Troubled Business Checklist

Michael Fingland

Executive Director and CEO

Through our work with businesses we’ve devised this 20 point checklist that indicates if a business is in trouble. Seeking assistance sooner rather than later can often mean the difference between the survival of a business or closing the doors.

If you answer “yes” to any of these early warning signs and don’t have the in-house capability to resolve it, or you are too close to the business to view it objectively, seek assistance from a turnaround expert.

Is your business experiencing any of the following?

Financial warning signs:

1.  Cash shortfall – Your business seems to be constantly in a cash crunch.

2.  Physical deterioration of facilities – Facilities not maintained due to lack of planning or inability to re-invest.

3.  Poor Accounting Systems – Accounting records and reporting are delinquent. You don’t know if you’re making money or losing money.

4.  High concentration of leased assets – Inability to secure traditional financing.

5.  Lender blamed for current condition – Management not accepting responsibility or looking for solutions.

6.  Mounting external pressure – Litigation, displeased vendors and creditors, and troublesome audits.

Communication warning signs:

7.  Poor external/internal communication – Lack of effective communication with external parties such as lenders and vendors, as well as internally with employees.

8.  Critical information ignored or discontinued – Management is not focused on how the company generates earnings, instead preferring to ignore it and focus on less valuable indicators.

9.  Defensive management team – Management team is always putting out fires instead of proactively planning to grow the company’s business.

10.  Liabilities ignored or underreported – Financial statements do not accurately reflect the company’s true performance and financial position, leading to aggressive actions, thus exacerbating a company’s problems.

11.  Credibility problems with key constituents – Distrust in management is creating unnecessary hurdles.

12.  Dishonest/Unethical business practices – Pushing the envelope in the face of mounting negative business pressures.

13.  Ownership distracted by outside activities – Lack of time for necessary oversight over management.

14.  Deny accuracy of negative information – Management is unable to accept reality and deal with it accordingly, instead preferring to “shoot the messenger”.

15.  Looking for a “home run” to fix everything – Management team is counting on the next product line, next store, or next IT system implementation to solve its troubles and not focused on tackling the true problems facing the company.

Product/Service warning signs:

16.  Inventory is over-weight in slow moving items – Unwillingness to write-down assets and accept reality.

17.  Quality issues with products and services – Indicator of poor management and future loss of sales.

18.  Market share losses – Management unable to compete in the marketplace and a sign of future financial pressures.

Employee warning signs:

19.  Departure of key employees – May indicate an inability to pay talent their market rate or otherwise maintain an attractive work environment. May also indicate that key employees realise the company is in trouble.

20.  Unmotivated/depressed employees – General attitude of lower level management and employees on the shop is a good gauge of how things are going at the company. Often they are able to catch on to a company’s troubles before it reaches the executive suite.

 If your business is experiencing any of these early warning signs it’s important to seek business help sooner rather than later to position your business for survival.

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