Early Indicators of Financial Trouble for Your Business

Every entrepreneur wants their business to flourish — and to achieve that goal, it’s important to be aware of the signs that your company is struggling. Here’s a look at four factors that indicate your company has to address some issues before it can thrive.

High turnover

Employee turnover is just a part of being in business, but it can quickly become costly for your company. If you find that your company is chronically short-staffed and you fail to retain your workers in the long haul, your enterprise may be struggling. Forbes contributor Mike Kappel suggests evaluating your company culture. Is the current management style aggressive, stressful, or unsupportive of employee growth? Consider evaluating your managers and fostering open communication with your crewmembers. Your employees should not have to endure harassment or toxicity in the workplace — and this environment will only weaken your company in the long run.

Poor publicity

While it’s well known that advertising is an essential part of entrepreneurship, customer word-of-mouth can be just as impactful for your company. Customer silence can speak volumes about the success of a small business. If your customers aren’t talking about your business, posting about it on social media, or sharing pictures of your products, they probably aren’t recommending it to their friends and family — which means your customer base is liable to dwindle or stagnate. If you’re missing out on this free publicity, Kappel suggests offering incentives to your customers to encourage word of mouth, like reviews and social media shares.

Dwindling margins

Investopedia editor Chris B. Murphy explains that you can monitor your net margins for a clearer picture of your company’s health. Your net profit margin is a percentage that illustrates the relationship between your net profit and revenue. To calculate it, just divide your net profit by your revenue. A higher margin indicates higher earnings. For instance, a 35% net profit margin means that your company earns 35 cents for every dollar of revenue. If you find that your margins have been in decline over time, consider ways to shift the balance in your favor. It could be helpful to review your expenses and see where you could cut back, perhaps by reducing operating hours, trimming unpopular products from your lineup, or switching suppliers to get a better deal on your inventory. You could also drive more sales by running promotions or revising your sales tactics.

Slumping sales

Depending on your industry, your business could be accustomed to slumps and busy seasons. However, to accurately gauge your company’s success, it’s important to track these trends. If you notice a consistent downturn, even during the times that are supposed to be your busiest, Kappel has a few suggestions to revive your sales figures. One remedy is to gather feedback from your customers. You could discover an untapped market or learn about a factor that’s keeping patrons away. Kappel also proposes increased advertising, in-store promotions, coupons, and community outreach as ways to drum up sales.

Entrepreneurs face a wide variety of challenges on a daily basis. If you need help managing certain aspects of your company, consider seeking professional advice from a business consultant.