Signs Your Business Needs to Pivot to Avoid Bankruptcy
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Bankruptcy is a frightening possibility for businesses of any size, even ones that have significant assets and capital at their disposal. While there are plenty of warning signs that indicate a need for change to avoid catastrophe, some of them are easy to miss or ignore until it’s too late. Avoiding bankruptcy requires vigilance, planning and willingness to shift strategies to keep your options open as you move forward.
There have been plenty of companies that faced bankruptcy despite a significant market impact and ever-increasing number of sales. Getting more customers and moving more products or services is certainly important, but so is the actual profit made on each of these transactions. Businesses should always keep track of their margins and carefully calculate their profit on each project or product offering. Changing consumer habits or market competition can force margins down, which means companies need to adjust their practices to maintain profitability.
Poor Credit Record
Even if employees or investors aren’t aware of a company’s true financial state, a close look at the organization’s credit record and rating can illuminate the truth. Perfect credit isn’t necessary for success, but businesses that consistently fail to keep up with bills or debt payments often struggle to borrow when their survival depends on it. Leaders should consider using company credit risk analysis tools and other resources to ensure they have access to credit when it counts.
High Turnover Rates
Successful companies know how important employee loyalty and satisfaction is in determining the ultimate outcome of a business venture. Acquiring skilled employees and investing in training or onboarding is no easy task in many industries, so rising turnover rates should spark concern for executives. Companies that consistently lose valuable employees need to evaluate their options and start building a healthier business culture that encourages engagement from the workforce.
Cuts to Essential Budgets
Many businesses go through slow periods where they struggle with cash flow and have to make painful cuts to parts of their budget. However, desperately looking for cuts anywhere and everywhere can also be a sign that the company needs to change course or face disaster. Slashing employee benefits, reducing research investments or cutting dividend payments are all warning signs that a company’s finances may be in trouble.
Bankruptcy may be a terrifying prospect to company founders and leaders, but it’s a fear that you must face when navigating the business world. Learning to recognize some of the early warning signs gives leaders more opportunity to adjust course and steer their organization away from the financial brink.
Anica Oaks is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. You can connect with Anica on Twitter @AnicaOaks.
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