Watch-out for 5 Business Failure Signals
1. Business with poor profit
This is partly due to inability to attract new customer and unawareness of break-even sales. Set a sales goal and a profit margin to help set priority.
2. Poor trade receivable management
When business is growing, receivable management is neglected. In bad times, long overdue debtors could threaten your cash flow position. Solid collection procedure strengthen your debt recovery.
3. Did not prepare cash flow forecast
80% of the business failure is because of cash flow problem. It is vital to forecast the future cash flow in and cash flow out for the next 9 to 12 months. Cash flow template tells you if you have enough cash to pay your debts.
4. Unable to measure business performance
Fixed cost is not fixed when business is growing. Fixed costs is not reduced when sales is declined. Fixed cost could spread over a range of products and services. Identifying and eliminating the unprofitable products could turn around a loss in business.
5. Business without long term plan
Planning for eventuality is important because business valuation is based on cash flow projection. If equity fund raising is your endgame, stable cash flow forecast will increase the value of business, and the cost of fund will be cheaper.