Every successful small business has its problems. It is normal to have ups and downs – a sales slump, a few jobs requiring a lot of rework, a sudden increase of employees’ leaving or a week where some machines break down. Short term, stand alone difficulties are just part of being a small business owner. While they are frustrating, they are not fatal.
The trouble starts when they become a pattern – the seasonal sales slump lasts too long, rework and mistakes become normal, there is a revolving door of employees and machines break down every month. Instead of being stand alone problems, they are part of daily operations; and, that is when they become fatal!
Here are 2 big signs your business has crossed the line of having routine problems to having fatal ones.
– Cash flow problems. If you are having a hard time paying employees, yourself or bills you are in trouble. Cash is king in a small business. You can be making a profit, but still not have enough cash to keep the doors open. Learn to read and understand the information your financials contain. They are a valuable management tool which provides facts – not your guess – as to why you are in this situation.
How long have the cash flow problems been going on and why? Who is paying on time and who is not? What are your profit margins? What is the billing cycle? How are the receivables and collections? Where can you decrease costs? Where is your money tied up (i.e. inventory, debt, overhead, salaries, skimming too much, perks)?
What about sales? Do you have salespeople or order takers? Do they have sales goals and are they held accountable for them? Do you need to increase or change your marketing? What are your customers’ perceptions of the products and their quality? Do you know what they think of your customer service? Have clients gone to competitors and why?
– A constant state of chaos. Some people thrive in chaos, but the majority do not. They operate best in a stable workplace, where they can do their jobs without too much turmoil and difficulties. If you go from crisis to crisis and spend most of your time putting out fires you are in trouble. It is time to figure out who and what is causing these problems.
Is it you? Are you trying to do too much by yourself? Does everything have to flow through you? Do you know how to delegate and hold people accountable effectively? How is your time management and ability to prioritize? Do your employees respect – respect, not like – you? Do they listen to you? Is employee turnover too high, and if so why?
Is it someone or something else? Do you have a disruptive employee or group? Is there a manager(s) who is undercutting you? Are your employees really a problem, or do they have valid concerns and complaints that you do not want to face? Do the employees have the instructions, skills, knowledge and tools to do their job properly? What will you do to address these situations?
Small businesses do not “suddenly” fail. There are signs all along the way that identify problems. As the owner of the company, you have the responsibility to figure out whether they are go, caution, or stop signs. Knowing the difference between the three will help you avoid the crash.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: