From small businesses to large multi-national corporations, everyone is culpable to failure. Regardless of size, age and market share, if a business isn’t run right it can have trouble, which can unfortunately lead towards a path of insolvency and business closure. The important thing is spotting the warning signs early, often businesses can suffer, because whilst everything is seemingly running smoothly there are fundamental problems not being addressed.
So what are some of the key warning signs which you need to be on the outlook for?
Financing and Cash Flow
These two almost go hand in hand, especially for young businesses just starting out on their venture. If the money dries up there’s not much you can do. You could be making a large number of sales, but if that money isn’t coming in fast enough, cash flow will be a serious problem. When it comes to financing, choosing the right way of borrowing money is perhaps more important than the amount you choose to borrow, repayments can have a massive knock on effect to your cash flow.
Having a solid cash flow plan will help budget for every month and have a plan for the years to come. It will also help you spot if you’re spending too much on rents, suppliers or you it can help you see if you should change the approach you have to accepting payments.
Same old business
Although there is nothing wrong with using the same clients over and over again, relying on them too much can spell trouble. It’s not the route to long term success and if the same clients are the only thing keeping your business going then you could be in serious deep water.
Finding new business isn’t easy and it’s not just something you can pull out of thin air, a business needs to have good marketing and a strong reputation to build up a range of clients. Having a more diverse range of clients also makes it easier to secure further finance deals, if there is ever room for growth or monies needed to purchase new equipment.
Creditors constantly on your back
Having creditors forever sending you reminders of the money you owe is perhaps the biggest indication that things aren’t going to plan. If a business’s outgoing are higher than the incoming revenue, you may look at trying to re-balance the books, however, by doing this you could delay payments to some of your most important creditors.
Naturally this can lead to all kinds of soured relationships with creditors and can put massive pressure on you, as creditors come looking for what they’re owed. They may even resort to CCJs, bailiffs or enforcement officers. Regardless of your cash flow’s health, you should always look towards paying your creditors on time, the only alternative is to communicate your issues with them as best as possible.
Re-financing again and again
Additional finance doesn’t always mean things are going badly. Sometimes you may need extra finance for growth, or even to purchase new equipment. The problem with refinancing comes if you always find yourself in negative credit, just needing that little bit more to get gey by. But this will often put you constantly being further behind on all your payments. Not only will this lead to a bad credit rating, but it’s a big sign that there are further financial problems within the business.
Refinancing can be used efficiently for a few months, if you need that little bit extra for a few months. Invoice finance, bridging loans and commercial finance are there to be used. Bt if not sued effectively and are taken advantage of, you could see yourself in big trouble.
Marketing issues
Perhaps one of the most difficult departments to get nailed down when it comes to maintaining a successful business. Lots of experienced marketers still struggle to get things right and new businesses will often stay away from it or will tackle it from the wrong approach without too much experience. If you can see that your business model is sound and effective, but your marketing simply isn’t working, having a knowledgeable and experienced marketing department could be massively beneficial.
Not planning for the future
When setting up a business, the most important thing to do, is to start with a strategy for where your business is going and what you want to do. A plan shouldn’t just be a guideline, but it should efficiently outline a year on year plan of your business.
If there is potential room for expansion, your plan should show where the additional finance is going to be coming from and how it will be used. If used in the right way, a business plan can be an excellent guide for growth, as well as providing you with achievable goals that you can work towards.