10 Signs Your Company is in Trouble

Note: This article has been so popular that we updated and expanded it into a new guide "10 Hidden Signs Your Company is Sinking." It includes tips and tactics for eliminating the problems.

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Sign Number 1: Customer Attrition Exceeds Acquisition

Traditional marketing benchmarks measure successes and exclude failures. Response rates, acquisition, and average order value are important measurements. They are also only part of the story. Attrition is a natural process in the customer cycle. When it moves beyond 3-5% of the house file, it is time to start seeking answers. If attrition exceeds acquisition or the new customer value is less than the baseline, then there must be concern. Otherwise, one day you will discover your business has simply disappeared.

Sign Number 2: Employees are demoralized.

When you walk through your office, you should feel the energy of people doing jobs they love. If you don’t, then you need to find out why. Your employees are your frontline defense against invading competitors. Keep them happy and excited and they will inspire passion in each other and your customers.

Sign Number 3: Objectives are not clearly defined to everyone in the company.

Visualization is the first step in achieving any goal. This is true with everyone in the organization. Management often operates on a need to know basis. They don’t realize that everyone needs to know the objectives to have a successful initiative

Sign Number 4: Vendors are not as responsive.

New product development, just in time inventory, and fulfillment costs are all contingent on your relationship with your vendors. A reduction in vendor responsiveness can seriously jeopardize your company.

Sign Number 5: The passion is gone.

If you don’t bound out of bed every morning, excited about the day and potential of your business, then you can’t expect your employees to feel excited about their jobs. Energy inspires energy. Find your passion and you will inspire passion.

Sign Number 6: Response rates, average order value, and lines per order are decreasing.

There is a tendency to review individual campaigns independently. If the campaign is profitable, then the postmortem analysis is complete. If it is unprofitable, then checklists are created to explain why the campaign failed to meet projections. The next step must be to compare the campaign to previous promotions. Only then will you know if there are some hidden issues influencing your business. Diminishing response rates, average order value, and lines per order indicate potential problems with marketing, service, and/or merchandising.

Sign Number 7: Fulfillment costs are increasing.

First, they start to creep, and then they leap exponentially. Find and eliminate the causes before they absorb all of your profitability.

Sign Number 8: New product to proven items ratio and exclusive merchandise is decreasing.

Research and development is one of the first cuts when companies seek to reduce costs. If the company is strictly merchandising without manufacturing, the investment in seeking new products is substantially reduced. At first, there is little or no impact. Then there is a little slip in the numbers followed by another. Before you know it, the sales are sliding south.

Sign Number 9: Inventory value and backorders are increasing.

It seems counter-intuitive, but an increase in inventory value is often accompanied by an increase in backorders. The result is greater risk and reduced service. The cause is typically a service initiative requiring a reduction in backorders. The inventory team increases the quantity on hand without incorporating the risk in the analysis.

Sign Number 10: Service levels are remaining constant or decreasing.

In today’s business climate, maintaining the status quo is equivalent to fast reverse. Service is key to building relationships and connecting with your customers. Anything less than service improvements is limiting your ability grow your company.

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