Every business goes through hard times. Sometimes the business recovers and is better for the struggle. But other times, the business fails, leaving employees without a job, and owners with debt and doubt about their future. Oftentimes however, there are signs that you’re going out of business, so let’s look at five of them so if they look familiar, you can take immediate corrective action and keep the doors open for business.
- You see “out of stock” everywhere
If you go through your inventory and see many of your items “Out Of Stock,” it may be a sign that you’re going out of business. As an owner, you may not work with the financials every day, so when your CFO says you need more revenue to stock inventory to sell, you may not realize the extent of the problem until “Out of Stock” turns into “Out of Business.”
- You drastically slash your prices
In a last-ditch effort to gain new customers, many businesses will slash their prices. But bills are paid with margins so reducing prices on goods and services, which are already low enough to warrant such drastic action, will only exacerbate the problem and expedite your path to bankruptcy.
- Your top talent is leaving
The demand for good talent is more pressing than ever, so when you see your top talent leaving your company, you might be headed for a failed business. Those on the front lines see the writing on the wall, often before owners who still have faith that their “baby” will grow into something more. While you can live on this faith, your best employees won’t share your optimism if you’re business is going under.
- Your revenue doesn’t cover your fixed costs
This sign that you’re going out of business is straight out of Accounting 101 but still holds true. A business can survive for a time operating in the red, but if it can’t cover its fixed costs (rent, salaries, and other obligations that are due regardless of operations), the business will soon find itself at the end of its life.
- Your cash on hand is steadily declining
As the saying goes, “Cash is king,” and a business without it can’t survive any better than a human without water. If you’re accounts receivable isn’t keeping up with your accounts payable, you will undoubtedly find yourself without the necessary cash to survive, and sooner than you think. Being more aggressive with your AR and pushing back your AP to 60 or 90 days may help stave off the cash hungry hordes long enough for your cash flow to recover. If the problem is more severe, you may want to head for a bank to extend your line of credit.
No business is easy but with the right insights, you can survive the toughest times and overcome these frightening signs that you’re going out of business.