Five warning signs your business could be in trouble
Business in Touble?
Stressed and worried?
Fearing for the future?
As it is written on the Hitch Hikers Guide to the Galaxy-
The sooner you act the better!
Sit down and be completely honest with yourself about the state of the business.
Now make a list of the top 5 priorities.
And now as they say in the movies - Action!
Change is hard but inevitable. The sooner you not only embrace it but make it your passion the easier it will be to grow your business.
Five warning signs your business could be in trouble
1. Unable to pay your debts or keep up with your creditors
If your debts are mounting debts and you're juggling your cash. Fobbing off one supplier to pay another. You are in trouble and the sooner you admit it and start the change the easier and quicker it will be. Don’t bury you head in the sand hoping it will get better, it won’t! unless you take action.
2. Poor profitability
If your profit is reducing – your business could be on a slow downward spiral. Or you are making a lost continually. Make sure your costing things correctly and completely its amazing how many people forget to factor in things like, condiments and seasonings. Adjust your prices as necessary.
3. Inadequate financial records
Financial records are the backbone to your business. Make sure you keep your records tidy, clear and up to date. Make sure you analyse it weekly and monthly to make any adjustments quickly.
4. Continually replacing staff
If you have a high staff turnover, it is costing you more than you think. It costs on average £1500 to replace a low skilled worker with advertising, interviewing and training. Make sure you look after your good employees but also make sure you fire as quickly as possible the bad ones.
5. No access to finance
If you don't have access to finance when you need it – this could be the start of the end of your business. Keep good record and talk to your partners/bank/investors as soon as the problems start.
Getting your business back on track doesn’t have to be done alone there is plenty of support out there!
Don’t be afraid to ask.
Don’t worry many businesses suffer these but all you need to do if unsure how to continue is ask for help.
Follow these suggestions and start to improve your business.
1. Make sure you have a good filing system in place that makes it easy to find invoices, bank statements and all the information you need to keep your financial records up-to- date.
· Set aside time each week to update the financial records and review them – perhaps on the quiet trading day so you won't become distracted.
· It's critical to keep your records up-to-date and monitor them regularly – make sure all your invoices and payments are entered weekly into your financial system.
· Review your profit and loss statement monthly.
· A cash flow forecast monitors the cash position of your business, and this should be prepared at least monthly – doing weekly forecasts will show you what payments need to be made, and where the money is coming from.
2. Think about ways you could increase cash flow, such as:
· preparing weekly cash flow forecasts to understand what has to be paid – and when it's due to be paid
· having solid procedures in place for collecting outstanding debts from customers – and stick to them
· talking to your bank about putting a temporary loan in place – such as an overdraft
· prioritise your payments, rent/mortgage, taxes and loan repayments need to be made.
· Do you have stock or equipment that isn’t used that could be sold to free up cash.
3. Start to monitor profit, identify issues regularly and consider areas such as:
· gross and net margins – check your stock prices and on costs and review expenses regularly to ensure that you are passing on any increases to your customers if possible
· sales/advertising/marketing – do you have measures in place to retain and attract new customers, and are they working?
· if you're offering discounts, your profit will be impacted – look for alternative ways to offer extras to your customers, such as after sales service or discounts for volume based sales
· review the productivity of your staff and your rosters – make sure all of your staff are fully employed during their rosters.
· Review your opening times are you making the most of the time available. Could you cut opening hours to save on staff and utility costs.
4. Having a finance facility in place that's available when finances get tight is a good contingency plan, so think about:
· obtaining a finance facility when the business is showing good profit and cash flow
· developing a good relationship with your bank and keep them informed on how the business is going – so that if you need to approach them for finance they'll l be well informed on your business operations which may assist in
· extending supplier terms – these are effectively an interest free loan
· monitoring cash flow through forecasts so you can identify possible cash flow shortages before they happen – and take action to rectify this before it happens.
5. Think about ways to reduce staff turnover, such as:
· having a recruitment plan in place that outlines the attributes your staff need to meet, such as any qualifications, flexible to working hours, being a team player – invest some of your extra time at this point to ensure you employ the right staff for your business.
· being an employer of choice – provide great support and training to your staff and the word will get around.
· involving staff in managing the business – you'll get more commitment when your staff have a say and a reward in your success.
· making sure the culture within your business provides the types of rewards your staff are looking for.
· Don’t be afraid to fire underperforming staff immediately they are costing your business.