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Signs a Business is Destined to Fail

Nearly half of U.S. businesses fail by year five. There are many factors that contribute to collapse, but being proactive can help you stay in the game.

6 min read

Do you remember when you first decided to create your own business? Think back, what made you start it? Perhaps you wanted the freedom associated with being your own boss, you had a burning passion or talent to share, or maybe you wanted the financial benefits of owning your own business. Regardless of your reason, a lot of time, energy, and money went into the building and running of your business. You didn’t start your business just to see it fail — it has to succeed.

Naturally, being told that you’re on the brink of failing is any business owner's worst nightmare, but unfortunately, that has become a reality for many. According to the U.S. Bureau of Labor Statistics, approximately 20 percent of new businesses fail during the first two years of being open, 45 percent during the first five years, and 65 percent during the first 10. Only 25 percent of new businesses make it to 15 years or more. The odds are not in your favor.

So, failing is common, but you can get ahead of it before it’s too late. Here are some telltale signs that a business is destined to fail:

Failure to Adopt New Technology 

We are living in the Digital Age and have come to expect the technology we engage with to provide an effortless, intuitive experience. That same level of convenience is expected of your business. If you don’t provide customers with an optimal experience using the most up-to-date technology, one of your competitors will.

We understand that new things — like new and complex technology — can seem scary and deter business owners from giving it a try. But that just won’t do — not if you want to succeed. Businesses need to be able to evolve with the times to accommodate their customers. Old school businesses that refuse to welcome technology will not succeed.

If you don’t implement new technology and stay modern, you will become obsolete: customers' needs won’t be met and they’ll jump ship. It’s as simple as that. 

Technology diffusion among companies is essential. Many business owners are wary of technology and others may prefer to wait and see how new technologies develop before using them. Instead of waiting, do your due diligence, research and become a pioneer in the world of technology. You will distinguish your business from others and thrive.

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Low Sales

The most straightforward way to detect that a business is failing is through declining sales. When sales are down, people notice. It's easy to identify an ineffective sales team because they work with observable concrete numbers that many oversee.

Sales are the backbone of every company. Without a tactical sales strategy, it can be hard to hit quotas and bring in the necessary amount of money. If your sales team is struggling and consistently underperforming, your business may be in trouble.

The reason for decreased sales could be the result of an abundance of factors: Bad employees, malfunctioning products, poor marketing efforts, inadequate training, outdated sales techniques, failing sales funnel and so on.  

Poor Hiring Strategy

Bad hires cost your business. With the expense of recruitment and training as well as the disruption and negative effect on customers and employee morale, the price of consistently wrong hiring decisions has extensive consequences for a business.

If you don’t hire the right employees, it leads to high employee churn, which in turn becomes an expensive burden financially and emotionally. Having to rehire and retrain employees is a costly task. This all stems from bad recruiting. 

A high employee turnover rate is a clear indicator of an issue with your Recruiting and Human Resources department and requires some attention. You want to hire top candidates who are a good fit for the role and have a clear understanding of the position.

It’s also a bad sign when your good employees start leaving. They are leaving for a reason, and this may indicate that your business is in trouble.

Inadequate Marketing Plan

When no one is talking about your business, that’s not a good sign. You want consumers to know your brand and to be excited about it. If there is no hype around your business, you should consider rethinking your marketing strategy. Regardless of how great your product or service is, consistent bad press and poor media management can do a lot of harm to your business. 

Do the necessary research and decide which marketing channels are best suited for your business: mobile, email, social media, blogging, and so on. If you are struggling with your marketing efforts, here are a few steps to get you started:

  1. Establish a clear mission statement that is in line with your brand; 
  2. Have a clear understanding of your target audience;
  3. Accurately describe your services or products;
  4. Establish a marketing and promotional strategy; 
  5. Familiarize yourself with your competitors;
  6. Set goals that are quantifiable and realistic; and
  7. Monitor your results and determine how you plan to measure marketing

Ineffective Team Management

Slow or indecisive management has a trickle-down effect on the rest of the employees. If they are leading improperly, it will have a detrimental effect on the company as a whole.

A common issue is insufficient communication from high-level business executives. Open communication is healthy and beneficial to a company. It helps to solve issues, address concerns and come up with effective business strategies. 

There are plenty of well-designed assessment and development programs, which can help you pinpoint the problem areas in leadership and start rectifying the issue. These assessments will provide leaders with the support they require to succeed and correctly train future leaders.

Toxic Company Culture

Company culture can make or break a business. This sounds extreme but it’s true. Placing emphasis on your employee's experience and striving to have a winning culture is critical because happy employees are the pillar of every great company. It improves employee engagement, which results in better retention and higher productivity.

Unfortunately, there are times when employers forget about their employees. It happens with busy schedules and not enough time in the day. However, time needs to be dedicated to fostering a healthy company culture. If you have a toxic work environment, it puts your business at risk.

But how do you know if you have an unhealthy workplace culture? If you experience the following, it may be time for a company culture revamp:

  • Bad benefits
  • Lack of respect
  • Low morale
  • No team bonding activities
  • Lack of or conflicting company values 
  • Lack of collaboration
  • Gossiping employees
  • Unfair practices
  • High employee turnover
  • Lack of communication

Employees who aren't treated well don't have loyalty to the business and will jump ship to join a company where they feel better appreciated. Company culture is something that constantly needs to be checked and improved. 

A lot goes into running a business and you can't be everywhere at once. Issues can be hard to detect especially when you are juggling a million other pressing tasks. However, if you continue to neglect these areas, these signs may become too apparent and your business might reach a point of no return. Once your company goes under, it’s nearly impossible to bring it back to life.

The best piece of advice for a business owner is to be diligent and proactive. Look out for these signs and do not be complacent. Always strive to improve your business in whatever ways you can.

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