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Five Signs that it Might be Time to Pull the Plug

February 2016

Is your business performing as well as you'd hoped when you started out? It's a cruel fact that some businesses are already dead, but their owners either don't know or won't accept it yet. So what are the signs that it may be time to move on with your life?

There are essentially two kinds of business problems; acute and chronic. Acute problems have an immediate impact that simply can't be ignored while chronic problems can go on for years as you turn a blind eye and learn to live with them. Spotting the latter before it becomes the former means you need to have a thorough understanding of the financial performance of your business…and the will to act. 

  1. Little or no revenue growth

    Early-stage businesses normally experience substantial growth as they're embraced by an enthusiastic market. This is followed by a levelling off period when growth seems to slow, then stop. It may be advantageous to spend a bit of time at that plateau while your business systems grow to handle the volume. But then you must look at ways to get back on the growth path.
  2. Deteriorating capital base

    Periods of flat revenue growth can cause a negative cash flow. You need a steady stream of profit to allow cash to service debt and allow for reinvestment in new technology, equipment, or new project development.
  3. Equipment failures that threaten productivity

    A negative cash flow will not just jeopardise growth; it will also affect current operations. If your equipment is not operating properly, your production may be slower, or quality not up to scratch. In addition, total breakdowns will stop production, leaving employees idle. This will raise your direct costs and lower profits even further.
  4. Poor employee morale

    If you understand that having good, motivated employees is a contributing factor in the growth and success of your business, it makes sense that the opposite is also true. The most immediate result will be diminished productivity. People who don't care show it. They take more time off and seldom think of ways to accomplish the task at hand more quickly or more efficiently.
  5. Unpaid taxes

    No business owner sets out to get into trouble with the ATO. Most have enough sense to know how painful that can be. But it may start accidentally and grow quickly. It often starts with a single payroll or BAS when the money isn't fully available. Wages are paid with the expectation that withheld taxes will be covered as soon as customers begin to pay outstanding invoices. But by the time these payments are received, other bills have to be paid or another payroll or BAS is coming up. Before you know it, taxes are owed and the money just isn't there. Now you're in very dangerous territory.

Topics: Tax, Business, Employees, Productivity

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