While it is tempting to celebrate #GroundhogDay by taking a page from the classic Bill Murray movie and publishing last week’s Tip post again, I decided that would be more a sign of laziness than homage. So, in the spirit of Groundhog Day, and the much anticipated sign from Punxsutawney Phil (or your other groundhog of choice) regarding the early or late end to Winter, the following are 12 types of important signs that you should be watching for in your small business.
1. Signs of Failure
While it is completely disheartening to come to the realization that your small business has failed; the mark of a true entrepreneur is the ability to learn from the failure and start again. However, not all paths to failure ultimately end up there. If you truly love your business take immediate steps to remedy signs of impending failure. These steps may be a change in processes, a strategic pivot, or simply becoming more engaged in the day-to-day. The following posts provide some key signs for which you should be monitoring:
- 8 Signs That Help You Know Your Business Is Failing from Inc. Magazine hits on some of the classic signs of failure such as widespread HR issues and late bill payment. It also highlights some less-obvious signs including making the same mistakes over and over again, not making any changes to any part of the business, and a CEO that has not met with any new customers over the past month.
- 20 Signs Your Business Needs A Facelift from Forbes suggests signs that indicate imminent failure, but that you can overcome with a revamp of your core business strategies and tactics, or a pivot to a more promising business plan. For example, if you’re finding that people don’t understand what your business does, if it does too many things instead of excelling at one, if you’re not gaining new (or losing existing) social media followers, if your sales leads are no longer converting as expected, if your longtime customers are leaving, and/or if your website is outdated, your small business may need “a facelift.”
- 5 Signs Your Small Business is Becoming Irrelevant suggests monitoring signs of shifting trends that move the market away from your products and/or services, small drops in sales of your top offerings, and increasing customer requests for products, product features, or services that you do not offer. While these are all indicators of market irrelevance, they tend to manifest slowly and can catch a seemingly successful business unaware. Thus the post suggests that small business owners maintain a clear business direction while avoiding complacency. While it can be nice to revel in success, a fast way to irrelevance is willful blindness to market shifts.
2. Signs of Success
It can be far easier to spot a failure than to realize a true success. The very nature of a successful entrepreneur is someone who is constantly striving for better; so it can be difficult to stop for a moment to savor success. While recognizing success is not an excuse for complacency, it is a cause for celebration. Here are a few signs that you’ve made it.
- Four signs that your small business has finally arrived submits that you can count your small business a sustainable success when your cash flow is healthy, your customers publically sing your praises, your employees are happy and want to stick with your company, and you feel happy, fulfilled and satisfied with your life and your small business.
- 3 Signs You Are Becoming Successful from Entrepreneur posits that you’ll know that you have become a successful entrepreneur when you have “haters” (people who hate you because of your success), when you start receiving offers from others who want to benefit from your wisdom and success, and when you start to receive partnership proposals.
3. Signs Your Business Is Successfully Growing
If your small business is growing, that’s a good thing—right? Not always. As the adage says, you can have too much of a good thing, and excessive growth can be as damning to a small business as no growth at all.
Determining an optimal growth rate can be difficult. This Staples post suggests that the Working Capital Turnover Ratio is a good measure of healthy growth. To calculate the ratio for your business, divide annual net sales by annual working capital (current assets – current liabilities). Here’s an example:
- 2015 Annual Net Sales = $1M
- 2015 Current Assets = $500K
- 2015 Current Liabilities = $300K
- 2015 Working Capital = $200K ($500K – $300K)
- 2015 Working Capital Turnover Ratio = 5 (1M/200K)
The post suggests that a Working Capital Turnover Ratio of 10 is an ideal growth rate, and that anything over 10 is an indication of growing too fast. Under 10 is fine, but if your result is under the rate of inflation (.7% for the US through the 12 months ended December 2015), it is a sign that your business is in trouble.
4. Signs You Need a Business Growth Strategy
If your Working Capital Turnover Ratio was under 1, it’s a sign that you may need a better business growth strategy. 10 Signs You Need A Growth Strategy For Your Small Business from Business 2 Community provides other signs to look for including the obvious ones like declining revenue, sales lost to the competition, shrinking profit margins, and cash flow troubles. The post also suggests that if you find yourself putting in long hours without getting a good return on your time spent, if you find yourself getting discouraged, or if you find yourself longing to get away from your business, that you should seriously consider revisiting your growth plan.
5. Signs Your Business is No Longer Small
A small business can be defined as much by its revenue and number of employees, as it can by its culture. That’s why some giant companies can have a small company feel, and why some small companies feel like cold bureaucracies.
Looking strictly at numbers, the SBA (Small Business Administration) has created industry-based definitions of a “small business” in order to determine eligibility for its loans and other programs. They provide a handy Size Standards Tool that will tell you whether your business meets the definition of “small.” Simply enter your 2012 NAICS code in the tool (you can find it here if you don’t know it), and the tool will then determine whether the “small” criteria for your business is based on average annual revenue, or on employee count. The following question will ask you to enter one or the other. After entering your revenue/headcount, click the “continue to next step” button to get your result. “Yes” means you qualify and “No” means you don’t. The tool also tells you what the cut-off is for your particular industry.
Cultural change can be more difficult to pinpoint. 3 signs your small business is no longer … small suggests that the performance and effectiveness of your earliest employees can be an important sign. If people who were once perfect fits suddenly become overwhelmed, significantly less effective, and no longer strategic assets to the business, it may mean that you need to reassess both the business and the team. The post also suggest that feeling a need to begin documenting policies and procedures, and a move away from whole company teambuilding activities, are signs that a business needs to let go of the small business looseness and move on to a more size-appropriate structure; ideally without losing the key components of the culture that make your business special.
6. Signs You Are At Risk for Losing Customers
As a small business owner, you want your customers to be happy. And study after study has shown that it is less expensive to generate repeat sales from existing customers than it is to acquire new customers. That’s why staying alert to signs that there are problems in your customer base is so important.
10 Warning Signs of Customer Service Issues in Your Company suggests that signs of systemic customer service problems include getting the same complaint from multiple customers, a marked decrease in customer satisfaction survey scores, and an unexplained drop in sales. The post also suggests that your company culture may be to blame for the problem. You may need a change if your company places more emphasis on providing quick responses than on providing meaningful help, if you don’t view customer service as a marketing channel, and if your employees are not sufficiently knowledgeable about your business to provide effective assistance to customers.
7. Signs Your Small Business Needs Capital
There comes a time when many small businesses find that they need to obtain external capital in order to grow. While it can be tempting to try to make do with the resources you have, Seven Sure Signs Your Small Business Needs Investment suggests that you look to loans or investors for a capital infusion when you find that your business is being held back by outdated equipment, inefficient processes, a cramped workspace, and insufficient or insufficiently skilled staff. The post also suggests considering external capital if you are falling behind the competition, your marketing isn’t driving sufficient business, or you are unable to strategically innovate.
8. Signs Your Small Business Website Needs Work
If you’re still wondering whether you need a website for your small business, stop—you do. (And if you don’t have one, check out last year’s Tip post Tips for Launching a Small Business Website). While having a website is essential, making sure that your website evolves with your business and the marketplace is just as important. How do you know when it’s time for a change?
10 Signs your Small Business’s Website Needs a Redesign recommends taking action if your site isn’t mobile friendly, if your site loads slowly, if you have lots of broken links and missing images, if your site isn’t generating leads (or converting leads into customers), if you can’t manage your own content, and/or if you have not effectively implemented Search Engine Optimization (SEO).
9. Signs You Need a Vacation from Your Small Business
According to the Spring 2015 Bank of America Small Business Owner Report, 85% of small business owners work more than 40 hours per week, 55% work more than 50 hours per week, and 10% work more than 70 hours per week. You just can’t keep up that pace without a break. So, how do you know when you need a vacation?
Forbes post The Top Three Signs You Need A Vacation suggests that a vacation is definitely due if you find yourself unable to come up with new ideas, or to execute on them; if you notice that none of your employees are taking vacations (as they are probably taking a cue from you), and if you’re losing touch with your friends and family. Health Magazine identifies additional tell-tale signs that a vacation is due including when little problems turn into big issues, you start making uncharacteristic mistakes, you start feeling overly cynical, you have unexplained body aches, stomach upset, and can’t sleep, and you start exhibiting counterproductive work behaviors (such as taking extra-long lunches or appropriating office supplies for personal use).
So, if you find yourself with an unquenchable desire for ever more paperclips and legal pads, take notice and take a vacation. Last year’s Tip Post How to Delegate Your Way to a Much Needed Vacation will help you make the time, and Tip Post Last Minute Vacation Tips for the Holidays will help you plan the trip.
10. Signs Your Employees Want to Leave
Your team is the lifeblood of your small business, and attracting (and retaining) the best and the brightest should be part of any strategy for success. However, people change, businesses change, and sometimes what was once a perfect fit becomes a mismatched pair. As with most potential transitions, it is important to know when to fight to keep a valued asset and when to gracefully let go. But, in order to make that decision you need to know it is about to arise. These posts include signs that indicate an employee is considering a change.
9 Warning Signs Your Employee Is Quitting from the Huffington Post notes that employees planning to leave within the next couple of months will typically contribute less in meetings, hesitate to commit to long-term projects, lose interest in advancement, become less social in the workplace, show less concern with performance, fail to suggest innovative ideas, begin doing just enough to scrape by, lose interest in training, and decrease their productivity. This HR Monitoring post also suggests that a great employee who suddenly displays sloppy work, starts keeping odd hours, starts dressing more formally, and/or begins to complain about work, is very likely looking to leave.
Knowing why employees want to leave is important too. One common reason is that they simply do not like you (or their direct supervisor), or do not think that their “boss” is a good manager. If that sounds familiar, and you want to improve, study the 14 signs your employees secretly hate you, which include an inability to make eye contact, avoiding any type of unnecessary interaction with you, not smiling around you, stopping laughter when you approach, calling in sick often, and communicating via email instead of in person.
11. Signs Your Small Business is Ready for Snapchat
Social Media is a big challenge for many small businesses, a number of which count themselves cutting edge for having a Facebook page. And depending on your customer base, sticking to the core social media venues (Facebook, Instagram, Twitter, LinkedIn) may be sufficient for you. But, if millennials make up the majority of your customers, or if your customer base is highly mobile-engaged, you’ll need to learn to change your marketing strategies as their interests and focus change.
One such shift is the move away from Instagram to Snapchat. While it may seem counterintuitive to embrace a marketing platform where messages disappear in an instant (or at most in 24 hours if snapped into stories), when done properly Snapchat campaigns can drive engagement and sales. 3 signs your small business is ready for Snapchat from the SmartBlog on Social Media, helps you determine whether Snapchat is a good fit for your small business marketing plan, and provides some suggestions for how to use it effectively.
12. Signs You Can Benefit from a Recurring Billing System
Do you have cash flow problems? Do your customers routinely pay their invoices late? Is your most hated task making collection calls? Do you mail out the same invoice each month, every month, to the same set of customers? Do your customers make installment payments on a single large purchase?
These are all signs that your small business can benefit from a recurring billing system, and if you answered “yes” to any one or more of the above questions, you should seriously consider implementing one. And, as luck would have it, that is a core component of PaySimple’s business– and we’d love to help. (OK this Sign is a bit self-serving on our part.)
Implementing a recurring payment system, where your customer’s credit card or bank account is automatically charged on the schedule you set, for repeating services (weekly cleaning service, monthly rent, or subscription marketing services, etc.) is an ideal way to make life easier for your customers, and to regulate cash flow for your business. Payment Plans, that automate installment payments for large services like major home improvements, are also cash-flow wins for your business and major conveniences for your customers. If you’re not comfortable with automated payment collection, you can start with automated electronic invoicing. This type of system lets you set an invoicing schedule and then simply let it run, with invoices that can be easily paid online sent to your customers automatically.
If the signs point to your small business benefiting from a recurring billing system, learn more on the PaySimple website, and see the system with our free interactive demo.