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Severin Sorensen

Transforming a Struggling Business: Addressing 10 Critical Markers of Failure

As executive coaches, we understand that running a struggling business can present significant challenges, but it's important to view these situations as opportunities for growth and transformation. Whether you or your clients are facing declining sales, a negative reputation, or other challenges, identifying the root cause of these issues is critical for turning things around.


In this article, we explore 10 critical markers of failure that could be holding a business back with strategies to address each. By focusing on these key areas, you can help your own, or your client’s businesses, navigate the challenges of running a struggling business and emerge stronger and more resilient than ever.



10 critical markers of failure and how to address each


Declining sales and revenues over an extended period of time

By considering the factors below, you can work towards turning around your declining sales and revenues and building a more successful business.

  • Market conditions: Changes in the market can have a significant impact on your sales and revenues. It's important to assess whether your decline is due to factors outside of your control, such as a downturn in the economy, increased competition, or changing consumer preferences.

  • Customer needs and preferences: If your sales are declining, it may be because your customers are no longer interested in your product or service. You should conduct market research to understand your customers' needs and preferences, and identify areas where you can make improvements to better meet their needs.

  • Marketing and advertising: It's possible that your decline in sales is due to a lack of effective marketing and advertising. Consider whether you need to revise your marketing strategy, invest more in advertising, or explore new marketing channels to reach your target audience.

  • Operational inefficiencies: Inefficient business practices can lead to higher costs and lower profits. Conduct a thorough review of your operations to identify areas where you can streamline processes, reduce costs, and improve efficiency.

  • Product or service quality: If your sales are declining, it could be because your product or service quality has declined. Conduct a review of your product or service offering to ensure that it meets customer needs and expectations, and identify areas where you can make improvements.

  • Staffing and leadership: Your staff and leadership team can have a significant impact on your business success. Evaluate whether you have the right people in the right roles, and consider whether you need to make changes to your team or invest in leadership training to improve performance.


A consistently high level of debt and difficulty in making payments

By considering the factors below and taking action to address debt, you can work towards building a more secure financial future.

  • The total amount of debt: The first step is to assess the total amount of debt your business has accumulated. This includes all types of debt, such as loans, lines of credit, and accounts payable. Understanding the total amount of debt will help you determine the severity of the situation.

  • Interest rates: High interest rates can make it difficult to pay off debt, as a large portion of your payments may be going towards interest rather than the principal balance. It's important to assess the interest rates on your debt and explore options for refinancing or negotiating with creditors to reduce your interest rate.

  • Cash flow: If your business is struggling to make debt payments, it's important to reassess your cash flow and determine whether you can reduce expenses or increase income to free up additional funds. Additionally, you may be able to negotiate more favorable payment terms with your creditors or explore options for debt relief, such as debt restructuring.

  • Credit rating: High levels of debt and missed payments can have a negative impact on your business's credit rating. It's important to monitor your credit rating and take steps to improve it, such as making timely payments and reducing debt.

  • Spending habits: If your business has consistently high levels of debt, it may be necessary to reassess your spending habits and make changes to reduce expenses. This could include reducing overhead costs, renegotiating contracts with suppliers, or finding ways to save on everyday expenses.

  • Professional advice: Finally, it may be helpful to seek professional advice from a financial advisor or business consultant. These professionals can help you develop a plan for managing your debt and improving your financial situation.


A high rate of customer complaints and a declining customer base

By considering these factors and taking action to address any issues, you can work towards improving customer satisfaction and loyalty, reducing complaints, and building a more successful business.

  • Customer experience: The customer experience is a critical factor in determining customer satisfaction and loyalty. You should assess whether your business is providing a positive customer experience at all touchpoints, including sales, customer service, and product or service delivery.

  • Quality of products or services: If customers are consistently unhappy with the quality of your products or services, it could be a significant factor in their decision to take their business elsewhere. You should assess whether your products or services are meeting customer needs and expectations, and identify areas where you can make improvements.

  • Pricing: Your pricing strategy can have a significant impact on customer satisfaction and loyalty. If your prices are too high compared to your competitors or if you are not providing value for the price, customers may be less likely to choose your business. Consider whether you need to adjust your pricing strategy to better align with customer expectations.

  • Competition: Increased competition in your industry may be causing customers to choose competitors over your business. You should assess the competitive landscape and identify areas where you can differentiate your business and provide added value to customers.

  • Communication: Poor communication with customers can lead to misunderstandings, frustration, and complaints. It's important to ensure that your business is communicating effectively with customers at all times, and addressing any issues or concerns promptly.

  • Reputation: A negative reputation can have a significant impact on customer retention and acquisition. It's important to monitor your business's reputation online and address any negative feedback or reviews. Additionally, you should develop a strategy for building a positive reputation through marketing and customer engagement.


An inability to attract and retain top talent

By considering these factors and taking action to address issues, you can work towards attracting and retaining top talent, improving employee satisfaction and productivity.

  • Compensation and benefits: One of the main reasons why employees may choose to work for another company is due to compensation and benefits. You should assess whether your business is offering competitive salaries and benefits packages compared to your industry and local market.

  • Company culture: The culture of your company can play a significant role in attracting and retaining top talent. Assess whether your company culture aligns with the values and expectations of your employees, and identify areas where you can make improvements to foster a positive work environment.

  • Career development and growth opportunities: Employees want to feel their careers are progressing and there are opportunities for growth within the company. Assess whether your business is offering clear career development paths and opportunities for professional growth.

  • Work-life balance: A healthy work-life balance is increasingly important to employees. Assess whether your business is offering flexible work arrangements, such as remote work or flexible hours, and identify ways to support employees in achieving a healthy balance.

  • Recruitment and hiring process: The recruitment and hiring process can impact your ability to attract top talent. Assess whether your process is effective and efficient, and identify areas where you can make improvements to attract a wider range of candidates.

  • Reputation and brand recognition: The reputation and brand recognition of your company can also impact your ability to attract and retain top talent. Assess your company's reputation among employees, and identify ways to improve your brand recognition and reputation in the job market.


A lack of clear direction and leadership from management

By considering these factors and taking action to address issues, you can work towards creating a more focused and effective organization with clear direction and leadership from management—ultimately resulting in improved employee satisfaction and productivity.

  • Vision and mission: A clear and well-defined vision and mission statement can provide direction and purpose for your firm. Assess whether your firm has a clear vision and mission statement, and whether it is being effectively communicated to employees.

  • Strategy and goals: Without a clear strategy and goals, it can be difficult to prioritize and focus efforts. Assess whether your firm has a clear strategy and goals, and whether they are being effectively communicated and implemented.

  • Communication: Effective communication is critical for providing direction and leadership to employees. Assess whether communication channels are open and effective, and whether management is actively seeking and responding to feedback from employees.

  • Leadership and management skills: The ability of management to provide direction and leadership is critical for the success of a firm. Assess whether management has the necessary leadership and management skills to effectively lead the organization.

  • Employee engagement: Engaged employees are more likely to be committed to the goals and vision of the organization. Assess whether your firm is effectively engaging employees through communication, recognition, and development opportunities.

  • Organizational culture: The culture of your organization can have a significant impact on direction and leadership. Assess whether your organizational culture is aligned with the vision and mission of the firm, and whether it is supportive of effective leadership and management.


Poor financial planning and management, resulting in a lack of cash flow

By considering the factors below, you can work towards improving financial planning and management, reducing cash flow issues, and building a more successful and sustainable business.

  • Budgeting: Effective budgeting is critical for managing cash flow and ensuring that expenses do not exceed revenue. Assess whether your firm has a clear and comprehensive budgeting process in place, and whether it is being effectively managed and monitored.

  • Financial forecasting: Financial forecasting can help you anticipate and plan for future cash flow needs. Assess whether your firm has a clear understanding of its cash flow needs and is able to accurately forecast future cash flow.

  • Accounts receivable and payable: Managing accounts receivable and payable is critical for maintaining cash flow. Assess whether your firm has an effective process for managing accounts receivable and payable, and whether it is being followed consistently.

  • Cash reserves: Maintaining adequate cash reserves can help your firm weather unexpected expenses or revenue shortfalls. Assess whether your firm has adequate cash reserves, and whether they are being managed effectively.

  • Credit and financing: Access to credit and financing can be critical for managing cash flow. Assess whether your firm has access to appropriate credit and financing options, and whether they are being used effectively.

  • Financial management skills: The ability of management to effectively manage finances is critical for the success of the firm. Assess whether management has the necessary financial management skills to effectively manage cash flow and finances.


Inefficient or outdated processes and systems

By considering the factors below, you can work towards improving the efficiency of your business processes and systems and reducing costs.

  • Process mapping: The first step in improving efficiency is to identify current processes and map out how they work. Assess whether your business has documented and analyzed its current processes, and whether it has identified areas for improvement.

  • Automation and technology: Automation and technology can help streamline processes and improve efficiency. Assess whether your business is using appropriate technology and automation tools to support its processes, and whether there are opportunities to implement new technologies or upgrade existing systems.

  • Employee training and development: Employees need to be trained and developed in order to effectively use new processes and technologies. Assess whether your business is providing appropriate training and development opportunities to employees, and whether they are effectively using the tools available to them.

  • Metrics and tracking: It's important to track and measure the effectiveness of processes and systems in order to identify areas for improvement. Assess whether your business is tracking appropriate metrics and using them to make informed decisions about process improvements.

  • Customer experience: Inefficient processes and systems can negatively impact the customer experience. Assess whether your business is providing a positive customer experience, and whether improvements to processes and systems could help improve customer satisfaction.

  • Organizational culture: The culture of your organization can impact the effectiveness of processes and systems. Assess whether your organizational culture supports continuous improvement, and whether there is a willingness to change and adapt processes and systems as needed.


A lack of innovation and inability to adapt to changes in the market

By considering the factors below, you can work towards improving innovation and adaptation in your business, increasing your competitive advantage and improving your chances of success in the market.

  1. Market research: Understanding the needs and preferences of your target market is critical for identifying opportunities for innovation and adapting to changes in the market. Assess whether your business is regularly conducting market research, and whether it is using the insights gained to inform innovation and adaptation efforts.

  2. Competitive landscape: Understanding the competitive landscape is critical for identifying areas where your business can differentiate itself and provide added value to customers. Assess whether your business is regularly monitoring the competitive landscape, and whether it is using this information to inform innovation and adaptation efforts.

  3. Culture of innovation: Creating a culture of innovation within your business is critical for fostering new ideas and encouraging creativity. Assess whether your business has a culture that supports innovation, and whether it is providing appropriate resources and incentives to support innovative thinking.

  4. Strategic planning: Effective strategic planning is critical for identifying opportunities for innovation and adaptation. Assess whether your business has a clear strategic plan that identifies goals and priorities, and whether it is being used to inform innovation and adaptation efforts.

  5. Talent management: Hiring and retaining talented employees who are capable of driving innovation and adaptation is critical for the success of your business. Assess whether your business has a talent management strategy that supports innovation, and whether it is effectively recruiting, training, and retaining talented employees.

  6. Agility and flexibility: The ability to be agile and flexible is critical for adapting to changes in the market. Assess whether your business has processes and systems in place that allow it to quickly and effectively respond to changes in the market.


An inability to compete with other businesses in the industry

By considering the factors below, you can work towards improving your competitive position in the market, and increasing customer satisfaction and loyalty.

  • Competitive landscape: Understanding the competitive landscape is critical for identifying areas where your business can differentiate itself and provide added value to customers. Assess whether your business is regularly monitoring the competitive landscape, and whether it is using this information to inform strategic decision-making.

  • Value proposition: Your value proposition is what sets your business apart from competitors and provides added value to customers. Assess whether your business has a clear and compelling value proposition, and whether it is effectively communicating this to customers.

  • Marketing and branding: Effective marketing and branding are critical for building brand awareness and attracting customers. Assess whether your business has a clear marketing strategy and brand identity, and whether it is effectively communicating its unique value proposition to customers.

  • Pricing strategy: Your pricing strategy can have a significant impact on your ability to compete in the market. Assess whether your business is pricing its products or services competitively, and whether it is providing value for the price.

  • Customer experience: Providing a positive customer experience can help differentiate your business and build customer loyalty. Assess whether your business is providing a positive customer experience at all touchpoints, and identify areas where you can improve.

  • Innovation and adaptation: The ability to innovate and adapt to changes in the market is critical for staying competitive. Assess whether your business is regularly exploring new ideas and opportunities for innovation, and whether it is able to adapt quickly to changes in the market.


A negative reputation within the community and among customers

By considering the factors below, you can work towards improving your business's reputation within the community and among customers.

  • Root cause analysis: It's important to understand the root cause of your business's negative reputation. Assess whether there are specific incidents or patterns of behavior that have contributed to this reputation, and identify the underlying factors that need to be addressed.

  • Customer experience: Providing a positive customer experience is critical for building a positive reputation. Assess whether your business is providing a positive customer experience at all touchpoints, and identify areas where you can make improvements.

  • Communication: Effective communication with customers and the community is critical for building and maintaining a positive reputation. Assess whether your business is communicating effectively with customers and the community, and identify areas where you can improve communication channels and messages.

  • Crisis management: How your business responds to crises and negative events can have a significant impact on your reputation. Assess whether your business has effective crisis management processes in place, and whether it is responding appropriately to negative events.

  • Community involvement: Being an active and positive member of the community can help build a positive reputation. Assess whether your business is involved in community events and initiatives, and identify opportunities to increase community involvement.

  • Branding and marketing: Effective branding and marketing can help build a positive reputation and improve customer perceptions of your business. Assess whether your business has a clear and positive brand identity, and whether it is using effective marketing channels and messages to reach customers.


The main takeaway

Turning around a struggling business can be a daunting task, but by identifying and addressing these 10 critical markers of failure, business owners can navigate the challenges and emerge stronger than ever. From developing a clear vision and strategy to addressing financial and operational inefficiencies, each of these markers presents an opportunity to unlock new avenues for growth and success.

In this article, we delve into the “10 signs or markers that your business is failing” chapter found in Next 10: Coach Wisdom for Entrepreneurs, Business Owners, and CEOs Wondering What Moves to Make Next, a book written by the Host and Curator of Arete Coach Podcast, Severin Sorensen, with contributions from Amelia Chatterley.

Copyright © 2023 by Arete Coach LLC. All rights reserved.

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