Some important warning signs that can help indicate when a business may face trouble.
1. You Can't Afford to Pay Your Employees
One of the first signs of trouble is when a company is unable to make payroll. There is a definite problem if an employer cannot afford to pay employees on time, and this issue needs serious and immediate attention. An upset or angry staff member isn't good, but multiple upset and angry staff members can amount to a swift reputation-killer.
2. Your Inventory is Collecting Dust
If inventory is rising, it is a sign that a small business is not selling enough of its product in a timely fashion. Either the company is showing signs of weak sales or it is investing in more inventory than is actually needed to meet the demand for it.
3. You're Noticing Above-Average Coupon Use
If a small business owner notices that the majority of customers are shopping with coupons, this is a sign that the company’s target consumers are tightening their collective belts and are unable or unwilling to pay full price for products. This can be a sign of trouble ahead!
4. Your Competitors are Vanishing
When a company’s competitors are going out of business, let it serve as a warning that the market has shifted; such a shift could affect a remaining company’s bottom line. While it may seem like a relief when a competitor closes its doors, it’s a worthwhile task to find out exactly why they did so. Was it a matter of poor management or something more serious like customers no longer being able to afford certain items or services?
5. Your Expenditure-to-Income Ratio Rises
When a percentage of fixed expenditures are rising in relation to income, this could be a sign of trouble for a small business. For instance, if a company always paid 30% of its income towards rent and suddenly that percentage rises to 50% without the rent being increased, this is an indication of possible financial issues.
6. You're Working Longer Hours
If a company extends operating hours in order to maintain the same income that it previously made, this could translate into trouble for a small business. In many cases, this strategy fails. Keep in mind that this is very different from extending operating hours due to success!
7. Your Vendors Start Having Credit Issues
If a small business starts having problems receiving credit from vendors, this could be a sign of a weakening credit market or a sign that your vendors' credit worthiness has dropped. Either way, pay attention to details!
8. You Can't Collect
Small businesses that suddenly have problems collecting from accounts receivable could be experiencing financial complications. If people that owe money to a company are unable to pay their debts, it usually spells danger!
9. You Can't Pay
When a company has problems paying accounts payable on time, it almost always means that trouble lies ahead. Obvious problems like this will ultimately damage credibility and possibly prevent a company from operating properly.
10. You Need More Tax-Time
If a small business has to request extensions on taxes owed, this could either be a sign that it has misappropriated money that was previously factored into the budget for taxes or that the amount needed to cover taxes has not been earned. Regardless of the reason, tax extensions are immediate red flags that something is wrong.
While any of these signs alone may or may not mean that a small business is in trouble, an owner is wise to pay attention to them and evaluate his or her business promotional marketing practices whenever any of these signs is evident.
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