Is Your Business Failing?
According to the U.S. Bureau of Labor Statistics, only half of small businesses survive five years or more. So how do you increase your odds? Recognize the signs while there’s still time to act. Here are three warning signs that your small business may be failing (and what to consider if you see them in your business).
Reason #1: Ignoring the unexpected
It’s common for start-ups to operate on thin margins. So the loss of a key customer, a price hike by a supplier, or a new competitor can have a significant impact on cash flow. Without a cushion, some businesses may not be able to weather these bumps in the road.
Idea: Make contingency planning part of your overall business strategy. That includes cash reserves or access to additional funds. Some businesses get a line of credit that provides the cash needed for unexpected expenses.
Reason #2: Focusing on today at the expense of tomorrow
It’s easy to get caught up in the day-to-day operation of a business. But too much of that is like driving down the road looking at the dashboard. Sure, you’ll know how fast you’re going but you’ll miss what’s up ahead.
That’s why you want to take the time to do some business planning. Take a look at your internal and external environment to identify opportunities and threats. Then set goals and measure your progress regularly.
Idea: Consider getting an outside opinion. Many communities offer free or low-cost business consultants. Consult the map on the Small Business Association (SBA) website to locate a program in your area.
Reason #3: Exercising passion without cents
Ever find a fantastic new restaurant only to discover it was closed the next time you wanted to eat there? A chef who is passionate about her product will attract customers but unless she manages the dollars and cents, the business may not be around to serve it up.
It’s important to account for the numbers behind your business. How does revenue compare with expenses? Do you have adequate cash flow to meet expenses? Are you on track to meet your sales goals (assuming you have some)? This information will help you make better decisions.
Idea: The SBA offers a free online course on business accounting basics. Whether you do it yourself or hire an accountant, it’s important to understand the numbers that support your passion.
While half of small businesses fail within the first five years, the other half continue to thrive. Recognizing the signs of potential trouble will help to make sure your business is around for the long-term.