01/23/15

Should You Start Thinking of a New Start-Up Idea? These Are the 8 Symptoms of an Unsuccessful Company

Approximately 8 out of every 10 businesses fail within 18 months. Since the math alone suggests long odds for the survival of a company, you must be able to identify the early warning signs of failure. Here are the eight symptoms of an unsuccessful company.

You Have Few Customers and the List Is Shrinking

Revenue is the driving force in any business. Without it, you have a company in name only. Since customers are how you acquire money, you need a loyal base along with the potential to grow. A stagnant company is rarely in good shape.

A business that is losing more customer revenue than it gains is going to fail at some point, probably soon. To succeed in business, a product or service must be marketable enough to entice new clients on a consistent basis. If your customer reaction is decidedly mixed and getting worse each quarter, the situation is grim.

You Have No Business Plan

Since monetization is everything, every business owner should focus to the point of obsession upon earnings potential. Shockingly, not enough start-up companies do. The goal is oftentimes to attain market awareness rather than revenue. That is the wrong way to proceed.

For example, if you are building apps for the latest high-end smartphones, such as the popular Android phones, you should identify exactly who your potential target audience is and how much they are willing to spend on apps. Every smart device contains its own marketplace, and revenue information for each ecosystem is readily available for research purposes.

You should calculate exactly how much revenue you can expect in the early days, plan how much of those earnings must be reinvested to sustain sales, and determine your long-term financial expectations. Remember that the maintenance phase of your app is the costliest. If your business plan fails to allow for this, your company will suffer repeated budget shortfalls.

You Have the Weaker Product

No matter how great your sales staff may be, they are never going to overcome a fundamental flaw with the business model. If you are providing a product that one of your competitors does much better, customers will flock to them rather than you.

Think about the situation from a personal perspective. Are you ever willing buy a product or service that you know is inferior to a competitor? Why should you expect your customers to behave that way?

Your Product Is Unmarketable

No matter how great your product is, you must have a potential client base to justify its existence. Once you bring an item to market, if a slew of customers have not at least inquired about your new offering, odds are that no one ever will. Some products and services take time to find new clientele, but most ones that have slow sales at the start never improve.

Your Employees Keep Leaving

This issue is one of the most troubling. It could be an indictment of the entire company. There are myriad reasons why your employees may seek greener pastures. They could feel like they do not fit well within the organization, they could lack motivation in their current job, or they could simply seek more exciting employment elsewhere.

None of these explanations is indicative of a solid organizational infrastructure. Either the company has subpar hiring practices, does a poor job of motivating the staff, or lacks enough creativity to entice employees to stay.

Profits Are Dwindling

Profit margin is one of the driving forces for a company. Oftentimes, new products in the market have razor-thin profits, but revenue increases over time as the item becomes cheaper to produce. If the opposite is happening, you have a problem. That indicates that either there is too much competition or production expenses are inching upward.

You Are Losing Your Passion

If the person in charge has lost their love for the company, that sensation will trickle down to your underlings. They look to you for guidance, support, and energy. If any of the three are flagging, others will pick up on the change, and it will affect them. Is your job a labor of love or simply labor?

Your Industry Is Dying

Not too long ago, newspapers were the best way to disseminate information and people used beepers to communicate. There is nothing more depressing than coming to grips with the fact that emerging technologies have rendered your product useless. Don’t let stubbornness prevent you from accepting that your business is doomed.

Recognizing signs of a dying business is the best way to attack the issues directly rather than meekly quitting without a fight. Be proactive, and you can stabilize your company before it fails.

If you’re interested in finding a loan for your business, get started here with Lendio’s free loan matching service.

If you found this article interesting, you might be interested in:

SBA Loans

Small Business Loans Made Simple

Get more small business tips from Lendio.

About the author

JT Ripton

Comments

More like this