Friday, July 3, 2009


A small business owner needs to be aware that there are often many important warning signs that can indicate when a business is in trouble.
While there are many indicators that can identify weaknesses in a company, here are 10 ways to know your small business is in trouble.
  • One of the first signs of trouble is when a company is unable to make payroll. If a company cannot afford to pay employees on time, there is a definite problem in need of serious and immediate attention.

  • If inventory is rising it is a sign that a small business is not selling enough of its product in a timely fashion. Either the company is showing signs of weak sales, or it is investing in more inventory than is actually needed to meet the demand for it.

  • If a small business owner notices that the majority of customers are shopping with coupons, this is a sign that the company’s target consumers are tightening their collective belts and are unable, or unwilling, to pay full price for products. Such can be a sign of trouble ahead.

  • When a company’s competitors are going out of business, this should serve as a warning that the market has shifted and that such a shift could affect a remaining company’s bottom line. While it may seem like a relief when a competitor closes its doors, it’s a worthwhile task to find out exactly why they did so. Was it a matter of poor management or something more serious like customers no longer being able to afford certain items or services?

  • When a percentage of fixed expenditures are rising in relation to income, this could be a sign of trouble for a small business. For instance, if a company once paid 30% of its income towards rent and, suddenly, notices that percentage rises to 50% without the rent being increased, this is an indication of trouble.

  • If a company extends operating hours in order to make the same income that it previously has, this is a sign of a weakening market that could translate into trouble for a small business.

  • Having problems receiving credit from vendors could be a sign of a weakening credit market or a sign that a small business’ credit worthiness has dropped.

  • Having problems collecting from accounts receivables can mean trouble for a small business. If people that owe money to a company are unable to pay their debts, the bottom line is affected.

  • Having problems paying accounts payables on time almost always means that a small business is in trouble. This will ultimately prevent it from operating properly.

  • If a small business has to request extensions on taxes owed, this could be a sign that it has misappropriated money that was previously factored into the budget for taxes, or that the amount needed to cover taxes has not been earned. Either way, this could be a sign that a small business is in trouble.

While any of these signs, alone, may or may not mean that a small business is in trouble, an owner is wise to pay attention to them and evaluate their business promotional marketing practices any time one or more of these signs are evident.

You must either modify your dreams or magnify your skills. - Jim Rohn