Early warning signs: Is your business in trouble?

28th October 2020

If I asked you about the warning signs of a heart attack, you’d probably be able to tell me the main one: Pressure in your chest.

There is also wide awareness of the other signs, which include pain in your arm or shoulder, jaw, neck or back; lightheadedness, nausea or vomiting; and shortness of breath.

That’s because there have been lots of public campaigns around this. Health organisations know that the sooner you can identify a heart attack and get help, the stronger your chances of survival.

For the same reason, most people know the identifying signs of a stroke: FAST (Face, Arms, Speech = Time to call for help).

It’s been drummed into us through dozens of social media memes…

But what if I asked you the most important sign that a business is in distress?

No one ever really talks about this…

Which is why it’s so easy to miss…

Or dismiss…

(And no, I did not plan that string of rhymes in advance.)

As I wrote last week, companies all over the country are entering a period of extraordinary pressure.

The combination of the Coronavirus economy, the uncertainty of Brexit, and - soon - the demand to start repaying government loans given during the pandemic is going to start to bite many companies hard.

But if you’re not completely clear on the signs that your business needs help, you can easily leave it too late. And this can be fatal - just like seeking medical help for a heart attack or stroke just a few hours after it occurred is disastrous.

So what’s the number one warning sign you need to watch out for?

Issues with your cashflow.

You see, the only thing that will truly kill your company is running out of money.

You can survive your key members of staff quitting… A trusted supplier abandoning you… You can turn around terrible marketing or even negative reviews on social media.

Not that I’m suggesting any of these are desirable - but they are fixable!

But you simply can’t function without cash to pay your suppliers and staff, pay your mortgage or rent, or buy raw materials.

When the cash runs out, your business is finished.

That’s why you need to watch your cash situation with an eagle eye.

If you have regular cashflow reports, you’ll be able to flag up any issues far ahead of time. That’s why cashflow reports are an essential tool for grown-up businesses.

But if you don’t, there are still red flags to watch out for….

For example, you might see your clients starting to take longer than usual to pay…

And you might start struggling to pay contractors or suppliers yourself (“Just a couple more days, we promise”).

You might be approaching your business overdraft limit. Or perhaps you’re moving money around from one budget to another, to cover your outgoings (because it feels increasingly difficult to do)…

Or you’ve had to take on some extra debt - including the government Coronavirus loans, which many treated as “grants” even though they were nothing of the sort.

Taking on debt can be a good thing for your business if it’s part of a well-thought out plan to help you grow. But if the purpose is to cover short-term financial needs, that’s a warning sign.

It’s important to note that you might still have a thriving order book - so your business might still look quite healthy on paper. That’s one of the reasons why so many owners of distressed businesses get complacent about cash flow!

But in reality, money is tighter and tighter… It doesn’t feel like a thriving business.

If any of those signs resonate, it’s always best to seek help sooner rather than later. Don’t wait for your cashflow issues to spiral out of control. Nip them in the bud!

If youd like help with that, get in touch with me today and let’s talk about your situation.

We’ve turned around many businesses showing signs of distress, nurturing them back to financial health with expert financial management.

We’ve even turned around quite a few businesses that were in very deep financial trouble and without intervention couldn’t have survived. But with strict controls, some emergency measures and a lot of hard work, they are once again thriving.

And if you’re worried about your company’s financial situation, we can help you too.

Just call us on 01279 647 447 to get in touch right now.

Warmly,

Garry

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