Published By Janet Gershen-Siegel at May 9th, 2018
We all recognize that companies downsize, get bought out, declare bankruptcy, or bomb entirely all the time. But it could never happen to you. Right? Er, right? You would never be caught in a failure trap!
Wrong. Nothing in life is set in stone, and it is prudent to be ready for worst-case scenarios. Look for these eight hints that you’re at a struggling business, and avoid losing out before it is too late. Failure can happen to any business.
Abrupt vision modifications warn that your business is losing its way. If your company’s vision is to sell the greatest widgets, but that suddenly changes to offering the most affordable widgets, then that is a significant modification. Can businesses change their visions and their foci? Of course they can; this much happens all the time. However, when a change is abrupt and does not seem to be the result of any pre-planning, then it is a cause for concern.
It is a foregone conclusion that an executive will read disaster in a business’s future much earlier a rank and file employee can. One person in management leaving for greener pastures or following their bliss elsewhere is one thing. However, it is quite another if the exodus becomes a stampede.
Prominent clients leaving are hints that something bad is on the horizon. One client leaving can be a parting of the ways due to other things. And it can signify someone will lose their job if they lost a really big account and they can receive the blame for that. But just like with management departing, look for trends and numbers here.
Are your best and brightest coworkers leaving for better opportunities? Such exits could mean that your company is going to pieces – especially if they are not promptly replaced.
Check the details. If the business used to provide sandwiches at all meetings, but they change to snacks or maybe nothing, take it as a warning.
Now, there is nothing wrong with a company tightening its belt to satisfy its mission, naturally. But employee perks going away without explanation is a cause for concern.
It is unlikely to expect that every news report, review or article about your business will be 100% favorable. And that is okay. However, a steady stream of bad press, on the contrary, can stop it in its tracks. Even a slight yet steady trickle of negativity can seriously harm its chances of long term growth. And no media coverage at all? That can really show you are at a struggling business.
Sometimes you just have to trust your instincts. A rise in office stress, regular high-level, closed-door meetings from which everyone comes out shaken and silent, and a general decrease in openness and communication are all signs of doom. Listening for whispers, too, and look for people taking long lunches or having to take their calls outside.
Of course anyone can have personal calls and need to take them private. Also, any office will have some form of whispering gossip. But when you combine that with what is essentially bad mojo, then it might be something more. A lot more.
So, do you want an immediate, insider’s look at your business’s general condition? Check out its business credit score. Companies with low business credit scores are felt to be untrustworthy about managing their payments. Dropping scores can harm your business’s chances of getting funding down the road, and thus your chances of obtaining paid.
You can get any company’s business credit score, as the Fair Credit Reporting Act does not apply.
Yes, this one can be fixed. Truth be told, they all can. Failure is not necessarily final. But decreasing business credit scores can turn around. And they can do so without laying people off or shaking up management. They can happen without selling the business, too.
If you are the owner, then this is within your purview. And if you are not, then there is nothing stopping you from suggesting these measures to the powers that be.
All they need to do is build business credit.
Establishing business credit is a process. It does not occur automatically. A company has to proactively work to develop small business credit.
Having said that, it can be done readily and quickly, and it is much quicker than establishing personal credit scores.
Merchants are a big aspect of this process.
Performing the steps out of order causes repetitive denials. No one can start at the top with small business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.
A small business must be fundable to lenders and merchants.
That’s why, a company needs a professional-looking website and email address. And it needs to have website hosting bought from a vendor such as GoDaddy.
Additionally, business phone numbers should have a listing on 411. You can do that here: https://www.listyourself.net.
At the same time, the business phone number should be toll-free (800 exchange or comparable).
A company also needs a bank account devoted strictly to it, and it has to have every one of the licenses essential for operation.
These licenses all have to be in the specific, correct name of the small business. And they need to have the same small business address and phone numbers.
So bear in mind, that this means not just state licenses, but potentially also city licenses.
First a business should establish tradelines that report. Then it will have an established credit profile, with a business credit score.
And with an established business credit profile and score it can begin to get credit for numerous purposes, and from all sorts of places.
These types of accounts have the tendency to be for things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.
But first of all, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are oftentimes Net 30, rather than revolving.
So, if you get an approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, such as within 30 days on a Net 30 account.
Net 30 accounts have to be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. Compared to revolving accounts, there is a set time to pay back what was borrowed or the credit in use.
To start a business credit profile the right way, a business should get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, the business can then use the credit.
Not every vendor can help like true starter credit can. These are vendors that grant approval with negligible effort. They need to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/
Non-reporting trade accounts can also be helpful.
A business can always ask non-reporting accounts for trade references. Plus, credit accounts of any sort will help to better even out business expenses, thereby making budgeting simpler.
Store credit comes from a variety of retail service providers. In general, it is revolving credit.
Fleet credit is from companies where a business can purchase fuel, and fix and maintain vehicles.
These are commonly MasterCard credit cards.
It will help to raise credit scores by simply knowing what is happening with credit. A business must make certain it is being reported and attend to any mistakes as soon as possible. The owner must get in the habit of taking a look at credit reports. They need to dig into the specifics, not just the scores.
We can help any business monitor business credit at Experian and D&B for a lot less than it would cost at the CRAs. See: www.creditsuite.com/monitoring.
At Equifax, a business can monitor its account at: www.equifax.com/business/business-credit-monitor-small-business.
A business must update the info if there are inaccuracies or the details is incomplete. At D&B, it can be done here: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. For Experian, go to Experian disputes. So, for Equifax, go here: www.equifax.com/business/small-business.
So, what’s all this monitoring for? It’s to dispute errors in the records. Mistakes in credit report(s) can be corrected. But the CRAs often want a business to dispute in a particular way.
Get a small business’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get a company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get a Equifax business credit report at: www.equifax.com/business/credit-information.
Dispute a business’s Equifax report by following the directions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.
Dispute inaccuracies on a business’s Experian report by following the instructions here: www.experian.com/small-business/business-credit-information.jsp.
And D&B’s PAYDEX Customer Service telephone number is here: www.dandb.com/glossary/paydex.
A business must always use credit smartly! They should never borrow beyond what they can pay back. A business owner must keep an eye on balances and deadlines for payments. Paying punctually and fully does more to boost business credit scores than almost anything else.
Building business credit pays off. Good business credit scores help a small business get loans. A loan provider knows the small business can pay its financial obligations. They know the small business is for real.
The small business’s EIN connects to high scores and lenders won’t feel the need to call for a personal guarantee.
Business credit is an asset which can help a company in years to come.
Companies do not last forever. And none of them are ‘too big to fail’. Know these warning signs so you can get while the getting is good. But business failure does not have to become personal failure. Share this and tell your friends what you think of how to change things up and live your best financial life.