One of these is not good, 3 is worrying, and five or more is a serious problem:
- A failure to assess, monitor and plan for the risks facing the business
- Reliance on very few suppliers or customers, or even a narrow market segment (record-labels anyone?)
- No succession or contingency planning in case key individuals become unavailable (through illness, departure etc)
- Using overdraft or other short-term funding on long-term assets (withdrawal of bank funding is becoming an increasing occurrence and the consequences could be terminal)
- Growing too quickly (it is not unheard of for the capital required to fund stock and debtors to exceed the funding available from taking credit from suppliers and banks)
- Inadequate monitoring and reporting of the cash position and future cash requirements
- Accounts that arrive too late, are inaccurate or focus solely on the distant past. Also beware if the key business indicator (such as order-book) is not part of the traditional accounting process and not regularly monitored, particularly for decline
- A business model at risk of being undermined or superceded by the internet, other technological changes or cheap competition from China
- Exporting/gifting your Intellectual Property to China, India et al
- Non-existent or sycophantic management team – no one who dares put an alternative view to the boss (or they will not listen)
Next topic – starting a new business venture