How to Know if your Financial Health is Failing

Financial ManagementIf you are running a business, you would realize that the very obvious sign of financial distress is running out of money. There’s simply no money left. This, if you think carefully, is more of warning sign or symptom of business failure than being the cause. If you are watchful and careful, there are many ways to detect these warning signals and address them before they brew up real financial trouble. If you are able to catch the symptoms early, there is every chance that you can overcome them . Here are some symptoms and their root causes which can help you avoid financial illness.

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.

Entrepreneurial Learning

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.

Image courtesy of [worradmu] / FreeDigitalPhotos.net

Leave a Comment

Your email address will not be published.

You may also like

Growing a Business

Want Great Guidance ? Find yourself a Super Mentor


They are the gods of small businesses, those inspired individuals who have achieved the highest levels of success. They can be the shining beacons who light up the path of running your business with their vision, wisdom and wealth of resources and contacts. They are The Mentors.

If you are fired with the passion to take your business to great heights, the best thing to do is find yourself a super mentor. Here are some tips to help in your quest

Pinpoint your Need

Sit down and focus your thoughts on your business growth strategy. Which area of the business needs a lift. Is is staffing, is it the finances, is it the production, is it the your lack of customers or is it the business as a whole that needs a makeover. Once you’ve zoomed in on the sore spot, this is where you need…

Read More
Growing a Business

Dreaming Big? You can Move Mountains with these Business Productivty Tips


You may be full of admiration for some people who seem to manage themselves and their work so usefully and efficiently. They seem to fit in so much productive work into the same number of hours which everyone has.. Let’s look what makes them tick and take a few tips.

Learn to identify your most productive hours

Its true, most productive people know which time of the day they can be most creative and efficient. They identify and allot these hours for the best part of their work. This way they are able to give their 100% awareness to the job and business productivity.

Early to rise- A winning habit

Waking up early is a personal habit that has all the plusses on its side. You need not necessarily go to work that early. It’s a habit that gives you more time for personal care, like mediation, exercise, walking,…

Read More
Growing a Business

Leadership Qualities that can make you an Icon


You may have reached the leadership position through sheer dedication to performance and a do or die attitude . Now that you are at the top, your viewpoint needs to change. You have to now be a role model, one whom others will look up to and follow. Here are some tips that can shape your leadership and management skills

Be Competent: Employees will look up to a leader who has good industry knowledge and management skills. If you do not possess these skills you should surround yourself with knowledgeable people who can offer good counsel. Competence is a trait all employees will admire.

Be Trustworthy: No one will look up to a person they cannot trust. Your employees will want to rely on you and count on you. In difficult situations, leaders are expected to apprise their employees of the situations and find solutions on how to address…

Read More
Raising Money

Are You offering Your Services Using the Right Pricing Strategies?


In these times of fierce competition, business people , mostly those that offer services and belong to the service based industry, are finding it a challenge to implement the right pricing strategies. It is virtually a struggle to set the right business price that will retain and attract the customers, and not drive them away. Follow these tips, the crucial dos and don’t s and you may be in a much better position to offer your services at the best price.

Maintain your Business identity and Dignity

If you are offering a unique or special product or service, don’t underrate it just because you want to build a better relationship with the customer. This will just cheapen your offering as another run of the mill. If its something special you are offering the customer, then communicate this fact to the client and get the equation right with the most…

Read More
Raising Money

What is a Fair Wage? How Do you Assess Fair Wage?


How do you figure out a fair wage?

This is a very common question for startups and small businesses. They can’t seem to decide or understand how to set wages and manage reputations at a time. They are determined to pay well but they also have to think about encouraging their employees to stay with them for a long time. This is why there is a need to think strategically.

Listed below are a few expert tips to help you decide:

Don’t Focus Only on Money

Money should never be the main focus for you or for your employees. You should decide on the wages in such a way that your employees are tied to your business. When your business does well they should be able to taste that success and vice versa.

Also, think about additional perks such as exclusive benefits and time off. Many employees value this more than the overall…

Read More
Raising Money

Tips to Winning Hard Negotiations With Ease


While some negotiations are easy, others are quite hard to win. If you stumble you will lose.

Whether it is a potential client or an investor, negotiations can be very tough and frustrating. The problem is that the moment you let your frustration overwhelm you, you will lose the deal and you will give in to whatever is being offered to you. In order to avoid that, here are tips to overcome tough times and to win even the hard negotiations:


Know your opponent as well as possible. This is the rule no matter what you do. You should understand your opponent to the T. Who the person is, what his culture is, what he thinks, what he stands for, how is his network, etc. are the questions you should ask yourself and answer through research before meeting up for the negotiation. Understanding the opponent will give you a great advantage.


Read More