Tanya is a freelance writer. She is interested in writing on various topics relating to marketing, small business, and tech.
Running a business is tough at the best of times, but the global coronavirus pandemic that has gripped the world for the last year has made things especially precarious. Small businesses that were profitable before the crisis are having to downsize – or even close on a temporary or permanent basis – and with no end in sight the future looks uncertain. But even at the best of times businesses run into trouble. There are some key areas which need to be overseen with a prudent and watchful eye, and problems in these areas can often be symptomatic of big problems. Knowing what early warning signs you can look for – and how to tackle them – is crucial to keeping your business open. Here are a few things to look out for.
Cash flow problems
There is no truer phrase than ‘cash flow is king’ when it comes to running a business. If you have inadequate cash flow (when incoming cash is insufficient to cover your outgoings) it is a sure sign that things are going pear shaped. Sometimes inadequate cash flow simply means you are losing money. But it is possible to have cash flow problems even when you’re turning a net profit – in which case your expenses and timing of payments or invoices needs to be tightened up.
What you can do:
Set up a cash flow forecast for your business. You’ll need to actively monitor it – make it a daily task, or assign the responsibility to an employee who will report into you. Staying on top is key. Review the terms and conditions you have in place for customer payments, and make sure any invoices display them clearly. And when it comes to late payments – a common problem, especially when your loyal customers are feeling the pinch from COVID 19 – you’ll need to chase. A course in financial literacy will bolster your skill set when it comes to managing your cash flow, or enlist the help of an accountant. And of course, review your expenses and overheads – even small changes can make the difference.
Sometimes the demand for products and services can ebb and flow. If you find that your company is not pulling in as much business as before, this could be a sign that bigger problems lurk around the corner. If you lose a major client it is also a worrying signal which needs investigation. And if you are experiencing a deluge of returns or complaints, you may need to address these issues as a matter of urgency.
What you can do:
Reassess your product’s pricing and place in the market. If you have altered the product your demographic might have changed, or simply been affected by the economic downturn. See if you can cut production costs by negotiating with or changing suppliers. You may need to rethink your marketing strategy, and a refresh of printed materials or an overhaul of your digital channels could help you get back on track. Actively seek feedback from your customers via surveys or personal calls.
A high turnover of staff can cause problems for your business, but also costs money and time, especially when you require a training or probationary period. Staff actively seeking to leave may suggest a toxic or depressed atmosphere, which can foretell severe problems. Having to let people go for financial reasons is an obvious sign of a business in trouble, but firing employees who aren’t up to the job may signal problems with your recruitment process.
What you can do:
A thorough recruitment plan will help you from the get go, letting new staff know exactly what is expected of them, and what you can offer them. The second part of that is especially important – a strong staff benefits scheme / flexible hours / bonus program makes for more productive employees and a happier office environment. It is a tough time, and cutting corners may need to happen until the economy picks up, but investing in your staff is still completely crucial to the success of your business. Don’t cut corners when it comes to people.
If your business feels like it is coming apart at the seams, a frank and honest self assessment, and some positive changes can make all the difference. And don’t leave things to fester – act quickly and decisively – the sooner the better.
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