5 Warning Signs Your Business May be Failing


I ‘ve worked with many different types of clients in a variety of industries and there seems to be a few common factors for business failures that can be, or should be, easily avoidable. As a consultant it’s very frustrating to sit back and see a client repeat the same mistakes and slowly watch the company become uncompetitive or irrelevant. Most of the issues have to do with an owner that has just become complacent and not longer willing to change.

If you’re a small business owner/operator then you will likely appreciate these words or counsel and hopefully help you avoid a few missteps. Some of the early signs of business problems are:

1. Slow methodical decline in sales. At first a business owner might dismiss it as an abboration or an industry related decline that will soon, or at some point, turn around. Ignoring declining sales for a period of 3 months or longer is a recipe for continued declines. Managers need to take corrective action soon in order to stem longer term declines. It’s a question of changing your management view from one that is “reactive” to one that is “proactive”. Addressing smaller issues before they become much bigger problems is much easier and requires less effort than waiting until you have serious business problems.

2. Limited or no historical investment in marketing or sales. In an effort to preserve cash or more likely because the business happened to have a compelling value proposition at some point the business did not have to invest in marketing or sales….word of mouth propelled the business forward. In some cases the business was benefiting from a strong base of referrals or repeat business. It’s only when the market dynamics change that the business realizes that it has very little brand equity beyond its immediate customer base. Generating new sales opportunities becomes more challenging when you realize the business has lost touch with the market. Developing and launching new products is a cornerstone to maintaining business relevance and giving the market a reason to keep your business top of mind.

3. The business owner/president does not communicate well or at all. One of the cheapest and most effective ways to improve business performance is to have open communication with your employees. When the boss stops communicating that’s when things start to go very wrong. Employees are left to draw their own conclusions about things, no information is shared, decisions start to get made on a tactical versus strategic basis. Some business owners are reluctant to share company information (e.g. sales or financials) with employees and that’s short sighted. The more your employees know what you are trying to achieve the more likely the business is to achieve those goals.

4. There is no financial planning or formal financial management in place. You’ve heard the phrase before….”cash is king” and more so in small/mid sized companies. Most small and mid-sized companies I’ve worked with spend more time managing or focusing on the sales/revenue line than cash flow. More often than not I’ve uncovered that there is no budget or forecasting done to guide the business in their decision making. Investments are made with very little insight on the actual return generated or with a financial target in place to keep the business on track. An annual budget should be prepared at a minimum to guide the business.

5. Waiting too long to take corrective action. Ignoring the warning signs and expecting business results to improve on their own is often a recipe for disaster. It’s much easier to turn a bad situation around when there is still the capacity for the business to make investments. It’s an entirely different set of circumstances when the business is now struggling to break-even from a cash flow perspective and needs to consider terminating employees. In many cases a business review can be completed that provides a comprehensive diagnostic of the business identifying key issues and opportunities for renewed growth. A business review is a relatively low cost diagnostic tool that helps keep a business on the path to continued growth.

I have often said that when times are good and the business is growing you could put a chimpanzee in the corner office and still grow the company but when times are tough you need a tiger in the CEO’s office who can make tough decisions. I prefer the chimpanzee management approach and to leave the tigers to run the competitors business.



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