Signs of a Drowning Company

Few business owners actually want to shut down their operations. Yes, sell. merge, perhaps. I doubt it, so shut it down. In actuality, more than half of all newly founded businesses in the United States and Canada fail within the first three years. This means that you must be aware of the situations in which it may be wise to give up and go.

You're at risk of experiencing it. I have personal experience with it, therefore I can talk from a wealth of knowledge. Accepting the fact that you must be ready to shut down your business when you start one is maybe the toughest challenge to overcome. A formula or schedule with a set of criteria to ascertain whether the objectives you believe are vital for survival should have been included in your initial business strategy.

Knowing when it would be appropriate to shut down a firm can often be a particularly difficult decision for a small business owner. Large organizations not only have substantially more resources to deal with potentially catastrophic issues, but the entrepreneur's lone wolf attitude that makes them successful can also make them blind to reality. An entrepreneur must approach running a business with the mindset that "I am delighted and I will succeed," but they must also be conscious of the risk that the business may not survive.Because of the dedication and hard work required to give their business any chance of success, a true entrepreneur frequently develops an emotional attachment to it. Unfortunately, the emotional attachment may also make them unable to distinguish between a stormy sea and a sinking ship.

Remember the following things. They don't necessarily indicate that the ship is sinking, but recognizing them could help you stop a terrible development from sinking the ship you've fought so hard to keep sailing full-steam ahead.

Money Flow. You are fully aware that in order to stay in business, you must make a profit. But go one step farther and pay close attention to your cash flow. For instance, it may be an indication that things are too tight to carry on for very long if you find it difficult to balance your income and outlay costs on a monthly basis. Keep an eye out in especially for cash flow issues that continue on for several consecutive months. This could be the beginning of a severe downward spiral that needs to be stopped right now, or it's time to flee.

Quality problems. Numbers can be a strong indicator that a company is really having trouble. Signs that won't ever appear on a balance sheet are just as striking. An increase in consumer complaints, for instance, may portend issues with goods or services that could ultimately cause a business to fail. This is especially concerning if you've previously made actions to try and fix the issue. A potentially catastrophic fault may also be indicated if you are losing clients or, on the other hand, see that your current customers are decreasing their business. Again, this is reversible, so don't give up on quality problems right away.

lies told to oneself. Being upbeat will help you as a manager or business owner get through the inevitable hard times. However, that must never descend into self-deception or being untruthful to oneself. Little lies you tell yourself grow into big lies, leaving you unable to assess your true position.

I'll use one of my own experiences as an example. I once hired a reasonably highly compensated worker. He had a broad range of experience, many connections, and seemed to be well worth the investment.Sadly, I mistakenly believed that I could turn a technical professional with project management knowledge into a consultant who could help me with business. Let's just say that it was never going to happen, but I continued convincing myself that he had the talent but is simply taking his time to understand it. My little white falsehoods to myself grew into a few major issues after a year and a half of a lot of wasted time (I redone much of his work) and money (I took a salary cut in the hopes that this individual would eventually bring me a lot of business as promised). Avoid falling into this rut.

On paper lies. Falsehoods that only appear in your internal dialogue are one thing, but fabrications that appear in paperwork and other firm materials raise the alarm to entirely new heights. Ever hear of WorldCom or Enron? A genuine warning that things might be beyond saving is when a corporation falsifies its financial data in an effort to keep things appearing optimistic. If you do this in order to deceive a bank or another lender, you will be caught. You won't only lose the money; you risk being blacklisted by anybody who finds out about your behavior, especially if it appears on a credit report.

a lot of turnover. Employees are frequently better able to recognize a failing company than the owner. An unexpected mass exit of workers at once is a hint that this might be the case. If this appears to be the case, inquire during exit interviews as to whether they have any worries about the company's long-term future. Occasionally, this can just be a cunning move by a cunning rival to steal your finest employees, or it might just be rumor mill panicking people over unfounded fears. With the use of exit interviews and perhaps some department meetings on employee concerns, learn for yourself.

extreme price reductions. If you find yourself decreasing prices more than you anticipated, it suggests a level of desperation that could prove fatal - if only because you're reducing your profit margin.

using plastic for payment. If you're using a credit card to cover payroll, you're merely increasing your debt load, which will eventually entrap you. Don't use a credit card to pay your payroll. If you are not trying to intentionally dig yourself into a financial hole, a Visa card is not the solution to making payroll.Discover the precise cause of your financial hardship. tardy payers? not enough work? Is R&D spending too high? There are several possible causes, and each one can be resolved in a different way. The important thing to remember is that, when you are ready to hire staff, you should secure a bank line of credit that, if possible, will cover two months' worth of wages, benefits, and taxes. a minimum of one month's worth.

either too little or too much enjoyment. Additionally, keep an eye on yourself. If your job is killing you—causing you to have difficulties sleeping, lose your temper, and the like—that may be a clue that the company is not worth maintaining afloat.When you first started the business, do you remember how eager you were to get to work each day? You can't expect to still be as passionate about anything in a few years, but you can count on waking up in the morning to check on the progress of the money machine you built yourself. You entered it in search of autonomy, financial gain, creative expression, or something that made you feel good about yourself. You might have a problem on your hands if you're not even slightly excited about a new workday.

 Knowing the warning signals of trouble may help you stop problems in their tracks. Consult individuals closest to you for advice and counsel, not just to identify potentially fatal errors but also to gain insight that could help you address the issue before it becomes worse. Talk to your accountant, attorney, and advisors. When your company is actually having problems, they may frequently tell you. Without even being active in the business, but just by being involved with you, friends and relatives can frequently spot the signals.