According to the Canadian government’s most recent statistics, more small businesses fail than are created in a given year. And without the collateral and credit history to secure a loan, many new owners must personally finance their venture – which makes it even more important to focus on your professional survival. So, how soon can you tell if your small business is in trouble?
A consistent loss of revenue is certainly something to watch for (and try your best to turn around), but it’s not the only warning sign that your small business may be floundering. Look for small business red flags like the ones below – if you catch them early and act on them quickly, it could mean the difference between bankruptcy and recovery.
Staff is turning over – quickly
It’s natural for employees to move around, and many small businesses struggle with gaining and retaining a solid staff. But if you notice that more people have given notice recently, that could be a sign that your ship is sinking – and they want to get off before it’s underwater.
Keeping your business afloat is not easy, especially when you’re faced with a lack of competent and engaged staff. Recruiting, interviewing, and training takes a lot of time and energy, so you’ll want to try your best to keep your employees on board.
Connect with your employees and commit to boosting their morale: respected and appreciated employees are more likely to stay. You can also host regular meetings to tap into major issues right away, encouraging honest answers and working with your team to find solutions.
You’re lying to your partners (and yourself)
Do you find you’re making excuses, rationalizing your actions, or telling tall tales to buy yourself time? The way you communicate and present your business decisions can point to a crumbling foundation. After all, if you can’t take accountability and be transparent about your actions, you probably know in your heart that things aren’t going well.
Instead of sweeping problems under the rug, now’s the time to face your troubles and form an action plan. Every business owner has strengths and weaknesses, so take a moment to get familiar with yours: once you know where you need a helping hand, you can seek out appropriate guidance from peers and experts. This is where a business association can come to your rescue.
You’re borrowing more, paying back less
This is a classic example of the unbalanced budget, and it’s an obvious problem. But what you may not realize is where and how the expenditures, evasions, and (lack of) collections are adding up. Have you been borrowing more from your bank? Perhaps your relationship with your banker is getting less congenial and a bit more clinical. If your credit limit is suddenly reduced, you’ll want to speak with your banker about their concerns, and what you can expect going forward.
Every business owner has strengths and weaknesses, so take a moment to get familiar with yours: once you know where you need a helping hand, you can seek out appropriate guidance from peers and experts.
Another sign that you’re in hot water? You’re falling behind on your taxes. Entrepreneurs who keep putting off their income tax or payroll tax returns could chalk it up to their busy schedules, but it’s more often a sign that cash flow problems are getting in the way of CRA obligations. Keep on top of tax concerns throughout the year to know where you stand when April rolls around.
Sometimes the problem is on the other side of the equation. If your clients aren’t keeping up with their payments, and you’ve been letting their lateness slide, your books could be in worse shape than you imagine. Perhaps it’s time to get a bit strategic with your invoice system!
You have no safety net left
Not every business is lucky enough to enjoy an endless stream of support. In some cases, success or failure falls squarely on your own shoulders. However, every savvy business owner knows that, whether or not you have a big cheering section, you’ll likely need some sort of backup to help you over emotional, administrative, and financial hurdles that could threaten the future of your company.
If you’ve put all your money into your venture, you’ll want to make sure one sudden, unexpected event doesn’t drain it all away. You can’t control everything, but you can put a plan in place to handle a crisis. This is where the right small business insurance comes into play: a tailored policy that takes a variety of risks and your specific processes into consideration will help you recover from a setback.
