As an entrepreneur, you started your business with faith that your business will get to the other side and be successful. You put in the work, invest your time, and make sacrifices for your new business.
A 2020 report by Failory shows that 90% of start-ups fail with 10% during the 1st year of business and 70% during 2 and 5 years in business. Even with your efforts, your business’ success is not guaranteed.
But, before a startup fails, it struggles. While some businesses get through the struggles, others don’t.
Experts say that startups fail for several reasons and not for a single reason. Meaning there are several aspects of your business if not well handled on time might lead to the end of your business. These aspects entail the struggles most startup business experience in their efforts to grow their business.
As an entrepreneur, you have to monitor your business as it grows in order to notice and stop any warning signs that would stall or collapse your business.
When your startup is struggling, you have two options, you either pivot and make the necessary changes or give up and let your business close its doors. But the fact that 90% of startups fail, there is a 10% that succeeds and that means you should not give up. Work towards being the 10% that gets to the other side even when things get tough.
But to be among the startups that get to the other side, you need to spot these problems and stop them.
1.A dysfunctional Team.
Your team is very crucial to your business. A functional team leads your business to growth and success. On the other hand, a dysfunctional team is not a good sign and this can stall the growth and success of your business.
Every entrepreneur needs the right team to drive their business towards growth and success. Initially, you hired the right team but now, your team seems divided and not coordinated.
Signs of a dysfunctional team.
When your team is dysfunctional, there are issues such as lack of understanding, harassments, and low morale. A dysfunctional team lacks transparency and trust. They don’t share workloads or even spend time together. All these stem from communication breakdowns.
As the business owner and the team leader, you need to cultivate a team culture. Talk to your team regularly and have one-on-one conversations where they can safely open up and be honest.
Come up with policies that guide and control team and company communications. Let your team know how and why to communicate to avoid team member’s harassment.
Build a communication system that encourages regular communication among your team and that helps your team deal with issues sooner before they get out of hand. This helps avoid miscommunication and unhealthy misunderstandings and unhealthy disagreements.
From an article on Forbes, psychologist Liane Davey emphasizes the importance of regularly recognizing and appreciating your team. Davey adds that healthy disagreements that are respectful help build a culture of honesty and teamwork.
High employee turnover rates.
Another element of a dysfunctional workforce in your business is high employee turnover rates. Losing multiple employees should be a wake-up call for you as a sign that something is amiss in your business and something needs to be done.
Employees quit their jobs for several reasons and it’s up to you to figure out why there is a high turnover. It could be a toxic work culture, pay dissatisfaction, unbearable work pressure, and work stress, or something else.
Find the true reasons behind employees’ departure and work towards addressing these issues.
2.Close Competitors are outcompeting you.
If your close competitors are overtaking your sales and seem to be outcompeting you, this is a red flag.
Your close competitors outcompeting is a sign of two things. One, your product or services are not able to strongly stand out from your competitor’s. It might be time to change your product or service prices and, or your product features to strongly stand out from your competitor’s products or services.
Two, your business, product, or service marketing approach is not effective. If that’s the case, it’s time to change your sales approaches and your marketing tactics.
Compare your business to your competitors and figure out why they seem to be overtaking you and beating your sales.
Look for secondary ways to add your business’s value to your customers such as ensuring an excellent customer experience.
3.Lack of Predictable Cash flow.
Running a business revolves around cash flow and no business can stand or last in the market without a stable cash flow. Therefore, if your business is struggling with cash flow, it’s only a matter of time before your business collapses.
Bernardo Arnaud writes on EU-Startups that your team should be able to think of ways to consistently deliver steady revenue streams.
If your team is not delivering stable revenue to pay your business bills and keep the business afloat, it’s time to make some changes.
Purposefully look at things affecting your cash flow. Probably it’s your product or service appeal and your market approach. Look for ways to improve your product or service appeal in your marketing or completely change your current market approach. To the extreme, consider changing your target audience or expanding your target audience demographics.
4.Little or no funds to carry on your business operations.
A study by D&B shows that 90% of failed businesses shut down because of poor cash flow management.
You need to be on top of your finances throughout and be able to manage your funds. Know what cash is coming in or is supposed to come in and what cash is going out of your business. This way, you will be able to notice money discrepancies earlier. You will notice when you are getting paid late or when your business is not receiving payments it was supposed to receive.
If you are running out of money to run your startup or oversee the day to day business operations, your startup is straining. It could be because of difficult times or due to avoidable financial mistakes. “A company with no cash reserves cannot breath,” Bernardo Arnaud writes on EU-Startups.
Find out what is causing a strain on your cash reserves.
Finding the source of your financial strain will help you come up with timely solutions. Is it late payments, is it the unexpected expenses, etc.
If you are dealing with late payments, change your generous terms, and be a little bit stricter with payment schedules and deadlines.
Also, adopt documenting your financial projections and transactions. With such documents, you will able to quickly notice and address any gaps.
To avoid overspending, work with strict business budgets, and stick to them. This will help you cut out unnecessary expenses.
Consider unexpected expenses your business might have to deal with and budget for them too so that when they come, they don’t mess with your finances. Plan to save for dark days when your revenue drops due to external factors.
5.Increased Negative Customer Reviews.
Your customers have a lot to say about your business and this can tell you where your business is heading. Also, what your customers say about your business affect your sales.
Your business, your product, or service is bound to receive negative feedback from your customers once in a while. However, when the negative feedback or reviews are too many, it’s a sign that there is something amiss and some problems that need to be addressed.
Some businesses tend to ignore and even delete bad reviews from customers and this does not look good for your business. Emily Washcovik from Yelp says that 53% of customers actually expect a response when they give a review online. So, reply to your customers’ reviews whether negative or good.
Responding to your customers is a good strategy to protect your brand’s image as it shows good customer service.
Exploring the negative reviews will help you figure out what is amiss and below your customer’s expectations and come up with solutions. You will be able to know what your customers are complaining about and whether there is a pattern of the same issues or isolated incidents.
Figure out whether these reviews reflect a problem with your product or service or whether it’s a problem with your customer service
6.Poor Customer Retention.
Repeat customers are a sign of a growing startup. For a business, repeat customers ensure repeat revenue.
If your customer retention is low and the number of repeat customers is dropping, you need to find out why and reverse the trend.
Fionn Concannon points out in Bplans that poor customer service and lack of added value leads to poor customer retention.
As a startup, focus on providing great customer service and improving your customer experience by making several adjustments here and there. For example, avoid making customers wait for too long at your store or for a response online and train your customer service team to offer the best support to your customers.
Adopt other customer retention tactics such as discounts, gifts, cumulative benefits, loyalty programs, etc.
Increase your direct customer communication to help you know their insights and critics that could help improve your product or service.
7.Low Market Demand for Your Products or Services.
This is an obvious sign – low or no demand for your product or service.
Products and services are meant to meet the needs of the market and, customer needs change too.
If you are having low market demand, this means the market need is changing and your product or service is outdated.
You always need to know what the market needs and regularly tailor your product or service to serve the present market needs.
As a business owner, keep track of your startup business to know and control where your business headed.
There are so many problems that can threaten the success of your business and spotting them early enough can help you stop them.
When you are in the know, you can tell when and why your business is struggling and come up with timely solutions.
Be customer-centric and provide great customer service as this increases your customer retention which boosts your revenue. You will also be able to provide products or services that meet the current needs of your customers.
You don’t have to close your doors when your startup is struggling. Give your business, your team, your product, or service another try.