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  • 7 Proven Warning Signs Of A Dying Business
 
Tito Philips, Jnr.
Sunday, 22 April 2012 / Published in Management, Thought Bank

7 Proven Warning Signs Of A Dying Business

what are the warning signs of a dying business?

Every dying business sends out certain warning signs before the eventual collapse. For the observant entrepreneur, this disaster is avoided by taking certain strategic measures. But for the non-observing entrepreneur, this disaster seems to creep in suddenly.

The death of a business is not as sudden as many tend to assume. Just as there is no such thing as overnight business growth, there is no such thing as overnight business collapse.

Accidents seldom kill businesses like it does kill humans.

Sicknesses seldom kill businesses like it does kill humans.
So what kills businesses then?

Businesses Die as a Result of these 3 Deadly Factors;

  1. Negligence
  2. Inexperience
  3. Greed
  • Negligence: I am writing this unusual article to help you fight against this number one deadly factor that kills most businesses –negligence!

Negligence is simply not paying adequate attention to your business. Negligence is about being too busy ‘working in’ your business that you forget the importance of ‘working on’ it.

  • Working in your business = doing business
  • Working on your business = building a business

Later on in this unusual article, I will be pointing out 7 warning signs of a dying business. Knowing them will help you to be less negligent.

  • Inexperience: This is the second factor killing most businesses and to some extent, this also has its root in negligence.

How do I mean?

Inexperience is not an excuse for failure. It is true that the best teacher is experience. But it doesn’t always have to be your own experience. Leverage on the experience and expertise of others ahead of you in different areas of your business. That’s why smart entrepreneurs always surround themselves with mentors, consultants, coaches and other professionals generally smarter than them on specific areas of their business.

You cure inexperience with borrowed experience. It doesn’t have to be your own experience!

  • Greed: this factor is self explanatory. Any attempt to bite more than is ethically allowed will kill your business faster than the first two deadly factors.

Your business will die if you give customers less value than they pay for – greed.

Your business will die if you give your employees less than they contribute – greed.

Your business will die if you think your own needs is far more important than the needs of others –greed.

You cure greed by following the golden rule of business.

Those are the 3 deadly factors that can kill your business. Let’s now identify the 7 warning signs that inform you of their presence. In other words, the 7 warning signs of a dying business are the different ways Negligence, Inexperience and Greed manifest their selves in your business. They represent the symptoms of the 3 deadly factors that can kill your business.

The 7 Warning Signs Of A Dying Business

What are the obvious symptoms of a failing business?

1.       LOW SALES

This is the most obvious sign of a dying business. Why? Because sales is the lifeblood of every business. Without sales, there is no cash flow and without cash flow, there is no business continuity.

Sales is to a business what blood is to we humans.

So when you begin to notice a period of low sales in your business, be on the alert, your business may be dying!

In this unusual article; what to do when business is slow, I described the first step you need to take in managing a low sales period.

2.       NO INNOVATION – Nothing New

Variety they say is the spice of life. Meaning, people love new things. Your business will always be at the front of your customer’s mind if you regularly innovate –come up with new things.

So here’s the big question; when was the last time your business introduced something new [product/service] into the market?

To remain in business, you can’t afford to rely on past glory alone. You’ve got to keep reinventing yourself through innovation.
IBM held on to their past glory as the industry leader of mainframe computers and watched Microsoft steal away the global market of desktop computers through their user friendly Windows Operating Systems.

When there’s nothing new about your business, you bore existing customers and discourage potential new ones.

3.       NO DIFFERENTIATION   – Nothing Unique

Be careful of making the mistake that innovation is the same thing as differentiation. I listed these two warning signs after each other to make this clarification.

New and unique are never the same.

New ≠ Unique.

New = latest in town

Unique = different from others

What is differentiation?

When you list out all the characteristics of your business, product or service and compare it with that of others in your industry; differentiation is those attributes of your business, product or service that isn’t on any of your competitor’s list of attributes.

Differentiation is about having a competitive edge above your industry peers.

Differentiation is about focusing on a specific point of uniqueness separate from your industry peers.

Businesses that last stand the test of time because they are different from others in the same industry. Customers treat you like others when there’s nothing unique about you.

So here’s the big question; what’s unique about your business in comparison to your industry peers?

4.       NO POSITIVE WORD OF MOUTH – referrals and testimonials

Are people talking about your business, product or service? If yes, what are they saying? If no, then you are as good as dead. Period.
When customers no longer talk about your business, then you don’t matter. Businesses that matter get talked about by their customers.

How do I know?

By the number of referrals and testimonials such businesses get.

So here’s the big question; how many referrals and testimonials has your business generated this year?

If your customers aren’t talking about you to their family and friends, watch out. They aren’t talking because you are not WORTH talking about.
To make them talk, give them something worth talking about –innovate, differentiate, blow their mind!

5.       LOW EMPLOYEE MORALE

Until now, the four warning signs discussed above focus mainly on your business’ relationship with your customers. That is; what customers expect from your business and what you expect from them. Now it’s time to shift the focus to the people who make the products/services you sell to customers –your employees!

How are they? How is your relationship with them?

They are the first customers of every business. After your purpose, they come next. They greatly determine the success of your business, because the products/services you offer for sale in the market come from their collective efforts.

So here’s the big question; how well are you paying attention to your people? How well are you taking care of them? Are they working with a clear unity of purpose? Are they at their best possible self ever? Are they working as one – a team?

A business with high employee morale is a healthy business. So to know how well your business is doing, check how well your people are doing.

6.       POOR CASH FLOW MANAGEMENT

If sales is the lifeblood of a business, it is so because of cash flow. After sales, the next financial indicator of a healthy business is how well they manage their cash flow.
Oftentimes a Profit & Loss (P&L) statement may show that a company is profitable, yet the company is struggling to survive.

Why?

The answer lies in their cash flow.

Successful small businesses become successful large businesses when they understand that cash is king and actually focus their business on generating, and preserving, cash.

What is Cash Flow?

Cash flow refers to the inflow and outflow of cash within a business. That is; the flow of money – where is it coming in from [account receivables] and where is it going out from [account payables]?
Managing your cash flow properly is ensuring you never run out of the financial resources necessary to sustain your business. A business that runs out of cash is a dead business!

So here’s the big question; how smooth is the flow of cash in and out of your business?

To accurately answer that question, below are two key indicators of poor cash flow management, both must be avoided to keep your business healthy financially.

  • Overstocking Goods

Having stock that you cannot shift or sell quickly is a serious waste of funds and points towards poor cash flow management. Cash is tied up in inventory, the less stock the better. So only order what you can sell: you can always order more as demand increases.

  • Poor Ordering and Invoicing Practices

Do you meticulously keep detailed invoices and accounts, outlining who has bought what, when they bought it, how much they owe and whether or not they have paid yet? If the answer is no then this must be fixed quickly.

7.       NO LEARNING AND DEVELOPMENT

Innovate or die.

Differentiate or die.

Change and grow or die.

Learning and development is the secret of competitiveness in business. To remain relevant in the market, you need to keep changing and keep growing. The moment you stop learning, you start dying. This is as true for individuals as well as businesses.

Your capacity to innovate is dependent on how much you learn and develop.

Your capacity to differentiate is dependent on how much you learn and develop.
So to do more, learn more.

To be more, learn more.

To have more, learn more!

Your Turn

From experience, yours or that of others, what other warning signs of a dying business can you add besides the 7 mentioned above?

Which of these 7 warning signs are you currently experiencing in your business and how do you intend to strategically correct it?

Speak your mind; share your thoughts and questions in the comment section below.

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15 Comments to “ 7 Proven Warning Signs Of A Dying Business”

  1. Mark Harai says :Log in to Reply
    April 23, 2012 at 12:52 pm

    Hi Tito,

    I’ve experienced just about every situation you’ve mentioned over the last 25 years starting businesses. As you’ve pointed out, it’s not necessary for these lessons to be your own, although it’s usually par for the course, even if you utilize the experience of others.

    There’s just something about having first hand experience over second hand information that makes a big difference for most entrepreneurs I’ve been around.

    Make it a great week sir!

    1. Tito Philips, Jnr. says :Log in to Reply
      April 23, 2012 at 8:00 pm

      You are right about first hand experiences. We naturally learn better from our own mistakes. For instance, I am currently working on a better cash flow management system for my business. I knew the importance of cash flow to a business’ survival, but I only saw it from the sales point of view and never from a management point of view.

      However, it also pays to learn from the mistakes of others, especially those we have been privileged to witness or learn about.

      Thanks for the comment Mark.

  2. Grady Pruitt says :Log in to Reply
    April 24, 2012 at 4:44 pm

    You mentioned that negligence is primarily working “in your business” rather than “on your business”. There’s another form of negligence that we must beware of, especially with an online business, or any sort of business where you don’t have “set hours”. That form of negligence is procrastination. In other words, not doing anything to work on your business at all. I spent three months in this zone, and I was fortunate to actually have the traffic to my site increase because of prior efforts, but I would think that this is not the norm. If you procrastinate too long, even previous efforts coming to fruition will not be enough to keep your business running.

    These things definitely are some great things for us to think about. Thanks for sharing!

    1. Tito Philips, Jnr. says :Log in to Reply
      April 24, 2012 at 8:29 pm

      Hello Grady,

      Your input about procrastination is so on point. What a fresh perspective you brought in here. Not knowing what to do is one thing and knowing what to do but not getting down to doing it when you should is another thing.

      Procrastination i would say is a higher degree of negligence because it shows how a business can die from inaction. It is a classical case of how most entrepreneurs are trapped “doing business” rather than “building a business”.

      Thank you Grady for this insightful addition.

  3. Joseph Mills says :Log in to Reply
    May 2, 2012 at 7:49 am

    Greediness can kill everything, yourself, your business, family your relationship with others. This is the most enemy in this world.

    Due to greediness lack of consideration to others arises and when it happened good relationship to customer are affected and start of dilemma begins.

  4. signs aurora says :Log in to Reply
    June 9, 2012 at 3:47 am

    Saved as a favorite, I love your web site!

  5. rony says :Log in to Reply
    February 23, 2013 at 3:50 am

    Grady pruitt says I quote him ” I spent three months in this zone, and I was fortunate to actually have the traffic to my site increase because of prior efforts, but I would think that this is not the norm”

    From his opinion i will be grateful if in this forum anyone can offer me the best route to promoting my website at a very cheap cost

  6. Belle says :Log in to Reply
    July 27, 2013 at 7:06 am

    Hello, I check your blog on a regular basis.
    Your writing style is awesome, keep doing what you’re doing!

  7. # says :Log in to Reply
    July 31, 2013 at 10:10 am

    So when burglars see a home with these type of Doors installed they will go to
    the toilet. Obviously, it will either need to be right so as to
    purchase the highest quality available with a full lip strike routing pattern,
    and end drilling units for sills and head jamb screws.
    To the integrity and credit of Colman, he always gave
    credit to Mr. Old doors often look dull due to their design, for
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  8. Debtor Finance Solutions says :Log in to Reply
    April 16, 2015 at 4:43 am

    Every business man should read this article.
    Yes, Cash Flow should be one of key points here. Most small business owners think about Sales rather than cashflow.

  9. Benard says :Log in to Reply
    October 22, 2015 at 10:06 am

    Great article I must say. If only entrepreneurs could listen http://www.entfire.com

  10. uthman Saheed says :Log in to Reply
    September 9, 2016 at 8:28 am

    The very first time my business failed was do to my lack of cash flow management knowledge in business. I only handled cash in a traditional way without paying attention to cash flow.

    Thanks for sharing this

    1. Tito Philips, Jnr. says :Log in to Reply
      September 9, 2016 at 8:32 am

      Thanks for the comment,

      Mistakes are usually the source of failure due to inadequate experience or knowledge. It’s good you are equipping yourself with the right knowledge for the entrepreneurial journey you are embarking on again.

      With careful execution and proper guidance, success is more achievable than just slugging it out ignorantly hoping to succeed.

  11. Jose Domingo says :Log in to Reply
    March 22, 2017 at 3:29 pm

    I totally believe in the first sign, low sales is a SUPER easy indicator of a dying business. Great article. My take on this topic is customer churn. One of the worst things a brand can come down with is a bad case of customer churn. The three symptoms are:
    Declining Purchase Frequency, Declining Sentiment (NPS), Declining Average Order Value. The article on how to track these are here:
    https://www.sweettoothrewards.com/blog/is-your-brand-sick-learn-the-symptoms-of-customer-churn/

    1. Tito Philips, Jnr. says :Log in to Reply
      March 23, 2017 at 11:44 am

      Nice contribution Jose,
      Thanks for the addition. Will check out your article.

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