Five Signs Your Business is at High Risk of Failure
With rising interest rates and inflation out of control, businesses are under more stress than they have been for a long time. The worldwide increase in interest rates over the last nine months has been the biggest and fastest on record. Consequently, many businesses are oblivious that they will fail or close over the next 12 – 24 months.
The five signs that your business is at high risk of failure:
- Lack of revenue growth – growing less than the inflation rate means profitability is falling.
- Large debts (both business and personal). With mortgage rates increasing from 2% to 6% over the last nine months, the finance cost quickly becomes unaffordable for many.
- Have large Australian Tax Office debts. If a business cannot pay its tax debts on time, it is on life support.
- Inability to control business and personal expenses – excess spending is the grim reaper of new enterprises. Too many business owners think the business cash flow is their private piggy bank.
- Expanding too quickly – confusing sales with profitability is a common mistake with new business owners. They are often so happy to have customers and grow sales; they forget the importance of profitability and cash flow.
For business owners to give themselves the best chance of succeeding, they need to:
- First, understand the five signs of business failure – as detailed above.
- Have an independent business failure audit undertaken on their business – generally by an accountant, business advisor, or business coach.
- Take action and make changes now. With early action, many business failures could have been avoided.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2