More people are forming a business now than ever. But the odds are unfortunately not in your favor. 49% of small businesses fail in their first five years of business.
Yes, you hear these statistics constantly. But the high failure risk means you need to pay close attention to your business’ livelihood and profits.
On the other end of the spectrum, you should know when your business is going under. There are times when you can salvage your company and other times when it’s best to walk away.
Here are 8 signs a company is failing and when you should close the doors on your business.
1. Your Clients Are Dwindling
Customers are the lifeblood of your business. Without them, your business is nothing. That’s why this is one of the most common signs a company is in trouble.
There could be various reasons why customers ditch your business. Maybe your customer service reps aren’t trained enough. Maybe your products aren’t priced appropriately.
But more businesses are just struggling to capture a strong customer base, especially if they’re in a highly competitive market.
Try reaching out to customers and see what you can do to improve your services. If you notice they’re not interested or left to support a competitor, it may be best to walk away.
2. Decreasing Sales
This sign is an obvious one, but many businesses blame sales loss on other factors, such as a slow season or bad economy. While those factors could be true, your decreasing sales could be one of the first signs your company is in trouble.
What are the first signs of decreasing sales? Pay attention to your quarterly projections. If they keep dwindling every quarter, diagnose the problem. If sales continue plummeting, you may need to prepare to close the shop.
3. Cash Flow Struggles
Maybe your money problems don’t result from bad sales. Maybe they result from bad financial management. From poor bookkeeping to debts, even a positive financial outlook means nothing if you’re not managing your cash flow properly.
Keep in mind, you can fix your financial management. But there may come a point when it’s too late to do anything.
4. Questioning Your Motives
Do you ever ask yourself, “is entrepreneurship really right for me?” It’s normal to second guess yourself occasionally. But if you’re not grateful for your business, even after a few years, then you may not be business owner material.
In addition, entrepreneurship is tough on your mental state. Owning a business comes with lots of stress and pressure. If this pressure is negatively impacting your mental health, it may be best to shut down your business.
5. No One Is Talking About Your Business
This advice extends to both negative and positive feedback.
Your business likely made a subtle buzz, whether on social media or word of mouth. But if your social media pages, review sites, and even your customer service line are dead, then you have a problem.
Before closing the shop, you can reach out to customers. Promote your products, send a survey, and communicate anything that may generate buzz. If your audience is still silent, you may not be able to save your business.
6. You Can’t Keep up With the Times
Bob Dylan says it best: “the times they are a-changin’.” Technology influences our lives as well as consumer buying demands. Smart businesses can adapt to customer needs. But this isn’t possible for all businesses.
Some businesses may also be too stubborn, not wanting to integrate modern customer buying demands and keep things “the traditional way.”
While some customers may appreciate tradition, more progressive customers will shy away from your business.
Let’s give a ma and pa retail store as an example.
79% of Americans shop online, yet many small retail stores may not switch to an e-commerce platform. With more people shopping online, the small store will either have to adapt to consumer buying demands or possibly close.
7. There’s Nothing Unique About Your Business
Sure, competition in the business world is healthy. But even businesses that offer the same products and services can find a way to stand out. If your business is a carbon copy of other businesses in your niche, you may not find success.
Maybe there are plenty of differences between your business and your competitors. But if this doesn’t reflect your branding or the customer experience, your audience will not see anything different about your business.
8. Your Staff Quits
Even though your customers are the lifeblood of your business, your employees are the gears in your machine that keep the system moving.
Your staff is one of your most important assets. If your valuable employees are leaving, this is one of the most common signs a business is in trouble.
Why is that? Your employees can identify issues long before you can. Rather than weather the storm, they may decide it’s best to leave and focus on their careers.
What to Do If Your Business Is Failing?
Now that you realize your business is failing, you may think you’re out of options. But there are ways to properly close your business and save your assets before it’s too late.
First, understand what went wrong. If you decide to re-open your business or form a new one, you can learn from your past mistakes.
From here, strategize your closure. Inform your staff and customers. Handle any last-minute projects and sales before filing the dissolution documents. Pay off any debts and taxes.
From here, cancel your business permits and licenses as well as your business financial accounts. If needed, file for small business bankruptcy.
Identify These Signs a Company Is Failing
It’s difficult to identify the signs a company is failing. But if your business isn’t in good health, it can be difficult to make the decision to close your business.
Fortunately, there’s always something you can do. Before shutting down your business, continue reading our blog for more business advice.