5 warning signs that your business is failing

Businesses generally don’t fail overnight. There are warning signs that a business is struggling long before the situation becomes critical. If you can spot these signs early enough, you’ll be able to take steps to mitigate – and hopefully reverse – the decline. Ignoring these signs may lead to passing the point of no return. 

Here are five warning signs that your business could be in decline.

1. Keep an eye on overall activity

It can take time for a slump in sales to manifest itself in the accounts and cash flow. And ongoing business from existing customers may hide the decline in new sales. So it’s important to keep an eye out for a general decline in business activity month over month. Your sales team might have fewer appointments than usual, for example. Or, you might notice that the phone doesn’t ring as often as it used to.

2. Are you experiencing higher employee turnover?

A sharp increase in employee turnover could be a sign that something isn’t right. It could be a general lack of morale or dissatisfaction with pay that is causing the problem. Or it could be a management style issue. Aside from the usual suspects, it could also be a sign that employees have seen something that you have missed. If employees see the writing on the wall, they won’t hang around until the bitter end, and instead will start looking for new jobs straight away.

3. Are you taking longer to pay suppliers than you used to?

It’s not unusual to need to pay suppliers late once in a while. However, it’s a bad sign if this has become normal practice, and if you start to receive final notices and demands for payments, that is a big red flag. You will spot the trend earlier if you keep a watchful eye on your accounts payable “average days to pay” ratio.

Related: Is cash flow stressing you out? Here’s what to do

4. Watch out for negative cash flow

A steady increase in your use of credit facilities is a sign that you have a cash flow problem. Using more credit means that the business is being supported by finance rather than by equity and sales revenues. The amount of finance that you are using may fluctuate from one month to the next, and a gradual increase in the use of an overdraft facility may not get noticed at first. Even so, an increasing reliance on credit indicates that there is an underlying problem with the business.

5. Keep an eye on sales trends

Another trend that needs tracking over time is the business turnover. One month of lower than usual sales is no reason to panic. If there is a steady downward trend over several months, though, it is cause for concern.

 

It’s very easy for an owner to look at their accounts and business through rose-tinted glasses. No one wants to learn that their business is in trouble, and it can be a hard fact to accept. Don’t ignore worrying trends or convince yourself that things will get better next month. Take action now and you will be in better control of the overall business.

Up Next: 3 more warning signs of a business downturn

Cinco señales de alarma de que su empresa no está funcionando

Por lo general, una empresa no empieza a desmejorar de la noche a la mañana. Hay señales de alarma que indican que una empresa presenta dificultades mucho antes de que la situación se vuelva crítica. Si usted logra detectar lo suficientemente a tiempo estos signos, podrá tomar medidas para mitigar y, con suerte, detener el descenso. Si se ignoran estos signos, se puede llegar al punto en que ya no sea posible dar vuelta atrás.

A continuación, presentamos cinco señales de alarma de que su empresa puede estar declinando.

1. Observe la actividad general

Una disminución de las ventas puede demorarse en manifestarse en los estados de cuenta y en el flujo de caja, y la continuidad de los negocios con los clientes existentes puede ocultar una reducción de nuevas ventas. Por eso es importante mantener el ojo abierto para detectar un debilitamiento general de la actividad mensual de la empresa. Su equipo de ventas puede, por ejemplo, tener menos citas de lo normal. O, usted puede haber notado que el teléfono suena con menor frecuencia que antes.

2. ¿Su personal cambia constantemente?

Un fuerte aumento del cambio de empleados puede ser signo de que algo anda mal. Puede que una falta de entusiasmo general o una insatisfacción con la remuneración sean la causa del problema, o bien el estilo de gestión. Fuera de los posibles culpables habituales, podría también ser signo de que sus empleados han notado algo que usted no. Si ellos ven la escritura sobre la pared, no se quedarán esperando hasta el final y, en lugar de ello empezarán a buscar nuevos empleos inmediatamente.

3. ¿Se está tardando más de lo acostumbrado en pagarle a sus proveedores?

No es raro tener que pagarles a los proveedores tarde de vez en cuando. Sin embargo, es mal signo que esto se convierta en una práctica normal, y si usted empieza a recibir notificaciones finales y solicitudes de pago, se levantará una gran bandera roja. Usted detectará la tendencia a tiempo si mantiene una constante vigilancia en su promedio de días para hacer el pago de sus cuentas por pagar.

4. Esté atento al flujo de caja negativo

Una aumentación constante del uso de sus fuentes de crédito es signo de que hay un problema de flujo de caja. Un alto uso de crédito significa que la empresa se sostiene con financiación y no con equidad e ingresos de ventas. La suma de financiación que usted utilice puede fluctuar cada mes, y un aumento gradual del uso de un sobregiro autorizado puede pasar desapercibido al principio. Pero, aun así, una dependencia creciente del crédito indica que hay un problema subyacente con la empresa.

5. Observe las tendencias de sus ventas

Otra tendencia que necesita un seguimiento con el transcurso del tiempo es el volumen de ventas. Un mes más bajo en ventas de lo habitual no es razón para entrar en pánico. Paro si hay una tendencia descendiente constante durante varios meses, entonces sí hay de qué preocuparse.

Es muy fácil para un empresario ver sus cuentas y ventas de color de rosa. A nadie le interesa ver que su empresa está en problemas, y este hecho puede ser difícil de aceptar. No hay que ignorar las tendencias preocupantes ni convencerse de que las cosas irán mejor el próximo mes. Tome cartas en el asunto ahora y así podrá tener mejor control de sus negocios en general.

¿En busca de más ayuda para mantener a su empresa con buena salud? Vea cómo evitar tres errores frecuentes de facturación.

International expansion: Is your company ready?

Pressure to expand your company internationally can come from many angles. The opportunity to grow, competition, an employee who is familiar with a foreign market or a buyer from another country are all among the reasons we entertain the idea. Perhaps, through a series of articles, I can share learning accumulated during my 40-year international business career.

Culture

During my time in the Peace Corps, I was headed to Venezuela and imagined that somehow, I would finally learn Spanish. Instead, the Peace Corps dedicated the better part of three months of training to cross-cultural experiences. Why? As in domestic business, trust is what motivates and sells. Without cross-cultural understanding to guide behavior, it is difficult to develop trust. Language ability is just table stakes.

Market entry

You have a high degree of product knowledge and know your competitors well enough to dominate your home market. Why not enjoy consistent market share and profitability around the world? Among the things to research thoroughly are cultural differences that affect buying habits or may require product modifications. Other concerns are barriers to entry, such as labeling requirements, tariffs, logistics and protection of local companies. Often, insufficient attention is given to currency issues, financing and labor.

Research and planning are mandatory. However, the selection of the team that does the research is a common stumbling block. The tendency is to rely on people and companies that are more like us: They speak the same language, have a good understanding of the product in its home market or are narrowly focused on product marketing, even if other business issues may have an even larger impact on bottom-line profitability.

Another major decision has to do with structure. Do you create an affiliate company in this market? Is it wholly owned, majority owned or minority owned? Or would it be better to name a master distributor who will build out a dealer network? Do you acquire a local company? What does your research tell you about the impact of these considerations on profitability, market share and repatriation of profits?

One of the choices may be to initially sell to a new foreign market through one or more distributors to learn about the market before investing heavily in another structure. This is a logical decision. However, attention must be placed on the selection of the distributor and the contract that describes the relationship. Some countries have protections for a local distributor that make it very difficult to end the relationship or to set up competition for the distributor. Often, criteria such as not reaching a certain volume of sales become disputes involving each party accusing the other. Be aware that in some cases, a distributor can gain the rights to sell your product if they at one time sold the product but your documentation is faulty. This is the case even if you have entered the market yourself or named another distributor. The courts will either favor the local company or tie you up for years. Obviously, you need a credible third party to do background and credit checks.

Joint ventures and acquisitions present alternatives to naming a distributor. If culture is always important, culture as a factor is extremely important in a joint venture no matter which party is in the majority. All too often, the partner coming in from another country ignores what made the local partner successful and attractive in the first place. The mandate to adopt home market policies and strategies leads to underperformance. Of course, the worst case is when the company coming from the outside names an executive with no international experience as their eyes and ears in the new market. If the idea is to make the joint venture a clone of the home country company, don’t do it.

That leads us to a wholly owned company. For some products, this is a great choice. It affords quality control, assures that multinational clients are treated as they would be treated in the home market and provides greater protection of intellectual property. In some cases, it may also provide opportunities for greater market access to regional markets and access to human resources. The main obstacles are the investment needed and the difficulty of adjusting to the local market.

In part two, we will have an in-depth discussion of the management of international operations, logistics, labor and treasury functions. Stay tuned.

Institute for the Development of African American Youth (IDAAY)

The good fight

Archye Leacock was a professor of political science at Temple University in Philadelphia when he first came up with the idea for the Institute for the Development of African American Youth (IDAAY).

The native Trinidadian, who also earned his PhD at Temple, was dismayed by the low number of at-risk youth in his classroom—youth who, in his opinion, were being neglected by the system. When he looked a little further, he realized his students weren’t isolated cases. The local communities surrounding the university campus were full of kids who were doing what they needed to survive in the city’s rough neighborhoods—and suffering as a result.

Archye wanted to show kids another path, so he started an SAT prep course on the weekends in his spare time.

“We were responding to the needs of young people and their parents who weren’t getting the proper support. They needed to learn how to read and do math,” he says. “So I decided to serve these young people and educate them—and their parents too.”

In 1991, IDAAY was officially born and, over the years, it’s grown tremendously to include innovative new programs. The Intensive In-Home Supervision Program, for instance, works with young people who have been arrested and teaches them how to avoid negative repeat behaviors. Young Fathers United offers workshops to help young men learn about their family history, family trends, basic health and childcare. And, of course, there’s the Main College-Bound Program which helps prepare youth, between the ages of 10-18, for college.

“Many young people believe that the only way to survive in the ‘hood is to be ‘strapped’ (or carry a gun). We focus on teaching them different ways.”

~ Archye Leacock, Executive Director, IDAAY

Cash crunched

Not only is the work “heavy”, according to Archye—two local youth were recently shot at the time of writing, and others are sitting on death row—but it’s often made more difficult due to lack of cash. While the organization is funded by city and state grants, including contracts through Health and Human Services of the City of Philadelphia, timely payment is a challenge.

“When you get a contract, you only invoice at the end of month and then you aren’t paid for another 90 days. So, it typically takes four months after we’ve performed a service before we’re paid,” he says, adding that the organization isn’t paid at all during the contract’s renegotiation period, which takes place over three months every summer. “We’re a non-profit—and we ain’t rich. So, for a while there, we were scrambling.”

“We were collecting donations, but still coming up short on payroll, rent and insurance—the three critical items you need if you want a good program.”

~ Archye Leacock, Executive Director, IDAAY

In 2012, the program had grown large enough that the funding shortage was a substantial problem. Archye explored getting a line of credit with the bank, raising debt, merging with another agency, but nothing worked out. Finally, the board president of IDAAY knew of someone at his church who knew someone at Liquid Capital and suggested a meeting.

Beacon of hope

When Archye sat down for dinner to meet with Liquid Capital, they already knew about the amazing things IDAAY was doing for the community—and they believed in the organization. More importantly, Liquid Capital said they could help.

Shortly after their meeting, IDAAY entered a factoring arrangement with Liquid Capital. The way it works is relatively straightforward: After the organization provides services to clients, IDAAY bills Health and Human Services and sends the invoice to Liquid Capital. Liquid Capital then wires IDAAY the funds and, when IDAAY is repaid by the city, it pays Liquid Capital back. During the summer renegotiation period, Liquid Capital advances the funds and is paid back months later.

It’s not a typical commercial arrangement—and there’s a lot of trust involved—but after years of trial and error, both Liquid Capital and IDAAY believe they’ve found an arrangement that works. IDAAY’s tremendous growth and success since 2012 seems to prove it.

“Because of Liquid Capital, we’ve been able to run more programs, especially our intensive in-home monitoring program. We couldn’t have served this constituency at all if we weren’t able to normalize cash flow,” Archye says.

The factoring arrangement allows IDAAY to pay for the insurance it needs to qualify for government funding—an expense that often lands between $60,000 and $70,000 per year. It’s also used to pay for the additional 11 staff needed to run and grow its truancy program (which Archye estimates has allowed the organization to serve an additional 200 people thanks to Liquid Capital’s help).

«When I’m in a crunch, Liquid Capital comes through. Recently we needed money wired to our account on a Friday but we didn’t communicate that properly. However, I was sending 50 young people to an event sponsored by Microsoft on Saturday and we needed the funds to make that happen. Michael Dasappan from Liquid Capital literally drove down to pay for the lunch, pay for buses. I had no money but Michael made it happen and I returned the funds to him once I received the wired money. I can’t say how critical that was.”

~ Archye Leacock, Executive Director, IDAAY

A promising future

What Archye finds most valuable, however, is the ongoing support provided by Liquid Capital and the peace of mind the factoring arrangement brings. After going blind at the age of 14, running the non-profit has been anything but easy. But knowing the financial side of things is taken care of has allowed him to keep persevering—which he believes is important for the community as well.

“It’s good for people to see a disabled person not only run an organization like this, but thrive. As long as I have the opportunity to help, and the necessary support, I think we can make a real contribution.”

~ Archye Leacock, Executive Director, IDAAY

IDAAY has already been honored with the 2018 International Men’s Day Lt Henry Mentorship Award and the GSK Impact Award—which has, in turn, won the attention of other organizations across the country interested in learning from the non-profit. It’s also working toward applying for additional federal grants. And thanks to the success of IDAAY, Archye has also raised his community profile—and is working toward a run for public office, which he believes will allow him to make a true difference.

“Liquid Capital has given us the courage to move forward and build our program. Money is needed for everything—and the company has been an enormous help. It’s not just a resource. Unlike the banks, Liquid Capital actually cares. They work hard to build a relationship.”

Leverage community connections for your business with these six expert strategies

For most small businesses, initial growth happens locally. Often, business leaders begin to spread the word through family and friends, who then tell their connections in the community. These word-of-mouth referrals can lead to new customers, vendors, partners, employees and more for a small business.

The members of South Florida Business Journal Leadership Trust understand the importance of tapping into their local community to fuel growth. Below, six of them share their best tips for leveraging local resources as a business owner.

1. Seek talent from local universities.

We often look no further than our own backyard universities for talent to grow customers and resources. It is often advantageous, efficient and effective to first invest in hiring those with local degrees who already know community dynamics and potential customers and have strong relationships. They can leverage their own networks and local insights to support business expansion in the marketplace. — Jeffrey BartelHamptons Group, LLC

2. Be active among your alumni group.

As we have seen, the use of influencers has been popular among local early-stage businesses. However, a referral from people who know you and your business well is much more powerful. Additionally, while influencers are strong promoters of consumer goods, your alumni group has a range of members that most probably is broad enough to include most types of business. Become an active club member! — Dennis CustageLiquid Capital

3. Partner with local nonprofits.

One way that we’ve connected with our community is to partner with local nonprofits. This has allowed us to make strong community connections, increase brand awareness with local business leaders (many of whom sit on the board of these nonprofits) and support organizations that are tackling important local issues. — Lauren FairbanksS&G Content Marketing

4. Actively connect with like-minded people.

Whether finding new team members or locating your next customer, working with like-minded people is always a recipe for success. Our team does this by giving back. Seventy percent of our employees are actively involved with local charities, collectively contributing nearly 2,000 hours of community service per month. As we meet similar people, it is only natural that synergies are made. — Jeremy StraubCoastal Wealth

5. Implement a corporate social responsibility program.

I’ve always believed in giving to give — not to get. Incorporating a corporate social responsibility program is a fantastic way to help a business grow locally, meet new talent and possible customers, gain introductions to new business referral sources, and much more. Plus, it feels good and is a win-win all-around! — Durée RossDurée & Company, Inc.

6. Participate in civic and charitable groups.

About 12 years ago, I relocated to South Florida to assist with a business that was just past startup. We wished to let it be known we were joining the business community here, so we looked to get the company involved in civic groups and charitable events. As an unexpected benefit, our participation became a source for employment recruiting and relationships that helped our business grow. — Michael SlukaB2B CFO Partners

Recent Fundings – November 2019