Key indicators that your business is in trouble, and how you can combat them
We’ve compiled some key questions to ask yourself to assess the health of your business, and figure out if you need to consider changes.
The number of UK registered company insolvencies in December 2022 was 1,964 – 32% higher than in the same month in 2021, and 76% higher than the numbers registered three years prior in 2019.
This increase in the number of insolvencies is no doubt the result of a range of economic and political factors which have been brewing in the last three years; the Coronavirus pandemic, the subsequent ending of business support schemes like the CBILs and furlough scheme, and now the significant impact of energy and wider inflationary pressures, which has seen prices rise across the board for both businesses and consumers.
Settling back into the new ‘normal’ has meant many businesses have had to have a long hard look at the state of their business, and realise what’s working, and what’s not, with some being surprised at what they found. As with anything, though, it’s better to be in the know and prepare to combat their difficulties, rather than sticking your head in the sand and waiting until it’s too late.
What’s going out, what’s coming in?
Would you consider yourself to be ‘financially literate’? It’s more important than ever for business owners to become clued up on even the most basic of financial terms, as this gives the best indication of how your business is performing. Being able to create and understand what a cash flow forecast is telling you gives you the ability to get ahead of any shortfalls in your budget – and plan accordingly.
There are many dedicated resources to help you create a cash flow forecast document for your business – from online templates, to free support and financial reviews offered by dedicated business support services in your county.
Are your team happy?
The people on your team, make your business. With a high staff turnover (which could be due to low wages, staff benefits and morale), you inevitably end up paying more for your staff than if you created a better workplace, through loss of skills and the cost of additional training for new recruits.
Listening to what your staff want and need, and using this feedback to develop your team, is a way to grow your business while developing your people and ensuring that your staff want to stay.
Location
Do you stay up to date with the latest developments and planning applications for the area around your business?
Things are changing all the time – with new roads, housing, industrial developments and connectivity infrastructure popping up all over the UK. With some new developments being a massive perk for some businesses, such as staff being able to access better, and easier commutes into work, better connectivity, and more local consumers – the flip side of this can be disastrous.
Does a new road or planning application threaten the livelihood of your business? Some town centres are introducing newer pedestrian-friendly road layouts, such as one-way and permit-holder only spaces which could negatively impact local businesses.
Target market
Has your target market changed?
Failing to keep up with your target market and adapt accordingly is where many businesses go wrong. As well as researching your target market before you start your business, it’s just as important to keep up to date when you’re successful to remain relevant to your customers. What channels are they using, who are they, what are they buying, and when? These are all important questions to try to understand your target market, and to try to anticipate what they need.
Economic climate
The economic landscape is vastly different now to pre-pandemic, and any businesses not prepared could be hit with unprecedented costs and loss in profits. Rising fuel and energy costs could be catastrophic for businesses that rely on heavy usage and haven’t yet started planning for cheaper or more eco-friendly alternatives – and with an increasing number of consumers and businesses preferring greener companies, you don’t want to be left behind.
Backing Essex Business is a fully funded business support service by Essex County Council, and we can offer Essex businesses 12 hours of free support and advice.
The team can offer businesses free financial reviews, access to finance, events and training, as well as signposting to other local organisations that can help your business to grow.
