Ernest Hemingway said it best when he warned of how financial troubles visit us: slowly at first and then all at once. There are usually warning signs, but they are not always recognized and they may persist for months, or even years. For example, business owners can go into denial about regularly occurring mid-month cash-flow problems if at the end of the month the bottom line looks healthy. Working more hours can be seen as just a sign of the times and in many ways that is a valid assumption. After all, someone has to manage the social media accounts and generate the content marketing.
Oftentimes, corrective action can be taken to divert the impending disaster and other times, the crash is fated. Still, forewarned is forearmed and taking steps to protect the business enterprise is always the right thing to do (as long as one does the right thing!). Presented here is a list of early warning signs that indicate all is not well in your business venture:
1 Flat or declining revenue
2. Unreliable cash-flow: difficulty in covering payroll, accounts payable, or payment to sub-contractors or vendors
3. Prices reduced to stimulate sales
4. Critical business investments cannot be budgeted
5. Repeat business is declining
6. Leads are dwindling or the sales conversion rate is declining
7. Referrals are declining
8. Inability to keep pace with growth, operational systems are overwhelmed
9. Inability to fulfill promised deliverables on time
10. Client complaints about the quality of products or services
11. Accounts receivable statements not issued as scheduled
12. Working many more hours just to “hold on”
So what can you do? First, be vigilant about detecting warning signs and pay attention to the client list, conversion rate of leads, referrals and the amount of repeat business. If those values begin to trend downward over the course of a year, that is serious. Do you have a new competitor? Might you need to upgrade customer service? Should you step up networking? Or do you need to update your marketing message and sales pitch to better reflect client priorities?
Declining revenue and cash-flow issues might be at least partially remedied by sending accounts receivable statements on time, or increasing the down-payment that clients are asked to pay when a contract for services is signed. Declining revenues also ask you to look at the products and services that you offer and how you package and present them. You may need to increase prices, if expenses are cutting too deeply into revenues.
If repeat business and/or referrals are noticeably weaker, networking to renew your relationships and meeting new prospects may do the trick. Figure out ways to stay in contact with former and current clients. If you haven’t been sending holiday cards in December, make a note to look into the process by the end of October. Send congratulatory emails if you hear of a client success story. Reinvigorated marketing and PR can also be a useful defense, including content marketing. It may be time to start a monthly newsletter, to remind your client and referral bases that you are relevant.
On the other hand, maybe you’re facing too much growth too fast and you lack the infrastructure to successfully manage your good luck. Get ready to spend money to hire the right help and make useful systems or technology upgrades ASAP and cure problems in service delivery immediately. You are only as good as your reputation and word of problems travels very fast.
Finally, console yourself with the knowledge that every business venture must eventually respond to change and that will mean doing things differently and taking on risk by plunging into the unknown. How we respond to change is a test of our mettle. Be brave and face it down by first conducting an analysis of your business environment, competitive landscape and client priorities and then developing strategies and action plans designed to save the day.
Thanks for reading,