warning-signAlthough many people venture into the business world with the aim of making profits, less than 85% will actually survive, let alone thrive.  There are many internal and external factors that can slowly kill a business, and if management is not vigilant, these factors may eventually result in the business closing down for good.

It is the responsibility of business operators and managers to note when a business is under stress and formulate a turnaround strategy to avoid closure. Any business in trouble has a few last kicks, and when it does, implementing a well constructed turnaround plan may be the only factor that can save its operation. Below are some of the internal warning signs to look out for that indicate a business is under strain and needs help.

Decline in Sales

A decline in sales is the first symptom that a business is in trouble.  To identify this problem, it is critical that sales are regularly measured and analysed.  While fluctuations are normal day to day and even week to week, if there is a decline versus similar periods in previous years, this is an indication that there is a problem.

If there is no obviously significant factor contributing to the decline in sales (e.g. a downturn in the economy) and competitor companies are still doing well, a strategy for sales growth is needed.

Another factor to consider here is customer retention.  If the decline can be attributed to losing long term and regular customers, then changes must be implemented and quickly.

Inadequate Cash Flow

With profits declining along with sales, cash flow will become tighter.  Not only will it become increasingly difficult to pay suppliers, but also employees – a less than ideal situation.

For any business to grow or make profits, a strong and adequate cash flow is required or there is a domino effect.  The quality of products and services that the business offers starts to decline resulting in dissatisfied customers.   Customers who are not satisfied with the quality of services and goods that a business has to offer, they will then look for an alternative.

The cost of losing one faithful customer is much more than gaining several new customers, and hurts the business operation and growth. If a business reaches this point, a suitable business turnaround strategy will be critical to address all issues resulting from inadequate cash flow.

Employee Motivation and Communication

Employees are the driving force that any business needs to satisfy customers. If employees lack the motivation and drive to serve customers and embrace their work, it becomes harder for the business to generate profits and ensure customer satisfaction.

In addition, if there is a lack of communication between employees and managers, this can cause tension within the business.  Communication is critical to give employees the opportunity to contribute their views on why the business is dwindling.  This feedback and contribution from the staff is often what can save a business.

If a business is in trouble, identifying the factors causing stress and heeding the warning signs is critical.  The most common ones are listed above, but any indication that business is declining can’t be ignored.  In this situation, employing turnaround management and the services of a suitably qualified turnaround professional can help.  Regardless of whether a professional is called in, the important thing is to identifythe warnings before it’s too late and take action to correct them.

Kestrel Solutions offers a checklist to determine how your business is sailing.  Click here to complete the list and get some valuable feedback.

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