Warning Signs Your Business Might Be Failing: Five Red Flags to Watch Out For

Warning Signs Your Business Might Be Failing: Five Red Flags to Watch Out For

Going into business is a difficult, stressful, and generally complex process and for some people – it lasts a lifetime. But for others, there are often times when the market seems to fall out from under them, the global economy changes, or something else happens – and the business, which may have been doing really well in the quarter before, is suddenly struggling to survive. Not every change in fortune is sudden, and there are actually some red flags, which – once you know what they are – can and should be watched out for, in order to help your business stay strong, and get over the hard times.

This is by no means an exhaustive list, but here are five red flags and warning signs your business might be failing, and if they’re discovered and actioned early – then catastrophic consequences may possibly be avoided!

Consistently Chasing Late Payments

Although late payments can happen, if they’re happening again and again, from the same areas or suppliers, or if the business is constantly finding itself short of money, even when careful planning has been put in place – this can be a red flag that you’re in trouble.

Businesses that don’t have a consistent cash flow or are constantly struggling to make ends meet are already in a precarious position and should any outside factors (such as a large order being returned, or sales being less than expected), then it can signal the end for the company involved.

Ignoring the Competition and the Market

As a business, you want to do your own thing, and be known for your product or service – but no business operates in a vacuum, and it’s important to take note of what those around you are doing, and how the current market is performing.

Businesses that ignore competitors can often find themselves making costly mistakes (sometimes ones that their competition have already made, which could have been learned from, at significantly less cost), or misjudge the market – in some instances, this can just be a minor inconvenience, but at other times, it can lead catastrophic results and the end of the company.

Sales are Down and Emergency Measures Aren’t Ready

Having a backup plan (and a backup plan for your backup) is crucial, especially if you’re in a market where your products or services are time limited. Businesses should be carefully monitoring their incomings and outgoings and highlighting specific Key Performance Indicators (KPIs) to determine how well products are doing – this goes for ‘old staples’, new releases, or different versions – and each should have their own metrics and performance evaluations.

The amount of time between each evaluation will depend on the type of product or service it is – some may benefit from very regular (almost weekly) review, whereas others may see a quarterly review being acceptable, but this shouldn’t be ‘guesstimated’ – rather it should be carefully worked out, based on sales, interest, turnover, etc – and then each check should be compared against others in the same year, and others from similar times in previous years (this is especially important if you have seasonal products that might hit peak popularity in Q2 for example, but would look in dire state when compared to Q4).

Once you have your statistics and figures, you should be using them to monitor sales, marketing, promotion, etc – and if there appears to be a problem, you’ll be positioned to make changes or implement your backup plan at the earliest most appropriate stage, rather than leaving it until it’s too late.


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