When you start a business, you are filled with all the passion and excitement in the world. You are thinking optimistically about how your customers will love your product and how you will expand your business into new territories. However, things do not always go as planned, and one must keep that in mind. No matter how hard you try, the success of your business still relies on the response from the customers. They are the ones in power without them even knowing about it. When a business starts to fail, it is a test for a true business owner.
If you think that a failed business attempt makes you a bad businessperson, you might want to think again. Evan Williams is one of the co-founders of Twitter, one of the biggest social networks on the internet today. However, there was a time when he started Odeo, a platform for podcasts, which failed miserably. Similarly, there are hundreds of other examples of people who failed at first but then made big comebacks. In reality, a bad business owner is one who cannot identify when it is time to close the business down and continues to take the damage.
CEO Guy Galboiz let us take a look at some of the signs that tell you that your business needs to be shut down. If you have a way to change things completely, do that. If you plan to continue as is despite the clear signs, you are only hurting yourself emotionally and financially.
Big Signs That a Business Needs to be Shut Down
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Reducing Customer Strength
Your customers are the strength of your business. You need more strength every day. The last thing you want to see is reducing customer count on your business reports. Of course, you have many different ways to reach out to new customers. You have to do some more intelligent marketing and try to get more customers as soon as you can. However, if you have been trying your best but your customer count is not increasing, it could be a signal that your business needs to be shut down.
It is important to know that you have to look at the customer count in multiple ways. First, you have the existing customers. Secondly, you have to look at the rate of making new customers. If your existing customers are going down, your next action should be to look at the rate at which you are making new customers. If this rate is faster than your customer turnover, you should not worry much. However, if your customer acquisition is going down and your customer retention is getting worse with time, it is better to close the business down unless you have some big plan in mind.
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Your Financial Stress Is Permanent
Financial stress is a part and parcel to any business. However, there is a difference between thinking about how to increase profits and thinking of how to reduce the damage. If you find yourself always worrying about worsening financial condition, take it as a signal. The owner of a successful business is thinking about expansion into new territories, improving service standards, bettering customer experience, etc. On the other hand, the owner of a failing business is mostly worried about survival. Are your financial worries associated with your survival?
If it has only been a few months since you started your business, the worry is natural and understandable. However, if you have been going like this for several months without any relief, it is better that you take the big decision. Keep in mind that chronic stress can be a cause of many physical illnesses. From diabetes to heart conditions, stress can cause all of that when you are dealing with it on a daily basis. If not for other things, close the business down and do something else for the sake of your health.
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You Can’t Pay the Fixed Expenses
Once again, you have to understand the difference between not being able to fulfill an order from a customer and paying the rent of your building. If you have a big order from your customer and you can’t fulfill it, you might just be short on your cash flow. Shortage of cash flow does not necessarily mean a failing business. In fact, all the new and small businesses have certain cash flow problems in the beginning. You can arrange some loans, fulfill the orders, make a loyal customer, and recover your costs when the customer pays for the products/services.
On the other hand, when you can’t even afford the fixed expenses of your business, you are in a huge trouble. There should never be a point where you can’t pay the rent of the office space or the building you have rented for your business. You should never have troubles paying the utility bills because that just goes to show that you don’t have any money as backup. When you don’t have a backup and you can’t pay your fixed expenses, you should wrap things up. The only other way out is to get a loan. However, getting a loan to pay the fixed expenses of your business can be the worst decision you can make.
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Your Employees Are Not Staying
You cannot blame the employees when this happens. They came to work with you because they have their own expenses. They have families to manage and many other financial troubles. The salary you pay to them keeps them working. However, mature employees are quick to realize when a company is on the brink of closure. A monthly compensation is not enough for them because job security and a stable financial future are two important considerations for them. They don’t want to stay with a company that will not be around in the coming months.
When they have analyzed the situation fully well, they leave your company. The biggest sign is when the employees you trust the most start leaving too. They can’t see a future with you and it is not their fault if they don’t stay with you. Loyalty is one thing, but they can’t pay their utility bills with loyalty or feed it to their children.
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You Notice Others Noticing a Failing Business
This is the most painful part of a failing business for the business owner. Somewhere in your mind, you are always ready to face challenges and hoping that you will be out of your troubles at some point. However, when you see that others can sense your business failing, it is not a good sight at all. You can’t ignore it no matter how much you want. You can sense it from the people look at you when they talk to you or with their facial expressions when they enter your business premises. You might even face some unusual questions from the people who come for the interview.
For example, an interviewee might ask something like, “What are the peak working hours of your company (while looking around searching for people)?” In short, they are trying to ask if there are any other people working for the company. A business that’s experiencing growth has hustle and bustle in the office or within the premises. If it all looks gloomy and quiet, and there are not enough people, it is a sign that people notice very quickly.
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Your Customers Don’t Take You Seriously
As unfair as it might sound, your customers might stop taking you seriously when they see that your business is failing. Humans should be concerned about other humans, but that’s not always the case in the practical world. In reality, your partners and customers are willing to go the extra mile for you when they can expect something from you in return. However, when they know that you are at a point where you can’t offer them any value, they stop caring about you. You might notice that in the way your customers pay you. Are they delaying your payments and seem complacent while doing that? If yes, they are not serious with clearing your invoices in the first place.
The problem in this situation is that even you can’t pressurize them to pay you the money they owe you. That’s because you are afraid you might infuriate them and lose any chances of getting your money back. You have to play the nice guy for as long as you can, but late payments from the customers are hurting your business on a daily basis.
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You Can’t Fix the Little Issues
Not having enough money to grow the business is one thing, but sometimes you don’t have enough cash to even fix the little problems with your business. For example, an electricity board might be waiting to get fixed for a long time, but you never had enough spare cash to spend on it. You might be noticing that the paint is coming off the walls but you can’t dare go for a paint job because you don’t have the money to do so. You can notice that the sign outside your business premises looks worn out, dusty, and old, but you can’t do anything about it no matter what you want.
When even the little issues like these become hard to fix, you should be clear in your mind that the business needs to be closed. Once again, you are highly advised not to go for a loan from anyone for something that does not yield any returns.
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Your Business Can’t Pay You
The least you can expect from your business is a salary for yourself. If you don’t have enough cash to renovate or grow the business, that’s okay. You can continue to run the business steadily and wait for the time when you have enough cash to do those things. However, if you are not even able to manage your own salary from the business, you should not take that lightly. It is a serious concern because you might want to start a job to pay yourself. Being employed and running a business at the same time just to pay yourself is not healthy. It will be a lot of stress and can take a toll on your health as well.
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You Can’t Think of Quitting Your Job
A lot of business people continue working for some time and quite their jobs when their business has reached a certain level of earning. If that’s part of the plan then it is a good thing. However, if you can’t quite your job because you think quitting it will get you in all sorts of financial troubles then your business is not doing what it is supposed to do. You are probably putting money from your pocket into your business. When you think of quitting your job, you know you will have no money to support yourself and your business. In short, you are managing everything from the salary you are getting from your employer. Your business is only a burden for you.
If you notice the biggest entrepreneurs of the world and their first advice to someone who they think have a great opportunity at hand, they often tell them to quit their jobs. In fact, they would even go to the extent of telling students to quit studies. That’s because a successful business gives you everything that a job never can. However, if the thought of quitting the job worries you, your business is only a source of sucking your cash up.
Final Thoughts
There is no shame in admitting to yourself that your business is not successful. It is a sign of a successful and strong leader to realize the mistakes and improve them with a plan. Not realizing your faults, mistakes, and damages unless you have a reached a point of total devastation is what a true failure looks like. Before you even start a business, you need to set an exit point. You have to create a checklist of items that will trigger an exit for you. When you analyze your business and notice that it checks every box on that checklist of failure triggers, you have to make sure you close the business down before suffering any further loss.