Signs That Your Company is in Trouble | Failing Business Problems

One big source of success in business and private life is the skill of critical thinking. Smart guys watch out for the warning signs of a declining company even when they are not at a fork in the business road. 

There’s often only a thin line between the obvious signs your company is failing and some temporary business problems. Your business’ occasional supply shortfalls, reasonable cash shortages, deferred payments, seasonal staff turnover, or more serious problems may be mere transitory issues.  

Here is our list of the top 10 TELLTALE SIGNS OF A FAILING COMPANY that can help you pinpoint the business problems:

• The Shrinking Bank Balance of Your Business
• Your Business Sale Slump
• Your Business Customers’ Delinquent Payments
• Snowballing Complaints about Your Business
• Your Business is Losing Key Customers
• Your Business’ Employee Churn Rate
• Never-Ending Business Disruptions
• Business Problems Posed by Occupational Burnout

Your takeaways on the failing business signs will be a valuable problem-solving tool in business. You will learn what to do when your business is failing. You will anticipate unfavorable trends and recognize the dying careers you may want to steer clear of. You will understand how to fix a failing business. If all problems are solvable, you will sleep well knowing that your firm is not a failing company.

Please note that our popular article published in mid-summer 2022 on our customized services and a review of the best countries for small business formation and development remains quite relevant. Please book our consultation for updates and business advice.

A quick look at the startup failure rates in 2022 shows that 9 out of 10 startups have failed or are likely to become failing businesses. Likewise, 11 out of 12 startups failed in 2019 (according to Startup Genome’s study). Does it seem that the odds are heavily stacked against your business? Are you afraid that the chances of success are negligible? You should not feel discouraged! Yes, companies may fail for different reasons. Yet, not any business failing is a disastrous problem. Besides, your attention to the early warning signs that a business is failing can make a great difference. A proactive approach to the signs that a company is going under will help you sustain and grow a healthy business

Sign 1. The Shrinking Bank Balance of Your Business 

One of the earliest symptoms of a failing company is your shrinking bank balance. It is one of the sure signs a business is failing. If you are short on cash, your business can fail miserably, unless you find ways to cut or cover your business costs.  Dwindling funds is never a good sign.

Therewith, your temporally depleted resources do not necessarily mean the beginning of the end for your business. For example, you may have just bought some new equipment, launched a new business line, or invested in your staff training. In other words, your business’ all-time high operating costs can be justified by the expected ROI of your quickly growing business. 

However, you should never diversify / stray too far away from the business’s core. Otherwise, you may miss the signs a company is going out of business. 

Takeaways from this business problem: It is vitally important to manage your business revenues and expenses from day one. Even if there are no signs that a company is failing, be sure to maintain a sound judgment of what happens if your business fails, what to do when your business fails, how much you would need to cover some gaps in your business budget. Most importantly, you would rather avoid and mitigate the possible problems.  Think how you can cut business costs on a regular basis and accumulate sufficient emergency reserves and cash funds. To maintain books of your business accounts more efficiently, invest in some advanced accounting software designed for specifically small businesses.   

Sign 2. Your Business Sale Slump 

If your sales are down, this is one of the clear signs that your company is in trouble. It may happen that you started the year well. Your first-quarter sales have replenished your business budget as planned. However, by the end of the third quarter, something has clearly gone wrong, and you can barely cover the core business costs. What has caused this business problem? 

If your services are seasonal (like tours to alpine ski resorts), or your business sells seasonal products (like snowboards, skis, sleds), warm winter weather may hurt your sales. But if you sell an all-season product, you should pinpoint and investigate other problems that may have triggered the sales drop.

Is there a new competitor offering their services or products for a fraction of the price? Look for the signs of their unfair competition. Has your business recently changed subcontractors or manufacturers? See if their quality is below your usual standards. You should have the courage to ask yourself tough questions and not turn a blind eye to the main problem.

Takeaways from this business problem: You need to know your customers, their expectations. Analyze the reasons why they buy your business’ services or products. Think about the external circumstances and problems that might have impacted your buyers’ priorities and preferences. Do they find the new design of your competitor’s business outlet more attractive? Have they been spooked by your price changes? Is there a completely new hero product on the market? What social problems may have triggered their buying behavior? Never assume that what worked before will always work well for your business. Don’t be caught off guard, so watch out for the early warning signs and problems. Ask your sales department such questions as ‘Why is my business failing?’, ‘What Made this lead a “good” lead?’, ‘What problem do most customers complain about?’, ‘Is there any problem with trust when it comes to our suppliers?’. Your business may need to anticipate the looming social problems and be more proactive. Offer new seasonal gifts coupons and promo codes. Elevate in-store promotions. Invest in and get the most of your sale pitch and interactive ads on social media. 

If you wonder whether you should move your business abroad in times of conflict, please read our article on how the global turmoil can favor your international startup.

Sign 3. Your Business Customers’ Delinquent Payments

If you have a business where you allow customers not to pay for orders up front, and if you offer flexible payment plans, you are likely to attract many customers with this exact advantage. However, the late-payment problems may pose threats to your business’ health. Customers’ overdue payments can be one of the obvious signs that a business is failing.

On the one hand, by providing a line of credit to your customers, you can charge interest for the missed deadline. On the other hand, delinquent payments can seriously impede your cash flow and grow into a critical business problem. 

It’s a bad sign If too many of your customers are not making their payments on time. Are your financial statements accurate? Can you rely on numbers? Do you cook decisions about the flexible payment plans ignoring the problems in your account books?  Don’t you create lingering problems in an effort to achieve short-term business results? 

Takeaways from this business problem: You should monitor and review your collection calls and terms, be very cautious when offering credit. You should sell directly to the consumer, borrow against your A/R to cover short-term problems, keep track of your business’ inventories, revenues and expenses. Watch out for the signs your business is failing, as your accounting rules influence the way business is done instead of sustaining your companies’ performance. And always close the lag between the deadlines of inbound and outbound cash flows in your business.

Sign 4. Your Business’ Unpaid Bills Piling Up

The signs your company is in trouble include the growing pile of the unpaid invoices from your suppliers, and your inability to make regular payments to your creditors, agents, and even employees. 

This problem is likely to be a result of customers’ failure to pay you on time. As follows, your business may face cash flow problems. 

Delinquency penalties may quickly push your business downhill. Only after you cover your current expenses, it would be safe to borrow funds for new business ideas.

Takeaways from this business problem: You should honestly discuss the case of the late payments with those you owe. If all your dues had been paid on schedule before the current cash flow problem occurred, your suppliers and staff will possibly agree to wait and remain loyal to your business. But please avoid taking out new loans, as long as you have a lagging income and an outstanding debt. There should always be a ‘cash cushion’ for a new credit, so that your business could avoid overdrafts.

Please note our article on how to choose offshore bank accounts – a helpful guide for you during the global economic turmoil. For current updates, you are welcome to book a free one-on-one consultation with our experts. 

Sign 5. Your Business Has Gone Over the Credit Limit

If all your business credit cards are empty, and no bank is willing to give you credit, take it as the sure signs your business is failing. 

That said, not any debt is bad. Your debt, when managed wisely, may help you generate your business revenues and build wealth. 

However, if you’re struggling to make minimum monthly payments and are in dire need of borrowed money to keep your business running, these are the signs your company is in trouble, and the problems require your immediate response.  

Takeaways from this business problem: Remember that the interest rate for borrowing money is also expensive. No matter how intensively you run your business, the extensive problems and recurring costs will not let you off this treadmill. So, to be on a safe side, you always need to maintain a sufficient cash cushion. 

Sign 6. Snowballing Complaints about Your Business 

Customer satisfaction and the growing number of loyal clients are the signs of your business success.  You may say that complaints are inevitable in any business, as people do have different opinions about the same goods and services. Yes, tastes differ, but every complaint counts in a sound business. 

Dissatisfied customers are far more likely to share stories of your problems. Almost all buyers consider other clients’ feedback. Too many negative reviews drive potential buyers from your business. However, you can learn from your customers’ experience. You should dig to the roots of negative reviews. What are the main customer grievances and problems? What are the areas for quality growth and business improvements? How can your business offer better products or services? 

On the other hand, many customers do not provide feedback. To understand your customers’ perception, you should encourage them to complain, praise, and suggest changes. Only then you can learn from your clients. 

Takeaways from this business problem: Snowballing complaints and negative word of mouth can be the sure signs your company is in trouble. Every complaint deserves your attention. Complaint management focuses on problem detection, problem remediation, and problem prevention. Your customers are happy when you ask their opinions of your business performance and keep improving it.

The only thing that is constant is change. Many of you have to review your business policies in today’s unsettled world. Please click to learn more about how small businesses meet challenges and overcome constraints.

Sign 7. Your Business is Losing Key Customers

The well-known Pareto principle (also known as the 80/20 rule) holds that 20% of your efforts yield 80% of your fruit. Likewise, 80% of your business depends on 20% of your customers. These are your key clients. If they leave, your business is doomed.

However, as soon as you notice the first signs of a mass exodus, you can take immediate action and save your business. 

It’s easier and cheaper to retain the loyalty of your main customers than to spend the effort, time and business resources on attracting new customers. Besides, if your key customers flee your business, new customers will also drop out for the same reasons. 

Takeaways from this business problem: Building a key customer base takes time. Follow up on your key customers’ feedback. Address the possible problems that may drive them away from your business. If someone has left for a competitor, you should find out if you can lure them back. If the problem is growing, design a tiered customer loyalty program. Launch a FAQ section on your business website. Stage attractive offline events for your customers. Make your homework on the moments of truth in your customer journey. Improve customer experience by mitigating their problems and removing obstacles. Let every staff member feel loyal clients are an important part of your business. 

Sign 8. Your Business’ Employee Churn Rate

Your employees are your important business resource. It is subject to change due to internal and external circumstances. However, of all the symptoms of a failing company, the high employee turnover rate can be a critical warning sign. It is too bad if a business can hardly fill the vacancies when its staff drops out. If that’s your case, you need to get to the core of this business problem and improve your HR policy. 

Many factors, such as low wages, poor working conditions, or ineffective business management, can affect employee’s performance and attitudes. Every employee contributes to the overall quality of your business’ products and services. You should make sure they do not feel left out when you set and discuss quality goals, business strategies, and outcomes. In fact, your business’ regular labor costs are far below the estimated total employee cost, including the salaries, overheads, binding variables, benefits, and other expenses associated with hiring, onboarding, and training new staff.

Make sure your staff is happy about their salary, work conditions, the company’s reputation, and the team spirit. The more you invest in your HR, the greater their ROI is. The opposite is also true. 

Takeaways from this business problem. Your HR is the business asset. You will contribute to its value by providing competitive wages and bonuses, a welcoming workplace environment, modern amenities, attractive career paths inside your business. To hire and retain the right employees, you need realistic expectations, clear attainable objectives, regular training sessions, and healthy morals. In other words, treat them the way you would like to be treated. By rewarding your employees’ contribution in your business, you enhance your own employer brand.

If you are interested in business formation abroad, please read our article on c-level leadership titles in international companies.

Sign 9. Never-Ending Business Disruptions

The warning signs that a business is failing include the never-ending business disruptions. As soon as one business problem is over, something else shows up, and then again. 

When you are sick and tired of business disruptions, you just have to fix the problem, upgrade some business operations, or even reengineer the entire company. If things need to be fixed, get this done asap. Out with the old, and in with the new! 

Takeaways from this business problem: Processes, procedures and documentation are the 3 business pillars of a happy company. Before you focus on business growth and sales, take the time to check the fail signs and mend the problems. You will feel relieved when your business gets back on the rails, runs smoothly and efficiently.

10. Business Problems Posed by Occupational Burnout

As sad as it is, you can lose the spark and excitement about your business after a few years of being burdened with endless business problems and worries. This is called burnout. 

Burnouts happen a lot in business, and it’s not your fault. If you recognize the signs of burnout, you should stop spinning like a squirrel in a business wheel. Gone are the days when you were passionate about the business, your strong team, working 7/24, great plans, and forthcoming success. Your passion used to be the lifeblood of your business. Now that you have fallen out of love for business, you have to grit your teeth and push through. You will steer your business as a sinking ship to a safer harbor. You will seek support by telling your business crew: ‘My business is failing. Please help me fix it. If you don’t jump ship it will stay afloat’. But when the storm is over, you should take a break, or leave for good. Just pack up and go, get away from it all, but on your terms. 

Don’t worry about your business too much. Your business will sustain without you if you write clear business strategies, share your load, stop micromanaging, allow yourself to take some time off when you need it. 

If someday you feel like returning, please remember that nobody can ‘step in the same river twice.’ 

Takeaways from this business problem: It’s too easy to give up if you see the signs small business is failing. Experts will advise you on how to get a bad business shut down. But if your business has been your passion, you are likely to come up with a game plan to fix it. As soon as things get better, decide whether you should drop your business or stay aboard. If you do decide to leave, at least you can do so not with a broken heart, not because things have fallen apart, but because you are free to retire keeping your upper hand.

If you wish you could travel the world – to get away from it all anytime anywhere, you should read our article on all available options for citizenship by investment in 2023 and request a free private consultation with our expert.   

On a Final Note 

After you start your business venture or get your dream job, are you alert to the possible symptoms of a failing company? How easily do you dismiss the signs your company is in trouble? Do you get so busy that you simply don’t take time to analyze your customers’ complaints and problems? Do you learn from your business mistakes before they turn into major problems? Don’t you agree that listening to your employees’ concerns is part of what leadership is about? 

We hope this article is a useful prompt on how you can make out that you are working for a failing company, what to do if your business is failing, how to tell if a business is going under, or when it is safe to rule out the alleged signs that a business is failing. If you have noticed any of the above-mentioned signs of a failing company, we urge you to take immediate action and fix the business problems. The longer you ignore the risk, the worse it will get for your business.

Please remember we are here to help you at every step!  If you need expert advice on business formation abroad, you can reach us at  info@offshore-pro.info.