Starting your own business is a common dream of many. Entrepreneurs often research many aspects of a business before launching but do they know the reasons so many small businesses fail? There are certain signs to watch for as a small business owner to see when your business is heading down the road to failure.
Small business failure happens for many reasons but if you spot the signs early on then many times you can do something to prevent it. Detailed record keeping is a big part of this. Constantly compare sales to prior time periods. Compare July 2012 to July 2011, compare this year’s first six months to last years, etc. Knowing how your business is doing compared to the past gives you a great idea of if your business is heading up or down.
Keep tabs on the amount of inventory you have on hand. If your company’s cash is all tied up in inventory that is not going anywhere you want to be careful. For businesses that carry different types of products this is also a tell tale sign of a product that is not working for your business and could lead your small business to failure.
The success or failure of a small business is all in the numbers. An owner needs to be constantly aware of all the accounting and financial numbers. If you are not a numbers person then you need to hire someone who is and have them constantly reporting these figures back to you. Being ignorant of the money coming in and going out of your business is a huge reason for small business failure. Know your company’s numbers every month, make adjustments as needed and look for warning signs that something needs to be tweaked. A good small business owner is on top of their financial statements and can handle issues as they arise before they become critical to your business.