Financial difficulties are the cause of many businesses closing. In the busy day-to-day of running a small business, it can be easy to pass off a warning sign of financial stress as something else. However, it’s important you don’t, because acknowledging and addressing any red flags early on may save your business. Here are four signs your business may be under financial stress.
1. Cash flow is a problem.
You are running behind on bills and invoices. Your outgoing costs exceed your incoming revenue. You’re struggling to keep on top of business running costs like rent and staff wages. These all point to a potential cash flow problem in your business.
2. Sales are down – and have been for a while.
All businesses have occasional quiet periods where sales are a little lower than usual. But beyond that, if your business’s sales and growth have been stagnant or declining for a long and ongoing duration, it’s likely to be more than ‘a quiet patch’.
3. Your business is stagnant.
Are you acquiring new customers? Or gaining return or referral business from existing ones? Are you having to cut back staff hours or aren’t hiring people to replace those who leave? Are you evolving your services to meet the changing needs of customers? Answering ‘no’ to most or all of these questions is indicative of a stagnant business that isn’t growing.
4. Your customers aren’t happy.
Whether it’s more negative (than positive) online reviews or customers wanting refunds or expressing their dissatisfaction with your business, a growing number of unhappy customers obviously isn’t a promising sign. In addition to losing existing and prospective sales, negative feedback and reviews, if left unaddressed, can have a flow on effect that can contribute to or exacerbate financial stress.
What to do if you see these warning signs in your business.
If you’ve identified some of these warning signs in your business, the first thing to do is take action by implementing steps to address them. Take a good hard and honest look at your business and identify the areas that need work.
Ways to address these warning signs:
- Working with professionals, such as an accountant and a financial or business planner, to see what you can do to get back on the right financial track. With their assistance, you can learn from the past and implement practices to better protect your business’s future. This may include addressing how to improve your cash flow, clean up your credit rating, manage your debts, and decrease outgoing expenses during quiet periods (or until business picks up). Your local state government will offer some kind of small business support and advisory program, usually at a subsidised rate. For example, the NSW Government offers Small Business Diagnostic made up of a number of ‘health checks’ for aspects of your business. The answers create a report that shows you any areas for improvement and the advice is highly subsidised.
- Talking to your employees. This may help you to address issues, such as morale and retention, as well as gaining an insight into the firsthand feedback your staff are receiving from customers.
- Assessing the feedback and information from customers and staff and looking at ways to mend issues and ensure that they don’t continue to occur in the future. This may also involve well developing and implementing processes and procedures on how different customer service situations should be addressed.
Don’t ignore the warning signs and don’t put off taking action. Action is essential when it comes to protecting the financial security and future of your business.
Talk to Prospa about how a small business loan could help your business.