5 Signs Your Business is Stagnating
Business malaise is subtle, often creeping in and gradually intensifying until you suddenly realise you have a significant problem. However, there are symptoms that can alert you to potential problems, and warn you that you need to take action.
1. Your numbers
Look at your business accounts and track your key figures back over the past five years: profits, sales, cash flow. Are your sales figures and profits flat, or even worse, declining? What’s in your contingency fund? Do you have enough cash to cover unexpected costs, to pay out dividends and bonuses, or to reinvest in your business? A stagnant or decreasing reserve fund suggests that your business isn’t financially resilient.
Look at your working capital and bank loans. Has your capital decreased or increased? If the latter, have you invested sufficiently in your business? Has your business been forced to take out a bank loan or extend an existing loan? This might suggest your business cash flow is sluggish and is putting your business viability in jeopardy.
It’s a scary thought, but consider what your bank manager thinks of your business. Why would they think that?
2. Your people
When you walk through the office or across the shop floor, do you see people who are happy, motivated and engaged? Or clusters of people whingeing, saying ‘that’s not my job’ and watching the clock? Or are your staff burnt out, frustrated and working flat out without ever getting on top of their workload? Do some staff seem to do all the work while others are loafing? Unmotivated staff and staff who are working harder not smarter are warnings that your business practices are unsustainable.
Do have difficulty recruiting staff? How many applicants do you get for each vacancy? How often do you offer a job and have the candidate turn it down? Are there particular roles that you find hard to fill? Difficulty recruiting can suggest that your organisation has a poor reputation as an employer. Social media, business networks and LinkedIn connections mean it’s easy for a potential employee to find out what it’s really like to work for your company, whatever the HR brochure states. Those hard to fill jobs, especially for technical or skilled roles, suggest a skills gap that will need to be addressed sooner rather than later.
3. Your markets
Look at your key customers. Have they changed? Are you marketing to the correct people? Is there still a demand for the products and services you sell? How many other businesses do what you do? If there are only a handful, it suggests that the market isn’t buoyant enough to sustain more and means your growth could be curtailed. Too many in your market might suggest that the market is saturated and companies are forced to compete on price, which is usually a ‘race to the bottom’.
4. Your competitors
You can’t, and shouldn’t, work in a vacuum, but keep abreast of what your competitors are doing and why. Are they all moving into a new way of working, or adopting new processes? Do you need to follow them, or has this opened up a gap which you can exploit? When you see a competitor changing their way of working, do you think, “We could have done that?” and run to catch up? If you’re constantly following your competitors, it shows you’re not on top of your market and you’re not innovating. Think ahead, work out how the market will change and how that could be an opportunity for your business.
Get your competitors to start thinking of you, ‘Why are they doing that?’ When your competitors monitor and analyse what you’re doing, you know that you’re in charge of your business and are doing things your way rather than following the pack.
5. Complacency
Do you find yourself saying, “We’re OK, so we must be doing something right”? This is a genuine quote from a managing director: two years later the main board was sacked and shortly after that the company was sold. Complacency (‘we’re OK’) means you lose your competitive edge and neglect to future proof your company. It’s a difficult one to spot and requires you to step back and see your business objectively with a dispassionate eye.
The five symptoms above should have prompted you to think about your business and whether you have any problems brewing. Hopefully the answer will be ‘no’, or ‘not yet’, but if you start to see any of the above in your company, you know to act quickly before your business suffers and it’s too late to change.
1. Your numbers
Look at your business accounts and track your key figures back over the past five years: profits, sales, cash flow. Are your sales figures and profits flat, or even worse, declining? What’s in your contingency fund? Do you have enough cash to cover unexpected costs, to pay out dividends and bonuses, or to reinvest in your business? A stagnant or decreasing reserve fund suggests that your business isn’t financially resilient.
Look at your working capital and bank loans. Has your capital decreased or increased? If the latter, have you invested sufficiently in your business? Has your business been forced to take out a bank loan or extend an existing loan? This might suggest your business cash flow is sluggish and is putting your business viability in jeopardy.
It’s a scary thought, but consider what your bank manager thinks of your business. Why would they think that?
2. Your people
When you walk through the office or across the shop floor, do you see people who are happy, motivated and engaged? Or clusters of people whingeing, saying ‘that’s not my job’ and watching the clock? Or are your staff burnt out, frustrated and working flat out without ever getting on top of their workload? Do some staff seem to do all the work while others are loafing? Unmotivated staff and staff who are working harder not smarter are warnings that your business practices are unsustainable.
Do have difficulty recruiting staff? How many applicants do you get for each vacancy? How often do you offer a job and have the candidate turn it down? Are there particular roles that you find hard to fill? Difficulty recruiting can suggest that your organisation has a poor reputation as an employer. Social media, business networks and LinkedIn connections mean it’s easy for a potential employee to find out what it’s really like to work for your company, whatever the HR brochure states. Those hard to fill jobs, especially for technical or skilled roles, suggest a skills gap that will need to be addressed sooner rather than later.
3. Your markets
Look at your key customers. Have they changed? Are you marketing to the correct people? Is there still a demand for the products and services you sell? How many other businesses do what you do? If there are only a handful, it suggests that the market isn’t buoyant enough to sustain more and means your growth could be curtailed. Too many in your market might suggest that the market is saturated and companies are forced to compete on price, which is usually a ‘race to the bottom’.
4. Your competitors
You can’t, and shouldn’t, work in a vacuum, but keep abreast of what your competitors are doing and why. Are they all moving into a new way of working, or adopting new processes? Do you need to follow them, or has this opened up a gap which you can exploit? When you see a competitor changing their way of working, do you think, “We could have done that?” and run to catch up? If you’re constantly following your competitors, it shows you’re not on top of your market and you’re not innovating. Think ahead, work out how the market will change and how that could be an opportunity for your business.
Get your competitors to start thinking of you, ‘Why are they doing that?’ When your competitors monitor and analyse what you’re doing, you know that you’re in charge of your business and are doing things your way rather than following the pack.
5. Complacency
Do you find yourself saying, “We’re OK, so we must be doing something right”? This is a genuine quote from a managing director: two years later the main board was sacked and shortly after that the company was sold. Complacency (‘we’re OK’) means you lose your competitive edge and neglect to future proof your company. It’s a difficult one to spot and requires you to step back and see your business objectively with a dispassionate eye.
The five symptoms above should have prompted you to think about your business and whether you have any problems brewing. Hopefully the answer will be ‘no’, or ‘not yet’, but if you start to see any of the above in your company, you know to act quickly before your business suffers and it’s too late to change.