Business owners often realize too late that their business is in trouble. What are the signs that it's time to take a closer look at the financial health of your company and take urgent action?
Sign #1: Stagnant Revenue
A concerning sign is when your revenue remains unchanged over an extended period, typically two to three years. Some owners may perceive this as a positive sign, thinking that maintaining a stable level of business is sufficient. However, over time, rising costs can eat away at profits. To stay at the same level, a company should aim for an annual revenue increase of approximately 10-15%.
Sign #2: Dividend Non-payment
Ignoring financial diagnostics can lead to overlooking real business problems. One simple financial criterion to assess business success or loss is regular dividend payments to owners. If a business cannot pay dividends as scheduled (monthly, quarterly, annually), it is a sign of losses. Delaying dividend payments can indicate the presence of underlying issues within the business.
Sign #3: Delayed Payments
It is crucial for business owners to not only recognize signs of their own business's losses but also swiftly diagnose the sinking of business partners, suppliers, and other counterparts. Payment crises from previously reliable companies can be a warning sign.
Signal No. 4. Extravagant Management Behavior
A clear sign of acute business trouble is an unexpected change in the public behavior of the company's director, owner, or CEO.
A sign of business trouble is a sudden change in the public strategy of the first person, an unexpected deviation from the usual behavior. If you have to deal with a company whose owner has suddenly become a "people's tribune", double-check the counterparty. If you yourself suddenly become too extravagant on a public circuit - know that this can be perceived as a sign of problems in your business by partners
Signal #5: Cost Cuts are Striking
A clear sign of a business in decline is when cuts in maintenance costs become visible to the naked eye. For example, the paper in the toilets of a shopping center or a hotel turns dark gray or disappears altogether, the loyalty system is reset, and discounts are not provided even to the longest and most loyal customers. The range of products/services is rapidly depleted both quantitatively and qualitatively.
In fact, business costs can be cut elegantly, so that it is not a critical blow to the quality of the product / service and does not scare off buyers. However, in most cases, cutting costs occurs chaotically, emotionally, illogically, resulting in losses, and sometimes even loss of business.
Bankruptcy never happens suddenly. This is the result of problems accumulated over the years. Unfortunately, the owner's personal intuition, the views of his top managers and other general impressions rarely give a complete picture of the situation.
These signs highlight the importance of financial analysis and diagnostics in identifying potential losses and taking necessary measures to prevent business collapse. Monitoring revenue growth, dividend payments, and payment patterns can provide valuable insights into the financial health of a business.
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