Making Profits is a Big Struggle
This symptoms is not an obvious one and even many talented businessmen fail to recognize this at first. Since raising capital for a running business is not all that difficult, in today’s market, this flaw gets overlooked. Whatever others may advise you, an unprofitable business is a business at risk. When there are no well defined path to profits, the business is forced to raise capital from outside sources and this raises the risk of debt.
Margin performance starts dipping
What a margin denotes is taking a profit number and dividing it by sales. A company’s ability to manage its key costs is usually measured by its Gross Profit Margin, which is gross profit divided by sales. In the same way the Net profit margin of a company is its Net Profit divided by sales. The Net profit margin clearly indicates how the company is likely to perform on its future growth trajectory. So paying attention to these margins and understanding what they indicate will give a good idea of company’s health.
Your Sales remain stagnant or decrease – There is no growth
It is obvious to everyone, that healthy businesses show healthy growth. It is almost like the biological equivalent to a plant which either grows of slowly dies. When sales are made the money is used to pay expenses and run the business. If there is stagnation in sales it is a dangerous symptom. It means customers are not accepting the product or service. And we know that customer acceptance is key to the success of a business. When you generate good revenue ie register good sales- it is a the best barometer of success. Stagnation is the precursor to failure.
You are noticing a high employee turnover
This may not seem like too much of a problem in the beginning, but depending on your industry, if you notice that employee retention is decreasing and you find significant changes in employee turnover, this is a warning signal indeed that your business may be heading for trouble. Employees sense when a business is not doing well financially, they are after all, the insiders , and choose to look for other, better prospects elsewhere.
The quality of your product or service is decreasing
When the all round environment is am unprofitable one, the quality of your product or service tends to suffer. Even though you may have marketed it vigorously, every product’s quality speaks for itself. Financial constraints force companies to cut corners and this manifests itself as poor quality and less satisfied buyers.
These are a few key indicators which tell you when your business is sliding downwards. It would save your business much trouble if you can identify them early and address these ailments to solve them effectively. Financial failure can be averted and precautions taken to recognize symptoms of financial failure and act upon them as soon as possible.
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