Financial troubles typically don’t happen overnight. Sure, a bad investment can derail your finances swiftly and significantly, but most financial trouble starts small. By paying attention to the following warning signs, you’ll be better prepared to protect your business from serious financial ruin.
Are you balanced?
When the money you’re spending to cover operating costs starts to exceed the amount of revenue your business is generating, your business is slipping into an unbalanced state. To find out exactly how the numbers are adding up (or not), Investopedia writer Ben McClure recommends starting with a thorough review of your business’ cash flow statements.
“If cash flow stays negative over a sustained period, it's a signal that cash in the bank could be running low, so also keep an eye on changes in the company's cash position on its balance sheet,” he writes. “Without new capital from equity investors or lenders, a company in this situation can quickly find itself in serious financial trouble.”
Are outside forces threatening your business?
Sometimes the root of your business’ financial troubles isn’t internal. Outside forces such as an unstable economy, consumers’ fickle interests or a crowded marketplace can destabilize your business’ financial health, adds McClure.
Do you have tunnel vision?
Even if the product your business creates or the service your business provides is unique, your customers will have needs and wants that change over time. What works for you now might need to be tweaked tomorrow or in the future in order for your business to stay competitive in the marketplace. In other words, you don’t want your business to become complacent so that it ultimately fails, as Blockbuster did, according to founder of Calendar and Entrepreneur VIP contributor John Rampton.
Is your business buzzworthy?
Constant communication with your clients and customers is a sign your business is flourishing. If the talking and listening seems to be dwindling or has completely ceased, it’s a sign that your business may be floundering, according to Rampton.
“Either you’re not actively engaging them or they just don’t have an interest in your products or services anymore,” he writes.
You should also pay attention to what your customers are saying about your business on social media. If they’re not responding to your posts, interacting with your outreach or leaving reviews, it’s time to focus on increasing your social media engagement, notes Rampton.
Is your staff jumping ship?
Whether you have two employees or 100, a dedicated team of professionals is crucial to the success of your business. If you’re struggling to fill positions or retain employees, your business is suffering.
“Sometimes employees realize that there’s a problem before you do. Whether it’s as obvious as not getting paid, or subtler like no longer believing in your business or frustration with management, you need to get to the root cause of high employee turnover,” advises Rampton.
By being diligent about your business’ bottom line, staying aware of negative forces that can impact your business’ performance, changing with the times, listening to your customers and investing in your staff, your business has a better chance of staying out of financial trouble.