Signs of a Troubled Business

Signs of a Troubled Business

Our services are normally requested when an organization is facing a difficult situation or is in crisis.  One of the most important steps in any recovery process is acknowledging the reality of the situation.  Based on our consultants’ past experiences, the following is a realistic list of external and internal signs of trouble displayed by most businesses in distress:
  • Ineffective Management Style

    Sometimes the leadership of the company is unable to delegate authority.  The leaders may be overly involved in too many aspects of the daily organizational tasks.  In this situation, good ideas or positive suggestions from other members of management staff may be ignored.  It also results in management staff not developing a sense of personal involvement in the health of the company.  Such a leadership void may jeopardize the entire organization.

  • Operating Without a Business Plan

    It is essential that businesses employ a written business plan. But sometimes, a business plan evolves by consensus and is never written in a formal document.  Eventually, this situation may lead to varying personal interpretations and create conflict and ambiguity among key personnel.  This situation may also result in inadequate communication to employees, which causes the organization itself to become dysfunctional.

  • Weak Financial Execution

    A company may face slow growth even though it has an experienced management team and solid business plan.  If this situation occurs, inventory may accumulate which cannot be sold fast enough, bills begin mounting, and the company's financial future is put in jeopardy.

  • Poor Financial Relationships

    When a business faces cashflow issues, conflict may develop with its lenders.  An adversarial relationship with a business’s lending institutions can further complicate existing problems, causing a cycle that is difficult to break free of.

  • Lack of Proper Infrastructure

    Disseminating information is the primary purpose of the basic principles involved in operating a company: organizational structure, accountability, and responsibility.  Inadequate communiatin can weaken infrastructure which will ultmiately weaken the company as a whole.

  • Declining Market Share

    Every company is worried when it experiences sagging sales and declining market share.  These are signs that the business has not kept pace with the needs of the marketplace.  Reasons for this could include inadequate technology, products, service, or marketing.  A company may also lack sufficient ability to distribute its products to the customer base.

  • Explosive Growth

    Leaders of companies that achieve fast growth may be so preoccupied with the growth itself that they fail to pay consistent attention to their balance sheets.  As a result, they may overlook the cash requirements for funding a growing business.  It is imperative that fast-growing organizations carefully monitor their financial records and constantly provide the additional resources needed for growth.  

  • Over Diversification

    If a company feels threatened by its competition, it may develop new product lines, employ new technology, or venture into new markets.  But if the company does not plan well for these new undertakings, it may over extend its managerial, financial, and marketing resources.  As a result, the company becomes vulnerable to the competition.

  • Unstable Customer Base

    When a company relies heavily on a small number of large clients, its business becomes vulnerable to the financial condition of its customers.  The loss of even one major customer could place the business in jeopardy and displace many jobs. Thus, over-concentration of customer base can be  as precarious for companies as over-diversification.

  • Business Versus Family Matters

    Family influence in companies can lead to difficulties in at least two common ways.  In businesses involving more than one family, domination of the decision-making for the entire company by one family can lead to problems for the company.  In a single-family business, rivalry between generations can cause problems that risk the health of the entire company.  As a rule, business decisions based on emotions are likely to fail and may lead to the departure of skillful managers, further jeopardizing the business.

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