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2015-03-20 00:00:00Starting a BusinessEnglish Signs of Decline to Watch For in a Business

5 Signs of Decline to Watch For in a Business

2 min read

We’ve all heard the expression, “what goes up must come down”. This is especially true in business, where many companies begin strong only to slowly slide into—what comes to feel like—an inevitable decline. It then becomes important for you as the Small Business Owner to watch for and take measures to stem this decline.

5 Key Signs of Decline

Financial analysts and critics have identified specific danger signs that indicate that a company’s fortunes are failing. Many of these signs are the result of mistakes and oversights that aren’t unique to big companies; they have triggered a collapse in whole industries but can just as easily affect SMEs as well. The following are the 5 most telling signs that your business could be failing.

a. Higher attrition rates: a company’s lifeblood is its employees. When the brightest and the best have begun leaving the organization it is a sign that the company’s health is deteriorating and in need of an urgent intervention. At times like this, exit interviews can help diagnose any festering problems. If they are serious about turning things around, management must solicit and accept critical feedback from departing employees.

b. Eroding customer-base: while employees are indispensable for product creation and marketing, it is the customers who buy these products that justify their existence in the first place. A marked drop in footfall and sales—whether at a physical outlet, or online—is incontrovertible evidence of a company’s failing health. At critical junctures like this, companies should start paying close attention to what their customers are saying—it might reveal that they are out of touch with their needs.

c. Underpricing products: selling products at less than the market rate, just so that you can hold onto your eroding customer base is a pretty solid distress signal. Taking such a measure is like trying to stanch the bleeding, without treating the cause of the bleeding. If customer numbers are already falling, selling products at a loss is only a temporary solution, since the product itself could be at fault.

d. Divestitures and payouts: companies start to divest themselves of their assets, it often means that its balance sheet is off-kilter and liabilities–like debt—have begun to outweigh assets. If there is no debt, what you might see instead of distress sales is large payouts of dividends and stock buyback. Such situations calls for introspection; it is important that company heads face the reality of what is happening, instead of burying as much of their person as possible in the sand!

e. Endemic and persistent unhappiness: just as a fever indicates the presence of an infection, a climate of acrimony and unhappiness bespeaks a sick and ailing organization. “Prevention is better than cure” is the undisputed mantra of doctors and public health professionals everywhere. It can just as easily be applied to the world of commerce and business. Catching a problem when it is nascent is always preferable to tackling it when it is full-fledged, and the stakes are higher.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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