How To Know When Your Small Scale Business Is Failing

Friend It is important for you as an entrepreneurs to be able to know when things are not working out. According to experts, statistics show that nine out of 10 start ups fail. This, they say, is an indication that small business owners have to ensure that they do their homework if their business is to survive.

The author of ‘Practical Steps to Financial Freedom and Independence’, Mr. Usiere Uko, says, “10 in 100 start-up businesses fold up in the first five years. Of the remaining 10, nine fold up in the next five years. So in 10 years, out of 100, only one is left standing. These are the odds.”

For an entrepreneur to successfully run a small business, Uko says, an entrepreneur has to be “ready to tread where angels dread”.

Experts say while many business owners pay attention to what it takes to start a business, they often pay little attention to indicators that their plan is not working out.

To help avoid this mistake, this article explains some of the warning signs that a small business is failing.

Failure to make profit

Of course, a new business is unlikely to break even or make profit in less than one month, but it gets to a point where the owner should be concerned that no profit is being made. While it is a struggle to get your business up and running during the first few years, you should be making a profit at the end of your second year. If your company has been operating at a loss for at least three years in a row from the time you started the business it is obvious that your business is having problems and you are going to need to take some steps to fix those problems.

Challenges with overhead expenses

Experts say another sign that your business is failing is when you start having challenges meeting your overhead costs. When you can no longer afford to pay staff, electricity bills, and other business obligations and you have to secure loans to keep y the business running, your business is in trouble. Experts say this is more so when your business has more debts than assets. They explain that borrowing money when you are not making any profit can make the situation worse. The best bet in times like this, they stress, is to consider selling off some of your assets. This is why the value of your assets in relation to your debts or overhead matters.

Inability to pay creditors when due

Many small businesses often receive a lot of items or services on credit, paying only after making sales. Experts, however, say when you start finding it difficult to pay for supplies and services on time, when your suppliers start reminding you of payments that are long overdue or when you start having cause to avoid them, it is an indication that your business is beginning to fail. The danger here is that you may be forced to borrow money pay them, as failing to do so means you may lose your suppliers. If you opt to borrow, it won’t be long before your business is deep in debt.

Experts warn that if you are already in this situation you need to hold talks with your suppliers and seek more convenient arrangements that will help you pay off the debt, while receiving suppliers. Ignoring your problems won’t make them go away.

Decrease in sales

When your business starts witnessing major decrease in sales or patronage, it is a major challenge to its survival. As a small business you should be aiming for more patronage; not less. A decrease in sales means less profit, less profit may require you to cut down on your overhead and this may affect the quality of your product or service. It could also affect your ability to pay or keep your employees motivated.

Experts say one way you can solve this problem and save your business is to do market research. This will help you determine why there has been a decrease in sales and how you can rectify the situation.

By knowing that decrease in sales can lead to failure, and taking appropriate action the moment it is spotted, you stand a better chance of saving your business.

Taking deadly risks

 It is normal for businesses to go through bad times now and then. At such times, experts say it is only normal that you will try to save the business. However, they say if you find yourself constantly taking crazy risks to save the business, then it is a sign that it is failing.

Getting back on track

Once you discover that your business is failing, it is important that you take steps to rectify the flaws immediately.

When you are contending with a failing business, experts say there is little room for errors. As a result they advice that once you realise that things are going downhill, you need to get professional help. Yes, they will have to pay, but the cost of that help may be more than what losing your business will cost you. At this stage, it is important to keep emotions aside and seriously review the situation.

Ask yourself questions such as, “Can my failing business be saved with more work or more money? Can I really do more than I have already done? Can I get more financing without risking more than I can afford to lose?”

Experts say if the answers to these questions are negative then, you may have no choice but to close your business. On the flipside if they are positive, you should get to work and find and avoid the mistakes you made in your first attempt. Experts say an alternative to closing the business is going into a partnership with others who can inject cash into the business.-The punch