Is your company failing? How can you tell?
It may seem obvious, but even if you own the company, it can be difficult to know just where you stand. There are many measures of a company’s success. Facebook took five years to become profitable, and there were lots of opportunities to give up in the meantime.
What are the most relevant signs a company is in trouble? How can you tell the difference between when it is time to hold on and when it is time to close shop?
We are going to answer these questions for you. Read on to learn the warning signs of a business that is genuinely failing.
From Money to Management: Signs a Company Is in Trouble
We have collected red flags from all facets of the business world. Some of these signs are easier for low-level employees to spot. Others will be more obvious to top executives.
Wherever you rank in your company’s hierarchy, we have no doubt you can gain valuable insight from reviewing these signs for yourself.
Take a look.
Poor Financial Record Keeping
It would be easy if all our list consisted of were one entry: “you are losing money.” Unfortunately, it is not that easy to tell if a company is failing. You have to look deeper below the surface.
When it comes to the financial side of a failing business, there are a few cookie crumbs on the path to destruction. One of them is negligence.
If your company does not keep up-to-date financial records, it is only a matter of time before it fails. How current should these records be?
When it comes to things like payments and invoices, these records should be entered into the appropriate software or system at least weekly. Profit and loss statements and cash flow forecasts should be reviewed or prepared at least monthly, and weekly forecasts may be appropriate.
Bookkeeping is not just about seeing where the money has gone in the past. It is about learning from the past to predict and adjust the future. Your company can’t do that if there is no clarity on the past for review.
Confusing Financial Systems and Accounts
This is a close sibling to poor record keeping. The two often go hand in hand, and they lead to the same destination: financial doom.
Perhaps your company is keeping financial records. If those records are not precise and meticulous, they might as well not exist. Your company has to do more than stay current with its taxes.
If the upper-level executives at a business cannot understand the company accounts, they are too complicated. These systems should be streamlined for simplicity and efficiency.
One door through which financial confusion can enter is a lack of proper record keeping systems. These should exist from the earliest moments of a company’s life, and they should keep pace with the company as it grows and changes.
Another way accounts can become confused is when operating costs are not kept separate from funding.
These things feed into each other, but they exist on opposite sides of the financial spectrum. One flows in, and the other flows out. When a company’s accountants and executives cannot see these two sides of the coin distinctly, disaster can ensue.
Employee Perks Go “Poof”
Our first two red flags have been at the level of the big picture. Now, let’s turn our attention to how things look on the ground.
There are some signs of failure so obvious we did not include them on this list, like an increase in empty desks. When layoffs occur without a large-scale restructuring taking place, it is clear what lies ahead for a company. But there are subtler signs akin to massive layoffs despite the fact that they may be harder to spot.
The disappearance of employee perks is one such sign.
Little office treats like refreshments tend to be first on the chopping block. A failing company does not have much interest in keeping a fully stocked refrigerator with the newest flavors of La Croix sparkling water.
Some of the other perks to watch for fall under the umbrella of the employee wellness program. Discounts at gyms, free B12 shots, and healthy lunch options are all candidates for cutting.
These perks can even include small structural elements of the workday, like Summer Fridays. A failing company can rarely afford to give its employees extra time off.
Work Is Slow
The lack of time off at some failing companies comes with a paradox, which is that the pace of work slows down. You have less to do and more time in which to do it.
A slow work day can be a breath of fresh air sometimes, but if you find yourself distracted by social media or forwarding chain emails all day, there is something wrong with your job. You can know this for sure if you are not getting in trouble for these productivity killers. It is one thing to waste time at work, but it is another thing when you do not even feel like you have to hide it.
Stuff Is Falling Apart
When we say “stuff” here, we are talking about the literal physical assets of the company.
Are you noticing delays in maintenance and cleaning of equipment and office facilities? Is your company replacing things like soap and toilet paper with bargain-basement versions of the brands it used to use?
These things can be tactics your company is using to extend its funds. It may not have the money for the brand name items, or executives may have instructed office management to stretch out regular maintenance visits to delay paying for these services as often.
Whatever the reason, it is a very bad sign when a company can’t even maintain its own facilities or inventory.
Raises Stop Getting Brought Up
Here is another sign that is easy to miss, especially if you have trouble thinking you deserve a raise. If that is the case for you, this red flag would not even appear on your radar. But regular raises should be a part of any business’ financial plan, and if they are not, something is wrong.
Inflation hovers around 2%, and it is entirely reasonable to expect a raise that keeps pace with that rise. If you are excelling at your job, your raise may be significantly higher. It may even come with opportunities for advancement.
What you will not see at a thriving company are employees who stick in the same jobs at the same salaries for years on end. That is not a model for keeping your workforce happy.
If your company is doing this, it is pinching pennies from the pockets of employees. Employees should not be financing the company with their salaries. They should be making it profitable from doing their work in the context of a functional business plan.
Living Paycheck to Paycheck
If you are not getting the regular raises you deserve, you may yourself be living paycheck to paycheck. But that is not the red flag we are raising here. We are talking about when whole companies conduct their finances like these struggling individuals.
A company has bills, just like the people who work for it. And when those bills are left unpaid, the company enters a cycle of scarcity that is difficult to recover from. If you hear rumors of your company struggling to pay its bills, it may be time to start your search elsewhere for work.
You may hear the company’s accountants refer to a temporary problem with cash flow. This is a legitimate problem that some businesses face, but it is not a persistent problem at successful companies. Ask your company’s accountants what is really going on, and pay attention to whether or not it feels like they are being straight with you.
Communication Breakdowns
The attention to your intuition in corporate communication will serve you well, and not just when it comes to talking to the accounting department. You can often tell how well your company is doing merely by observing the communication style of those in charge.
Do you see a rise in clandestine meetings? Are there lots of conversations in hushed tones in break rooms and out of the central office floor? These could be signs of more than just juicy interpersonal gossip.
That is just when it comes to observing how managers and executives communicate with each other. You can also tell a lot from how these upper tier employees communicate with middle management and entry-level workers.
When a company’s average employee cannot get straight answers from superiors, that is a reliable sign of a failing business. Executives have nothing to hide when a business is succeeding, and the best managers encourage feedback and questions from all employees. If an employee cannot communicate with bosses straightforwardly, there are cracks in the company that may not be fixable.
Bad Press and Poor Media Management
Not many people work in jobs where the press is even an issue. In those cases, any press may be a sign of failure. If your quiet little company all of a sudden makes the news, it may be unlikely that it is just part of a positive human interest piece.
Other companies appear in the news regularly. This does not have to mean making national headlines. It can merely be a matter of appearing in trade publications.
When this press takes a turn for the worse, there can be stormy waters ahead. It takes a great deal of finesse to address the issues that caused the bad press as well as the fallout from the press itself. If your company does not have those resources and does not appear to be responding well to its appearance in media, it is only a matter of time before that press causes the business to implode.
Bleeding Executives
It is not always clear what executive hirings and firings represent. Sometimes, a company seems to want the change of direction that comes with hiring someone with a different background than their predecessor. But when the top of the food chain starts to look like a conveyor belt sushi restaurant, that is a sign of strategy problems.
If your company’s owner does not know what they want or the board of directors is indecisive, executives may frequently come and go in attempts to satisfy their whims. If you see this happening, you may want to follow the next executive out the door.
Slow or Indecisive Management
That indecisiveness mentioned above is our last warning sign. This also can be an early link in the chain of breakdowns in communication.
It is not exactly news that a company needs strong leadership, and part of that strength is being decisive when the time comes to act.
If your company cannot pick a path in crucial moments, it will suffer and eventually fail. No action is not standing still. It is moving in reverse.
Pay attention to when your company faces big decisions. If you see executives hemming and hawing, making excuses, and retreating into those secretive meetings we mentioned earlier, the foundation may be crumbling.
Stay Out of Trouble
Running a business is not an easy task, but neither is working for a failing business.
After learning the signs a company is in trouble, we hope you feel empowered to make the decisions you need to about your own career. You may be the owner of your own company, or you may be a fresh face in an entry-level position. If you notice these warning signs, do not be afraid to speak up or cut bait if necessary.
Check out our other financial suggestions if you are looking to start your own business or just get the most out of the current business that you are in.