Lack of cash is the main reason given for business failure, but a number of operational aspects begin to point to difficulties long before the money runs out.
There is a skill in how to spot the signs of business failure and be brave enough to make the necessary changes so that any decline is arrested and trading fortunes improved.
One or two negative signs do not necessarily mean that financial failure is inevitable. Clearly, the more signs that are in evidence without corrective action being taken, the greater the cumulative effect of creating an unwelcome downward spiral.
Having been consulted by many businesses over the last 25 years, one learns to spot the tell-tale signs. Some businesses were saved and returned to a profitable pattern of trading. Others were not so lucky.
1. Advice
Nobody makes the correct decision every time and most businessmen and women are successful because they know what they are good at and are happy to accept advice from others who have better knowledge or experience in other matters.
Learning from mistakes is just as important as getting it right first time. Being headstrong and not listening to anyone is unlikely to promote success, even if the business is a singe-person entity.
2. Delegation
An inability to delegate does little to promote success.
Doing everything yourself is likely to create high blood pressure, decrease efficiency and reduce business success. Many people who have built substantial businesses have done so by recruiting high quality people and delegating key tasks to them. As a result, everyone benefits from participation in the business.
3. Quality attitude
A consistent and high quality attitude toward the business product or service is paramount.
For example, a window cleaner will not enjoy a significant level of repeat business if he leaves streaks or marks on a window and knocks the heads off the householder’s prize begonias when placing his ladder in the garden.
Equally, a supermarket will lose customers if goods aren’t fresh or well presented.
A quality attitude pervades all aspects of a business.
4. Change
Many businessmen who have been around for a number of years find it difficult to accept change to existing work practices. For example, if everyone is sending e-mails, using the postal system is helpful but unlikely to demonstrate an ability to embrace new technology.
Be flexible, understand why change is beneficial and act accordingly.
5. Ability to do the job
Most tasks cannot be completed to a customer’s satisfaction without you having sufficient technical ability and knowledge.
If an individual retires early and decides to run a public house, without technical ability and expertise, the business is unlikely to thrive.
Don’t be afraid to ask for help.
6. Communication
The art of communication is a fundamental aspect of any business whether that is in relation to fellow directors, employees, customers, suppliers or third parties.
Without being able to communicate what the business is trying to achieve and securing help from others, an owner may find life terribly frustrating because he forms the view that nobody seems to understand him.
That is not to say that one happily discusses trade secrets but merely ensures that everyone involved with the business is pulling in the same direction.
Michael JM Reid is a kicensed insolvency practitioner and partner of Meston Reid & Co