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Businesses In Trouble

The Early Warning Signs & A 7-Step Recovery Program

All too often it isn’t until a business owner is facing dire consequences is he/she willing to admit ‘the business is in serious trouble.’ Don’t be confused. We are not talking about snags, hitches, setbacks, hindrances, quandaries, predicaments, obstacles or dilemmas. These are the daily stock-in-trade of all business owners. However, left unattended, they are the precursors of crisis.

To state the obvious, the problem with ignoring or delaying the process of dealing with business difficulties is – the longer the delay, the longer it will take to resolve them and the more of the business owner’s time will be consumed in the process.

What are some of the typical early warning signs of pending disaster?

In Sales -

• There is little or no revenue growth (either the number of sales is falling and/or the average sale size is less)
• The sales "pipeline" of potential orders is slowing
• The sales staff is reporting fewer order-producing sales calls than they have historically averaged
• Key customers have stopped buying or their orders are smaller and less frequent
• Customer special requests, comments and complaints are increasing
• There is competitive pricing pressure (created by either new competitors or existing competitors seeking to increase market share, or by new technology)
• Profit margins on sales are declining (due to excessive customer incentives, etc.)

Financially –

• Available cash balances are shrinking
• Checking and savings balances are trending lower than normal averages
• Credit line balances are trending higher than normal averages
• Customers are taking longer to pay
• The business must borrow more money to make credit payments or meet business obligations
• Supplier payments are late (either continually delayed or put off all together)
• Tax payments are delayed or unpaid
• Key customers (or many customers) are having financial problems
• Profit is decreasing (a steady stream is required to services debt, and invest in new technology, equipment and business development)
• Banks, other loan providers, and credit-term vendors request additional information on financial statements and loan applications.

In Operations –

• Inventory (in general) is increasing
• High volume inventory items remain unsold for longer-than-expected periods
• Cost of producing goods or services is rising
• It is taking longer to produce goods or services
• Equipment failures threaten productivity (raising direct costs & lowering profit)
• Employee turnover spikes Growth and development plans requiring additional funding are retracted, delayed or cancelled

Disaster can be averted. All that is required is recognizing the early warning signs, analyzing the problem(s) and its (their) potential resolutions, develop a corrective action plan, and swiftly implement it. If a business owner has any doubts about his/her ability to effectively execute any of these steps (analyzing the issues, identifying the proper corrective action, and implementing the solutions), seeking outside help from qualified, experienced professional is mandatory.

As the saying goes, "given an infinite amount of time and an infinite amount of resources, any problem can be solved." Prior to deciding to try his/her hand as a "self-fixer," a business owner should consider the future lost revenues and profits, the hard costs, and the time that will have to be expended in "experimenting" on a trial-and-error basis with alternative solutions – and with no certainty of success.

The small business owner is best advised to take a page from the play-book of the Fortune 500 companies. In spite of the fact that they have thousands of employees on staff with a broad range of expertise and many thousands of years of experience, they still collectively spend billions of dollars each year on "outside" expertise to solve core business problems. Why? They have run the calculations and determined the return on investment in outside assistance outweighs the associated cost, both in time and money.

Now you have to ask yourself, is the average small business owner more savvy and capable than the leaders of the Fortune 500? If common sense prevails, the business owner will realize there is only one logical conclusion. Seeking professional assistance is the only reasonable, cost effective option available.

Companies of all sizes experience similar problems. Although the resolutions to them are strikingly similar, the "fix" applied must be custom tailored to the individual company to achieve optimum results. It is only logical then that the business owner would engage the services of the largest consulting company to the small to medium size business in the North America, IPA-IBA. Our breadth of knowledge, expertise, and experience in resolving troubled business’ problems is unparalleled in the business community.

Timing is the key. The worst thing a business owner can do is ignore the warning signs. Business troubles are like cancer. If you catch the problem early-on (in its infancy), and immediately institute a treatment protocol, the prognosis for a complete and speedy recovery is very high. The longer the underlying cause is allowed to persist, the more prolific the symptoms and the less likely a speedy and/or complete recovery is possible. Just like cancer, if untreated, death is inevitable.

Choosing to have an IPA-IBA Business Analysis at least biennially (every two years), or more frequently if the business’ proactive monitoring system sets off an alarm, is the wisest course of action available today. As we know from experience, to some business owners it will mean the difference between survival and failure.

A business owner’s 7-step trouble recovery program:

1. Have an effective "proactive" monitoring system in place
2. Don’t blame the business problems on events beyond your control (e.g. the economy, industry trends, 911 etc.)
3. Don’t discount current business trends assuming they are only part of a more-protracted-than-usual seasonal trend
4. Realize more money is not the answer to your problem(s)
5. Recognize and react to early warning signs (and engage professional help – IPA-IBA – to assist in building a recovery plan)
6. Stay calm and stay focused
7. Never stop marketing