We write this article in the hope that you never need to read it. Opening a business yourself is a thrilling and yet terrifying endeavor, and one that you already know might end in failure. For every business that ends up growing to the point where it makes millions of dollars in turnover, there are ten or twenty that fall by the wayside within the first twelve months. We’re probably understating that – it’s more likely to be fifty or sixty. Making it in the world of business is hard, and failure can be extremely costly.
If you’re savvy and smart enough to have come up with your own business idea in the first place, you’re also probably savvy and smart enough to realize that it’s so much of a risk that it probably constitutes a gamble. Think of it this way – you’ve spent big money on a chance of success in the future. Isn’t that exactly what someone does when they’re playing online slots? You might feel like you have more control over what happens next than the average online slots player does, but that’s not always true. There are always things you’ve never thought of or expenses that you couldn’t have foreseen, and they can derail you. One essential skill that successful players of online slots have is instinctively knowing when to quit and walk away, and that’s a skill you need to develop too.
Nobody wants to give up on their business – especially when they still believe it could be a success. Unfortunately, sticking with a failing idea for too long can leave you in increasingly dire financial straits. Once you’ve borrowed from somewhere to cover your expenses once, you’re likely to borrow again and again until you have nowhere left to turn. Your personal finances are likely to end up as badly damaged as your business finances, and that can make it difficult for you to start again or even return to regular employment. Seeing the signs of failure before it’s too late to shut up shop in an orderly manner is an essential business skill, and these are the signs you need to look out for.
High Staff Turnover
High staff turnover inside a workplace doesn’t necessarily mean a business is failing. It could, for example, mean that you have a toxic workplace culture, and people don’t enjoy working for you. You should already be aware if this is the case, and if you’re not, a trusted senior employee should be able to tell you. If you’re satisfied that you’ve created a healthy working environment and you’re a good boss, but people are leaving anyway, it might be that they can see what you can’t. Often, a boss is too close to a situation to see the inevitable. Employees know how much money they’re making for a business, and what the business costs are likely to be. If they can see that one doesn’t cover the other and they can smell blood in the water, they’ll jump ship. If you’ve had a lot of people leave recently, try hard to get honest feedback from them on the way out. They might tell you what you don’t want to hear, but you still need to hear it.
You’re Not Taking Your Salary
It’s easy to kid yourself that everything is fine if your workers and suppliers are always paid in full and on time. If you’re not also paying yourself in full and on time, you’re deluding yourself. You can’t continue on in that fashion. You’re the person with the most on the line, and you’re also probably the person putting the most work in. If there isn’t enough money left over to pay you for your efforts, your business model doesn’t work. It might be acceptable to do this once or twice in the early months of a business while you wait to be paid for work you’ve done, but if it goes on longer than that, you’ve got an issue. Consider whether all your staff are essential. If they are, consider where you could make cutbacks. If you can’t, your outlook is bleak in terms of long-term profitability.
You Can No Longer Obtain Borrowing
Banks are hard to borrow money from at the best of times. Even before 2020 happened, banks were lending less money to small businesses than they were at any point before the last recession in 2008. They barely need an excuse to say ‘no’ to you, and if they’ve all started saying ‘no’ in a unified voice, you’re in trouble. A bank will only lend money if it believes there’s a strong chance it’s going to get that money – plus interest – back. If they’re looking at your business plan and your books, and they can’t see that potential, they won’t lend. This might be infuriating to you if you believe in your model, but think of it this way. An independent third party has looked at your plan and your profitability and decided there’s no merit in it. One bank might be wrong about this, which is why it’s fine to shop around, but if they’re all saying it, they might have a point.
You’re Late With Bills
You might be inclined to say “thank you, Captain Obvious” to this point, but it’s a serious matter. Self-employed people don’t have a ‘payday.’ Cashflow depends on when you get paid by customers. That means that a small business might sometimes struggle to guarantee payment by a specific date each month. If you’re only a day or two out, don’t beat yourself up about it. If you’re a month or two down, you have a major issue. Arrears have a habit of building up quickly, and they’re hard to get on top of once you’re two or three months in the red. A healthy business generates excess money, and that excess money should be banked to cover bills as and when they arise. If there’s nothing in the pot, ask yourself when there’ll be sufficient capital to catch up on everything you owe completely. If you have no idea when that day might arrive, chances are you’ve got a dying business on your hands.
You’ve Stopped Planning For The Future
Pause for a moment and take a look at your agenda for the rest of the day, or even for the rest of the week. What’s on there? Is it full of meetings about future opportunities, networking events, and chances to meet or make new customers? If so, great. If, on the other hand, it’s full of meetings about problems and conversations about how to deal with them, you’re no longer planning for the future. All your time is being sucked up by trying to deal with issues in the present, and that means problems will arrive in the future because you haven’t been able to take the time to stop and see them coming. You can’t persist with a scenario where you lurch from one crisis to the next with no end in sight. Sometimes a good boxing coach throws in the towel for their boxer. Be kind enough to do it for yourself.
If any of this sounds familiar, you have our sympathy, but remember it’s better – and often braver – to get out now instead of waiting for the inevitable and have closure forced on you. Arrange to speak to a business professional today, and see what options might be available to you.