What happens when things are not going so well for your business? What are some of the warning signs that you need to recognize immediately so you can do something proactively to right the ship as quickly as possible?
The following are 20 warning signs, in no particular order, that you should be cognizant of:
1. Cash flow is tightening or non-existent.
2. You are concerned about making the next payroll.
3. There is a downturn in sales.
4. Employee morale is down.
5. Employees are leaving en masse.
6. Employee politics are a distraction.
7. Employees may be behaving more territorially.
8. Costs are increasing.
9. Profit margins are eroding.
10. There is more competition.
11. Customer complaints are up.
12. Productivity is falling.
13. You are paying bills late.
14. Vendor credit is drying up.
15. You are receiving collection calls.
16. You are not paying taxes on time.
17. You can’t pay yourself.
18. Inventory levels are rising.
19. You lack direction.
20. If the company is public, you may see insiders selling stock.
What to do immediately
The most important thing is to recognize the problem or problems early on, so you can take immediate corrective action. Knowledge is power, so gather all the information you can to help you avert a crisis.
Answer these eleven questions:
1. How severe is the problem?
2. Can it be fixed? By you?
3. Can you seek help from advisers, consultants, employees or other stakeholders?
4. Can you diversify your customer base?
5. Is there a disruptive new technology affecting your industry?
6. Do you have a 30-, 60-, 90-, 120-day strategic plan?
7. Can you cut costs without impacting your quality and service?
8, Can you renegotiate with your critical vendors?
9. Can you sell assets?
10. Can you shed some office space or renegotiate your lease?
11. Can you refinance your loans, if any?
What to do long-term
If your business is showing several of these warning signs, the last place you want to be is in denial. If you are hoping things will improve, and you bury your head in the sand, you are not facing up to your problems. Consequently, your business will most likely fail.
If you have an employee, no matter how senior, and they have a negative mindset, becoming part of the problem and not the solution, fire him or her.
That will put everyone on notice that you are serious about taking whatever measures may be necessary to turn your business around. What you don’t want to do is drag it out and let employees go, week after week, as you are forced to cut payroll. You don’t need your employees updating their resumes at work, worrying that they will be next and bailing out instead of working hard for you.
It is time for emergency management 101 – to hunker down, look under all stones, cut costs where practicable, and operate more efficiently.
Track your business vitals: sales, cash flow, costs, inventory, etc. Keep the business on a short leash. Monitor your key performance indicators more frequently (you are in the business equivalent of the ICU). Track monthly, weekly, even daily data as needed, to help you regain control.
Be honest with your employees (and yourself) and discuss your game plan to turn things around with their help. Let them know how much you value them. Reiterate that you care about them and their families, though this message should have been ongoing lest they believe you only care because your business is now in trouble.
This may be a great time to bring in a turnaround specialist if you are not sure what to do, or if you can’t do it yourself. You need honest answers from trustworthy sources and someone who understands business.
Stop the bleeding
If you have had it, and you want out, know that this is not the best time to sell. In fact, it is the worst time. You may be tempted to throw in the towel and lock the doors. I hope you don’t.
Know the early warning signs and take immediate corrective action. That way, you are much less likely to end up in a crisis again.
Dennis Zink is an exit strategist, business analyst and consultant, a Certified Value Builder and SCORE mentor, and past chapter chair of SCORE Manasota. Dennis created and hosts “Been There, Done That! with Dennis Zink,” a nationally syndicated business podcast series and “SCORE Business TV” available at Time4Exit.com. He facilitates CEO roundtables for the Manatee and Venice chambers of commerce. Dennis led a SCORE team to create the Exit Strategy Canvas and Exit Strategy Roadmap program that provides a real-world methodology for business equity realization. Email him at [email protected]