Business Failure

8 Telltale Signs Your Company Is Going Under

Boundless optimism is required to launch a business but a steady grip on reality is required to stay in business.
8 Telltale Signs Your Company Is Going Under
Image credit: Caiaimage | Tom Merton | Getty Images
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You’ve heard it time and time again: 90 percent of all startups fail. Yet, we keep taking the risk and following the dream of owning our own business, despite the high risk of failure.

What separates the successful entrepreneurs is their uncanny ability to realize when it’s time to walk away from the business. It’s not an easy decision but, instead of pumping more time and money into a failing business, they cut their losses, learn from their mistakes and move on to the next business venture.

If you’re still uncertain that you’re business is in serious trouble, then pay attention to the following eight telltale signs.

1. Low sales.

The first, and most obvious, sign that your business is sinking is low sales. This could either be lower than expected projections or a decrease in sales than the previous quarter. Your business can't succeed without a steady income to pay all of your expenses.

When you notice that there’s a sudden decrease in sales, you need to diagnose the problem. Begin by surveying your employees and customers, conducting a competitive analysis and examining the outside environment, like societal changes or natural disasters.

This should give you a better understanding on why there’s a decline in sales and if there will be a turnaround. If it doesn’t seem likely the industry or your business can turn things around, then it’s rather clear that your business is in trouble.

Related: The 15 Most Profitable Small-Business Industries

2. You can’t remember the last-time you spoke to a client.

Customer service reps aren’t the only ones talking to your customers. Even as a founder and CEO, it’s your responsibility to talk to your potential or existing customers to understand their needs and how to improve your business. It’s a trick that everyone from Sam Walton to Slack’s Stewart Butterfield have relied on.

It’s another troubling sign for your business if you can’t remember the last time that you spoke to a customer. Either you’re not actively engaging them or they just don’t have an interest in your products or services anymore.

3. No one is talking about your business.

This almost goes hand-in-hand with the previous point. Something is wrong if no one is mentioning you on social media, leaving reviews or getting in-touch with customer service reps. It’s either because you’re not interacting with your audience or they simply don’t care about your business.

Make an effort to reach out to your customers by asking them to leave reviews and boosting your engagement on social media. If there’s still silence, then that might not be enough to save your business. I personally blog about payments a lot to attract people to my company. It helps!

Related: 10 Harsh Lessons That Will Make You More Successful

4. You regularly question your motives.

We all have moments where we ask questions like “Why am I doing this?” or blurting out statements like “I can’t take this anymore.” That’s normal during the entrepreneurial journey. However, if that mentality is becoming more and more frequent, than it’s time to move on from your business.

Even if your business is successful, you stay may want to shut-it-down. That’s what Flappy Bird creator, Dong Nguyen, did in 2014. He was tired of the scrutiny, relentless criticism and accusations. Instead of marching-on, Nguyen decided to pull the plug on the Flappy Bird before things got any worse.

5. There’s nothing unique about your business.

Your business needs to stand-out from your competitors. Take a moment and jot down all of the characteristics about your business, products and services, then compare it with the others within your industry. If you’re different from your top competitors, then you have a competitive edge you can use to your advantage.

If not, you can be certain that your business won’t stand the test of time. Either find something that makes you unique, or find an industry where you can differentiate yourself.

6. Complacency.

 Blockbuster is the poster child of business failures in recent history. The main reason that the company went kaput was it failed to acknowledge that its customers wanted something different. Instead of driving to their local Blockbuster and paying hefty late fees, people enjoyed having Netflix deliver or stream movies. Reportedly, Netflix executives offered a partnership with Blockbuster around 2000 but was laughed out of the office by Blockbuster execs. 

In short, complacency was Blockbuster’s demise.

If you’re sitting there wondering why your business is in danger, ask yourself when was the last time that your business introduced something new into the market?

7. Employee turnover and hiring turnovers.

Sometimes your employees realize that there’s a problem before you do. Whether it’s as obvious as not getting paid, or subtler like no longer believing in your business or frustration with management, you need to get to the root cause of high employee turnover.

It costs more money to hire and train new employees then to retain the employees that you currently have. Things can get real tricky when you don’t have the budget to replace those employees. That means that you’re expecting your already frustrated and overworked staff to do more work for you. How much longer do you think they’ll put up with that? It’s a vicious cycle that can ultimately bury your business.

Related: The 10 Best New-Age Business Ideas You Haven't Heard About Yet

8. There’s serious cash flow struggles.

Cash flow is the money that is coming in and out of your business. It’s generally accepted that if you want your business to survive it has to have a positive cash flow, which means that you’re bringing-in enough money to manage all of your expenses.

If you’re having cash flow problems due to debts, poor bookkeeping, growing too quickly, and not accurately forecasting your future earning and spending, then there’s one of the most obvious warning signs that your company is going under. If not correctly dealt with, don’t expect to keep your business open very much longer.