As more information becomes available, it turns out that there were some definite warning signs about the submersible that imploded recently. Had the participants paid attention to certain warning signs, they might have been able to avoid the disastrous consequences that occurred.
Last month we talked about business implosion. This month we’d like to talk about a few telltale warning signs you might want to be aware of.
Signs, Signs, Everywhere There’s Signs…
Someone should write a song about that, right?
Hey, I don’t know about you, but sometimes I get annoyed with the sheer number of signs we are subjected to when driving down the road. Seems like everyone is trying to sell me something I most likely don’t need. And then my annoyment increases when I keep seeing the same signs repeating the same messaging. Do you ever feel like that? How do you cope with that? For me, I tend to stop paying attention to them. I filter out the redundancy and only focus on the info I need to get me where I’m going.
Are you doing that in your business? Which signs are you paying attention to, and which ones are you ignoring?
Yea, yea, I don’t like being told what to do. But ignoring signs does not mean underlying issues will resolve themselves, Pollyanna…
Here is THE most basic sign you need to pay attention to…
- How is my cash flow? Are your cash balances increasing or decreasing?
This is a very fundamental sign that indicates the basic health of your business. Think of it like taking your pulse. Is your pulse running fast or slow? The answer indicates that there might be something dysfunctional going on that should be looked into.
Let’s assume it’s going in the wrong direction. If that’s the case, what other signs should you be looking for? Here are a few for your consideration:
- Take a look at your AR (Accounts Receivable) Aging.
- Are your customers paying on time? If not, why?
- Is your AR increasing? Why? That might be either a good or a bad sign depending on that reason.
- Are your credit card balances increasing? Why?
- Are you able to pay these bills on time every month? Are you paying interest to the credit card company?
- What are you spending the money on?
- Are you buying business essentials or fun things to have?
- What is the Return on Cash for what you are buying? In other words, when you spend money on something, when does the money come back to you (if at all)?
- Low or negative EBITDA. Is your Earnings Before Interest, Taxes, Depreciation, Amortization increasing or decreasing? Why?
- Decreasing volume in sales. Are you selling less products or services?
- Increasing inventory.
- When physical inventory increases, it sucks cash.
- It’s also an indicator of slow movers that might need to be discounted to move (or seasonality)
We implore you to be aware of things that might bite you on the buns if not acted upon. We HATE business implosions, especially when we can avoid them.
Need some help finding and fixing anything you see here? Give us a call. We can help!!
