whatever you invest in with your business should return in equal, double or ideally triple amounts. Of course, some business investments are bound to end up failing. If your business has made several bad investments, it’s time to make a rapid course correction. If it’s equipment, you can return them or resell. What’s most important is that you plug the cash that’s going down the drain.
2. Insufficient Cash Flow
Has it been a while since your business made enough money to cover all the expenses and then turn a profit as well? Then you have a problem. Your cash flow, obviously, has to be more than your company’s expenses. If your cash flow is just meeting the expenses, then your business is failing. Signs of lack of cash flow include overdue bills, struggling to pay essential business costs, falling behind on paying employees or contractors, and so on. A sensible business must have capital at least twice the amount of total monthly expenses. This prevents the business becoming suddenly insolvent.
3. Your Company is Selling Generic Products
Is there anything distinguishing your products from competitors in terms of features? Is your product the same as dozens of others on the market? That means there’s nothing unique about your product, and your business is in a vulnerable position. Generic products never really appeal to a niche segment of the market. You need loyal customers to stick with your products. Otherwise, customers can easily go to a competitor and you will be out of business.
4. Horrible Customer Satisfaction Numbers
If customers are not happy, your business will not make it. It’s important to keep customers happy in today’s market where anyone can post an online review. If customer surveys and online reviews for your business are consistently on the negative side, then your company is in trouble. Your business will eventually stagnate as potential customers are discouraged to purchase from you, and returning customers dwindle.
5. Lack of Green Practices
Green practices, like minimizing paper use and solar power, are not just promotional gimmicks. They can save your company operating costs. Also, customers are increasingly purchasing from brands that are genuinely green for a variety of reasons. Lack of green practices could cause your business to pay higher energy bills, lose potential customers to competitors and face regulatory hurdles.
Your business should really avoid all of the above to stay afloat. It’s important to spot the problems and weaknesses early to manage the damage. Finally, if loss in inevitable and is too much to manage, you should immediately seek help from experts like BLG bankruptcy. Legal professionals will help you mitigate and recover from business-related financial losses.
About Carson Derrow
