Watch out for declining sales and low morale in your company. It may be the start of a steep slide.
Q: Hi. I've been reading with interest the practical advice you've been doling out.
My mom is in business and I am helping her out. When I graduate this semester, she wants me to be her fulltime assistant sales manager. But I would like to help not only in marketing but in a bigger way. I've been studying our financial records whenever I could take time off from my studies. I am a bit alarmed to see a downward trend in sales. Not too steep, but more of a slow but consistent downward curve. There are other signs, like our otherwise cheerful employees who seem indifferent now.
Our business seems to be on the decline and we may have been "sleeping" for a long time. I would like a deeper study. What can I do? Where can I go for help?
— Ren-ren, Quezon City
A: Declining sales is definitely one of the first things to sound alarm signals and, when found, needs further study. It implies a drop in demand, oversupply of the products and services that you sell, perhaps a need to improve the product and pricing mix, etc.
At the same time, a drop in demand may be temporary. So you have to check out other possible factors, such as:
*
Any deterioration in the quality of the product or service.
*
Substantial production/procurement cost increases that cannot be passed on to customers, including raw material, wage, utilities, tax and technology costs. Look also for unnecessary costs resulting from excess capacity, inefficient machines, and inappropriate technology.
*
Excessive overhead costs and operating expenses without commensurate increase in sales.
*
Substantial increase in interest rates and charges.
*
Tax problems.
*
Declining cash balances.
*
Slow or uncollectible receivables.
*
Slow-moving inventory.
*
Diversion of funds for speculation/non-earning assets or unrelated investments.
*
High level of advances to owners, relatives, and affiliates.
*
Sales of fixed assets to raise cash.
*
Over-investment in land, jewelry, and similar non-productive assets.
*
Over-borrowing/high debt-equity ratio.
Yes, signs of low employee morale are another warning signal. Possibly, at the first good chance they get, they will quit. High employee turnover is another distress sign.
Other early warning signs you should watch out for: Poor quality of raw materials, poor product design, limited product assortment, dependence on a single or very few markets, intermittent production operations, and lack of distinction between business and personal funds.
Most of these are of course mere symptoms of deeply-rooted problems that may only surface when the operations are studied and analyzed in depth.
Some of the remedies may be administered by you or your mom, as owners, with or without guidance from professional business counselors. These may be in the form of identifying slow-moving inventory, waste and cost cutting, seeking new markets and new marketing channels, introducing more capital, plowing back profits into business, and introducing price increases, among others.
On the other hand, for some seriously ailing businesses, more drastic solutions may be indicated. Bankers and lenders, for example, might suggest mergers, loan restructuring, venture capital arrangements, converting loans into equity, and the deployment of professional managers to put the business back on its feet.
I hope you won't mind a plug: The UP Institute for Small-Scale Industries' Program on Rehabilitating Distressed Enterprises or PRIDE has helped many entrepreneurs, banks, NGOs and other institutions recognize early warning signs for troubled SMEs, diagnose and analyze these, and take measures to rehabilitate their businesses.
The course is basically an action learning program that features workshops on business diagnosis and rehabilitation plan formulation. Would you care to try it? Call these numbers for more information: 928-7076 to 79 and 927-9238, or email us at serdef@upissi.net. We look forward to hearing from you!
Source: Philstar
Q: Hi. I've been reading with interest the practical advice you've been doling out.
My mom is in business and I am helping her out. When I graduate this semester, she wants me to be her fulltime assistant sales manager. But I would like to help not only in marketing but in a bigger way. I've been studying our financial records whenever I could take time off from my studies. I am a bit alarmed to see a downward trend in sales. Not too steep, but more of a slow but consistent downward curve. There are other signs, like our otherwise cheerful employees who seem indifferent now.
Our business seems to be on the decline and we may have been "sleeping" for a long time. I would like a deeper study. What can I do? Where can I go for help?
— Ren-ren, Quezon City
A: Declining sales is definitely one of the first things to sound alarm signals and, when found, needs further study. It implies a drop in demand, oversupply of the products and services that you sell, perhaps a need to improve the product and pricing mix, etc.
At the same time, a drop in demand may be temporary. So you have to check out other possible factors, such as:
*
Any deterioration in the quality of the product or service.
*
Substantial production/procurement cost increases that cannot be passed on to customers, including raw material, wage, utilities, tax and technology costs. Look also for unnecessary costs resulting from excess capacity, inefficient machines, and inappropriate technology.
*
Excessive overhead costs and operating expenses without commensurate increase in sales.
*
Substantial increase in interest rates and charges.
*
Tax problems.
*
Declining cash balances.
*
Slow or uncollectible receivables.
*
Slow-moving inventory.
*
Diversion of funds for speculation/non-earning assets or unrelated investments.
*
High level of advances to owners, relatives, and affiliates.
*
Sales of fixed assets to raise cash.
*
Over-investment in land, jewelry, and similar non-productive assets.
*
Over-borrowing/high debt-equity ratio.
Yes, signs of low employee morale are another warning signal. Possibly, at the first good chance they get, they will quit. High employee turnover is another distress sign.
Other early warning signs you should watch out for: Poor quality of raw materials, poor product design, limited product assortment, dependence on a single or very few markets, intermittent production operations, and lack of distinction between business and personal funds.
Most of these are of course mere symptoms of deeply-rooted problems that may only surface when the operations are studied and analyzed in depth.
Some of the remedies may be administered by you or your mom, as owners, with or without guidance from professional business counselors. These may be in the form of identifying slow-moving inventory, waste and cost cutting, seeking new markets and new marketing channels, introducing more capital, plowing back profits into business, and introducing price increases, among others.
On the other hand, for some seriously ailing businesses, more drastic solutions may be indicated. Bankers and lenders, for example, might suggest mergers, loan restructuring, venture capital arrangements, converting loans into equity, and the deployment of professional managers to put the business back on its feet.
I hope you won't mind a plug: The UP Institute for Small-Scale Industries' Program on Rehabilitating Distressed Enterprises or PRIDE has helped many entrepreneurs, banks, NGOs and other institutions recognize early warning signs for troubled SMEs, diagnose and analyze these, and take measures to rehabilitate their businesses.
The course is basically an action learning program that features workshops on business diagnosis and rehabilitation plan formulation. Would you care to try it? Call these numbers for more information: 928-7076 to 79 and 927-9238, or email us at serdef@upissi.net. We look forward to hearing from you!
Source: Philstar
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