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Indicators to know when to close or keep your business

BusinessIndicators to know when to close or keep your business

The return to the so called new normal is proving to be much harder than it seemed it would be; the economy has been touched down because some sectors are blocked (e.g. tourism), because social consumption is still unthinkable (bars and discos, for example) and because the mentality of the consumers also seems to have changed.

And now is the time to ask the hardest question for some small business owner: is it time to close or keep it alive?

The famous saying “a timely retreat is a victory”, seems fundamental from a business point of view to face the harsh reality. The objective? Just not to fall into high debt in order to continue with your life, learn from your mistakes and, who knows, try again this time doing things right.

Study first if your project will be viable

Finding out if your project is viable, that is, if it can really be profitable, requires a previous study that addresses multiple factors. From knowing if the place you have chosen is still in a good area, to having the business model well tied up. Remember that no matter how much you think it is a safe business, it must solve the needs of your potential customers. And if they don’t really have that problem, no matter how much you adorn your product, it won’t do any good in the market.
Fixed costs and bloody cash flow will always be twice as big a problem as you plan for in the current situation but things could not only not get better but could even get worse. What if there is another lockdown? What if another variant of the virus appears?

Let’s remember, for example, what happened to those stores that sold electronic cigarettes. Most of them closed down within a year.We have to wait for consolidation, because we have to be very clear that the situation is not going to change and it’s going to knock us down whether it happens or not.

Indicators to know when to close or keep your business

As you can imagine, falling in love with an idea in such a way that it prevents you from seeing when you should close your company is a danger you’d better not fall in.

There are many useful business intelligence tools that can help you determine if it is worth going forward or if it is time to fly away, but above all, the analysis should focus on these two:

Cash flow

The contraction of consumption is a fact and the reduced availability of money in the buyers’ pockets is evident. Only companies that have sufficient assets of their own not to incur in debt and flexibility to adapt to the changing cycles of the modern economy are ready to survive. This applies from a restaurant (it is different if the owner is also the owner of the venue than if it is leased) or a stationery store (machinery in renting or in ownership, payments from customers and suppliers at different rates, unpaid bills, etc.). Fortunately, there are companies like Axton Global which help you unlock deferred payments with your suppliers from China, and in doing so, significantly improve your cash flow.

Other metrics such as units or services delivered, people interested in the product, success in promotional events, economic income, audience, comments, etc. will help us evaluate the situation.

Willingness to move forward

The whole team has to be involved in the continuity of the project. If there are people who want to take their pay and run away from the first moment, we know that they can no longer be counted on if things get really bad. In most cases the owner himself will accept, not only not to have benefits, but not to receive a salary in order to keep the business going, but you have to know if you can count on the support of the employees: if they will be willing to change their vacations or days off, if they will accept payments as the objectives are met, if they accept teleworking, etc.
If the meetings are tense, if the days become tedious and there is no faith in going forward, that is, if the team does not work fine, it is better to leave.

Of course closing is a sad decision that nobody likes to make but sometimes it is better to stop in time… to get momentum.


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