Running a small business has its advantages and disadvantages. The most obvious of these is simply the question of scale. When the company is small, you have less responsibilities and less resources; that balance is ultimately reversed as a company grows.
An important thing to remember, for small business owners, might be that the resources – time, funds, staff, etc. – will dictate what the responsibilities are. A small company with limited resources will be managing less orders, lower-scale fulfilment, and marketing of a more limited reach. This does not mean though that the maximum responsibility possible cannot be taken.
The ecommerce revolution has ushered in a great democratization of business. However, business is still business, and a fundamental mistake anyone can make is to assume that it has been made easier. In fact, most small businesses fail before they ever get a chance to grow.
Most often, it is an inability to seize growth that spells doom for a small company. Or, less commonly, it is the attempt to grow before the company is ready. Furthermore, it is very much possible to put together a list of the most common red flags – the signs that small business is certainly not headed towards success.
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The Importance of Cash Flow
One of the things that a small business craves is stability. Not scaling up after becoming stable is another major error, but the stability certainly needs to be achieved first. For small businesses, the best measure of stability is a healthy a cash flow.
Cash flow experts fastFACTR, a company dealing in invoice factoring for small business, say that a healthy cash flow means being able to meet every financial obligation when it arises. It is more important than total profits because while these might amount to a figure enough to cover all expenses, if a company is ever waiting for the funds to “come in” before a particular financial obligation can be met, then the company has a poor cash flow – regardless of what the overall profits are.
Before a stable cash flow has been achieved, companies might rely on invoice factoring or other such services in order to get by. The point of growth is when such services are no longer needed.
Small Business Red Flags
So, with the importance of cash flow adequately covered, here follows some signs that a small company is destined for failure, not success:
Lack of Follow-Through
This red flag is most commonly seen in the field of marketing. A company needs to be consistently promoting itself, and this means regular marketing campaigns and social media posts. At this stage of a company’s growth, it’s also possible to respond to interested customers. A company that isn’t doing this is not on the right track.
Lack of a Coherent Team
Specifically, this means team members at the company with different goals and different ideas about how to grow and what direction the company should head. This type of confusion is a definite red flag.
Poor Investments
Investment is the way to growth, but a company needs to be ready to make them and to make the right ones. Investment in outsourced fulfillment before an expansion of inventory is a good example of this.
Leader Doing too Much
You have a limited team at the start of your company’s journey, but you should still delegate certain tasks to those with more expertise. If the CEO is simply doing too much, then it’s almost certain that they will be doing some of those tasks poorly.
Managing a small company takes effort and diligence, and it needs to constantly move forward.