No new business venture sets out to fail, but there are a number of common causes of failure that could befall any business. Some factors are environmental or beyond reasonable control but most can be remedied if caught early enough. Any responsible company director or small business owner should be aware of the signs so they can change their fortunes early before they are faced with dissolution or insolvency. Take note of the following warning signs:
Cash Flow Problems
Cash flow – that is the money coming into a business may have certain months that are stronger than others due to the nature of the product of the service. A business must be able to identify that they have enough cash flowing in to be able to pay bills, creditors and staff on time. If you are regularly unable to cover costs and not just in an expected or seasonal deficit period, it indicates that it is time to look at the business as a whole to identify the specific reasons for the cash flow shortage.
Consider cash flow forecasting to better understand your financial outlook. This will help you pinpoint problem areas to be addressed. Consider also alternate means of financing your businesses without reaching the limits of your borrowing capacity.
Declining Sales
The single biggest cause of business failure is lack of sales. Success in business can be broadly defined by achieving increasing sales year on year. If sales begin to decline or even plateau, it is time for a business to take a fresh look at its marketing strategy. Re-establishing your product or reinforcing your message to customers could persuade them back. Having a general awareness of consumer trends would also help a business to decide if it should update its offerings.
Inexperienced or Poor Management
Behind a successful business is a strong management team, taking the lead on decisions and strategies to build staff and customer confidence. Weak or inexperienced management left to ‘fire-fight’ issues like staffing and creditors on a daily basis is a sign of possible business failure.
To stop a poorly managed business slipping into insolvency, help should be sought from professional accountants or a licensed insolvency practitioner who can signpost areas of improvement to focus on.
Loss of Key Customers
Relying too heavily on one or two key customers for the majority of revenue is a high risk approach to business. The circumstances of others cannot be easily controlled nor can the superior offering of your competitors if this is what proves to be the reason your customer takes their business elsewhere.
Your business should have additional sources of finance should they suffer the loss of a key customer to buffer the financial repercussion of this. Your business should also be looking to the competition to ensure you are continuing to meet the needs and expectations of those valued customers.
If any of these signs are ringing true of your business, the next step should be to seek expert help. If you would like to seek business recovery advice, contact Voscap today on 020 7769 6831, or email team@voscap.co.uk, to speak to one of our business recovery specialists.
