Danger Ahead: 6 Signs of a Struggling Business

From brand awareness to operational efficiency, so many factors can make or break a small business. It’s no surprise that thousands of companies fail each year. According to the latest figures from Statistics Canada, in 2013 more than 83,000 small and medium-sized enterprises (SME) exited the marketplace, exceeding the number of new SMEs that year by close to 5,000.

Could your business be at risk of failing in 2018?

Sometimes, even when all the signs are there, small business owners fail to recognize—or admit—that the enterprise they’ve worked so hard to built is in crisis. They may adopt a wait-and-see approach, hoping market conditions will change. While this may turn out to be the case, business owners could end up waiting, and waiting, until it’s too late to do anything to salvage their company.

So what can you do to avoid this outcome? The first step is to identify the signs that your business is struggling. Do any of these sound familiar?

1. Your company is suffering significant losses in revenue. It’s true that many businesses experience revenue fluctuations. But if sales in recent months or years have plunged to the point that cash flow has dried up and bills aren’t getting paid, then it’s a sure sign that the business is in trouble.
2. Shareholders need to come to the rescue. You’ve exhausted every other possible source of cash flow and none of the banks will give you a loan, so your shareholders are forced to put in more money to keep the company afloat. It’s time to face the hard facts if this is happening in your business.
3. You can’t make a living from your own business. It’s not unusual for business owners to pass up on salaries so they can plow profits back into the business. But if there simply isn’t enough cash flow to either pay yourself a proper wage or invest in the business, you need to sit down and take a cold hard look at what’s ailing your company.
4. A large customer or receivable has fallen through. The loss of a critical customer can have a significant adverse effect on a business, regardless of its size. Similarly, when a large receivable goes unpaid – which can happen for various reasons, including an invoice dispute or the delinquent customer going bankrupt – the impact on the company that’s owed the money can seriously jeopardize the survival of the business.
5. Late on filing your tax returns? It’s another sign. Business owners are chronically short on time. But when they keep putting off filing their income tax, GST/HST or payroll tax returns, it usually isn’t merely because they’re too busy but rather because they’re worried about how they’re going to pay their taxes. With cash flow problems and bleak prospects for growing their revenue, the last thing they want is another bill from Canada Revenue Agency.
6. CRA has handed you a big bill you can’t pay. Whether it’s the result of a reassessment or the accumulation of past tax debts, it’s never pleasant to get a large bill from the CRA when you have no immediate means of paying it. To make this problem worse, the CRA can be aggressive in collecting back taxes and has the power to freeze bank accounts and seize assets.

When all the signs point to trouble: What you can do

If your small business is experiencing any or all of these signs, then you need to take action immediately. Gather as much information and insight as you can, and discuss your situation with any business partners or key leaders in the company. It’s also important to seek the help of a professional—such as a licensed insolvency trustee—who can guide you through options such as refinancing, restructuring or, in some cases, either a proposal or small business bankruptcy.

Stop waiting: Act now before it’s too late

Serious business problems won’t go away and will likely get worse if they’re not acknowledged and addressed. If your company is struggling, the best thing you can do is to take action now. The path ahead may be difficult but with the help of the right professionals you’ll be on your way towards the best solution for you, your team and your business.