Over the years I’ve experienced the pleasures of working at a successful start-up – and heard about the disappointments of being trapped in a failing one. Often there is a thin line between success and failure, and you’ll want to be on the lookout for any signs that your company is not heading in the right direction. So what are the signs?
1 Struggling to pay yourself
It’s a familiar story for many self-employed people. The end of the month comes round and you don’t have enough cash in the bank to pay yourself, but hope there will be enough cash next week. This particular ‘next week’ never comes. Then, in a couple of months, you find you haven’t taken a wage and are in mortgage arrears.
DON’T do it. Not being able to pay yourself in anything other than extraordinary circumstances is the first real signal that something is wrong. If having enough money to pay yourself becomes a persistent problem – close the business down and get a ‘proper’ job.
2 Using your personal credit card to pay suppliers
DON’T do it. If you use three personal credit cards to pay business suppliers, all with £10k credit limits, and your business fails – imagine being left with £30k of personal debt.
3 Always at your overdraft limit
You never have any cash in the bank, you are running an overdraft and you’re continually hovering around your limit. If you can run your business within your overdraft limit – why can’t you run it without an overdraft?
4 Fearing the bank manager
You dread that phone call from the bank manager asking you to come in and see him. Once that panic sinks in, the alarm bells should be ringing. Don’t let it get this far down the line.
Don’t fret if you recognise these warnings. A failed start-up is not the end, it can be a stepping stone onto your next idea, which could be a much more successful business. Noticing the downward spiral and avoiding the accumulation of unwanted debts and wasted time – now that’s a real life saver.
Take solace in the fact that it took my boss three businesses before he started Stinkyink.com. The lessons he learned from his failures helped shape the company into the success it is now. So whatever happens with your business will doubtless make you stronger.