The worst nightmare of every entrepreneur is a failed business.
Sadly though, this nightmare is pretty common for most business owners as research is done in the year 2019 showed that 11 out of 12 start-ups fail.
To put that in another way, you have 1 in 10 chances of succeeding in life as a business owner.
Of course, the businesses researched above didn’t fail in the most disastrous or depressing way you think but still, it is undoubtedly a risky game to start a business.
How you define ‘failure’ plays a vital role in deciding your idea of failure. Though there are variables like DFMEA and PFMEA that alert us before the failure actually happens, it is important to be careful.
So, what are those warning signs that tell you that your business is going to fail miserably? Keep reading to know about them.
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Your Business Funds Are Drooping
At the end, it’s all about numbers. No, that doesn’t mean that we’re accountants trying to suggest you the importance of numbers but we are saying this because it’s true.
One of the indicators that will come to you at the earliest is when you begin to notice a shrinking bank balance. It is never a good sign to be short on cash.
However, dwindling funds might not mean doomsday but if you invested in any new equipment or machinery, it is valid that your balance is lower than the usual. Keep a tab on your expenses and income.
You’re Not Getting Timely Payments
Do you operate a business where you allow customers to pay you over time instead of making 100% upfront payments?
Well, it’s true that providing flexible installment options lets you tempt more customers but you might not have acquired otherwise. This is, like several other things, a double-edged sword.
If you have too many customers who are not making timely payments, this is a warning sign for you.
You should review the terms and conditions, put your debt collectors into account and sell directly to the customers.
Your Sales Have Gone Down
Did you start off the year with $150k in terms of sales during the first quarter? But by the second quarter, you are just barely pulling off $50k in sales. What do you think went wrong?
In case you’re selling a product that’s seasonal, dropping sales can make sense but if your product is relevant throughout the year, it’s time you investigate the reason further.
Check whether or not there is a new competitor who is giving away the same product at a lesser price. Put on your detective hat and ask yourself tough questions.
You Are Getting Too Many Customers Complaints
It is pretty normal to have a couple of customer complaints every now and then but if there is suddenly an increasing number of complaints arising from customers, it’s high time to start digging into the reason.
The first step is to check the reasons that make customers unhappy. Since this is an age where most customers base their purchases on website reviews, negative feedback can kill your business.
You’ve Attained Your Credit Limit
Did all your credit cards max out and you’ve reached a point where you can’t find a bank from which you can borrow? If yes, this is a surefire sign of impending danger.
Debt is not always a bad thing as it is possible to leverage debt in a way that makes you build wealth.
But when you’re struggling to keep up with the minimum monthly payments, you should know that you’re in a mess.
So, if you wish to analyze whether or not there is a potential machine or system failure, you should leverage the fault tree analysis tool.
Besides, keep in mind all the above-listed warning signs before you set up a business of your own.
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