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10 Signs Of Impending Business Failure

Updated on February 21, 2020
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Ced earned a bachelor's degree in communication studies in 1999. His interests include history, traveling, and mythology.

Ignore these signs at your own risk.
Ignore these signs at your own risk. | Source

You wouldn’t want to think about business failure. Why would you? Business is all about optimism and positive attitudes and motivation.


Well, ever heard that prevention is the best cure? If not, the ONLY cure? Recognising the signs of impending business failure might actually be the only effective way to prevent your baby from going kaputt. Here are ten signs of impending business failure that no business owner should ignore. I wouldn’t state that they are proven. I would instead assure you that over time, they prove themselves true.

1. You have cash flow issues.

Or more accurately, you have little or no cash reserves. All businesses require cash to survive. If you are operating hand-to-mouth, you’re in for big-time disaster. And by cash reserves, I mean money that actually belongs to you. Not money to be paid to someone else soon. Or money you just obtained from a loan.

2. You dread looking at your bank statements.

This is a manifestation of symptom 1. But it could mean other things too. Such as dwindling sales, rising costs, increasing overheads, or some sort of liability that you are paying cutthroat interest for. Whatever it is that’s keeping you away, attend to it right away. With every passing second, more life seeps from your business.

3. You sold the same product for years!

To do so implies so many things. Your product development is non-existent. Your marketing is lacklustre. You’re in a sunset industry. In short, this indicates your overall development is near a standstill. What happens when this evergreen product goes downhill? You know the answer.

You really should be worried if your company is still using these.
You really should be worried if your company is still using these.

4. Your office software is horrifically outdated.

And you keep making excuses till one day, you find yourself unable to communicate with suppliers or customers. For your software is three, four, FIVE versions behind. With software prices so affordable now, there’s really no reason to shun upgrading. Moreover, many software did improve tremendously over the years, vastly simplifying what used to require days to do. My guess is, if you’re opting to forgo all these benefits, you already sense something is wrong with your business. Either you don't have the cash to spare. Or you don't feel the benefits would revitalize your business.

The same applies to office hardware too, naturally.

(To give you an example, I once dumped a printer four years ago for this reason. Everyone was communicating with PDFs, he was still using PageMaker, year 2000 version. This printer closed down shortly after.)

5. Your customer list had the same names for years.

I know of some businessmen who thrived for years with the same customers. When I reconnected with some of these recently, more than half of them announced they intended to “retire early.” The actual reason, after I probed, their anchor customers left or went out of business. That’s what happens when you do not grow your customer pool. You are essentially leaving all your eggs in someone else’s basket. When they go under, down you go too.

6. You have terrible staff turnover.

Staff movement is a great indicator of business health. It is a natural instinct for people to distance themselves from misfortune. If you can’t retain employees, chances are there are several things wrong with your business. Or at least there is the prevailing perception that your business is on the downturn, soon to lead to salary issues, retrenchment, etc.

I’d add that it might be the other way around too. If you find yourself firing people regularly for underperformance, or worse, misdemeanours, it’s high time to review your operations. Something must be sorely lacking somewhere. Left unattended, these issues could easily lead to irresolvable calamities.

7. You fail numerical acid tests.

There are many such tests. A simple asset-vs-liability check is one. Failing any of these is a symptom of impending business disaster. To fail a couple, well …

AND, if you are obstinately refusing to perform these tests, then I think you already know what’s down the road for you.

Knowing how to do acid tests objectively can immediately warn you about business downturns.
Knowing how to do acid tests objectively can immediately warn you about business downturns. | Source

8. You are baffled when reading materials about your industry.

The Chinese Art of War states, win a war by knowing thy enemy. Thus, conquer an industry, or at least survive in it, by knowing the industry inside out. This is not about mastering the latest gimmicks or hacks. It's about adopting knowledge and technology for efficiency. Efficiency that would both keep your competitors on their toes, and prevent them from booting you out of the industry.

9. You despise any discussion of business failure.

It’s bad karma to gossip about the misfortunes of others. But done academically, it educates. If you are uncomfortable with any such discussion, could it be that the topic is cutting too close? Is there something you are subconsciously ignoring when you shun such discussions? Only you know the truth.

10. You simply, simply, SIMPLY, loathe getting to work.

The best of us wake up on the wrong side of the bed once a week. But if day after day you cannot drag yourself to work, something is terribly wrong. As the owner, you know better than anyone else what’s keeping you away. Wake up, figuratively, and do something about it. Or else, there soon wouldn’t be any business for you to trudge to.

Which is the most telling business failure sign?

See results

© 2016 Ced Yong


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