10 Signs Your Business is About to Decline in Value
written by: Ryan Russell•edited by: Wendy Finn•updated: 2/10/2011
In order for your company to grow it must increase in value over the long term. If you are unsure whether your business will decline in value, check out these 10 signs that the financial vitality of your company is on the decline.
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The financial strength of any business lies in its ability to increase its value (and profits) year after year. One of the most frustrating experiences for any owner, is watching their business lose value. However, this loss doesn't have to catch you by surprise. Below are 10 signs your business is about to decline in value:
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1. You're Seeing a Steady Loss in Profits.
It shouldn't be surprising to discover that a decline in profits will lead to a subsequent decline in your company's value. Healthy profits are the life blood of any company. If the bottom-line is in trouble, the future of your business is in grave risk.
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2. You're Experiencing a Loss in Property Value.
Another sign that your business is about to decline in value, could be the decline of a major company asset, such as the building it occupies - this will hurt the total value of a small business especially. If other indicators are strong (especially profit) then this should by no means be deathblow to the business, but nevertheless, it is a factor that could decline the value of your company.
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3. Your Employees are Leaving.
If you find your business shedding employees quickly, this could usher in a decline of your company's value. Employees don't leave en masse unless there are issues with their working environment. Look to fix this leak, or a serious decline in your company's worth is imminent. Speak to exiting employees about their grievances and address them promptly.
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4. Your Debt Level is Increasing at an Alarming Rate.
If your company's debt is soaring at a rate that is difficult to manage, this could be the beginning of a marked decline in your company's value. This is especially true if profits aren't keeping up. If your debt is getting out of control, seek the services of a good accountant while there is still time.
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5. Your Most Loyal Customers Aren't Showing Up Anymore.
Your most loyal customers are essential to the vitality of your business. Not only are they frequent patrons, but they are likely to bring in more word-of-mouth traffic. If your loyal customers aren't coming by as often, this is a sign that the quality of your services have declined and your business value may soon follow. Seek these customers out and kindly ask them for their opinions and recent experiences with your business.
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6. You Have Dropped Your Prices Too Low.
When facing tough competition, many small business owners cut too deeply into their profits, in an effort to retain current customers. Instead, you should focus on better and more personal customer service to justify slightly higher prices. Taking too much out of your profits is a sure sign that your company is about to decline in value, especially if debt continues to rise.
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7. Your Passion For Your Business Has Waned Considerably.
If your industry is suffering a decline across the board, your business will likely be affected as well. Most of the time this is simply out of your control as consumer tastes and needs change with time. You have to assess if the market that currently exists will be sustainable into the future.
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9. You're Experiencing Government Intervention.
Government interference with your business or industry will likely affect both your company's bottom-line and value. This could be due to higher taxes or stricter regulations being placed on your industry.
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10. Your Company Has Less Liquidity.
If you find that your company's cash reserves are declining with each passing quarter, this will likely lead to a wholesale value decline for your business. If profit margins are slimmer and debt mounts, less cash reserves will be inevitable.
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Any one of these ten signs that your business is about to decline in value, could arise at any time in the life cycle of your business. Be on the look out for all of these concerning factors. Seek to remedy these issues as soon as they occur, even if outside help is required. If left neglected, these issues are sure to compound and your business will suffer.