It is easy to miss the early warning signs that a business is in trouble. Lower than usual sales volumes might be put down to a seasonal variation. The cash flow getting a bit tight might be blamed on a few late-paying customers. If the downward trend continues, though, then you will know that action is needed. You are going to need to cut costs, look at your margins, and investigate why your sales have dropped.

The actions that are needed to save a failing business are apparent in the cold light of day. But when it’s your business, cold logic can fly straight out the window. So, if your business looks like it is in trouble, take a deep breath. Read these ten mistakes that you will want to avoid.

1. Carry on Regardless

Businesses facing financial difficulties rarely sort themselves out. So, if you have had successive months of disappointing numbers, don’t ignore the warning signs. Yes, you might be able to trade your way out of the problem. Yes, the issue might be nothing more than a temporary glitch. Even so, you cannot run a company on optimism alone. So, begin taking steps to turn around the fortunes of the business as soon as you see the first warning signs.

2. Panic

Your reaction might be the opposite of carrying on regardless. You might go into a panic and start making hasty decisions. It would be much better if you can stay calm, analyze the situation, and devise a well-considered recovery plan. The underlying reasons why your business is not doing well as expected may take time to uncover. It will take time for you to consider all your options. So, stay calm, and think things through before you take any action.

3. Review the Numbers

Sometimes, the reason why you are experiencing a downturn in fortunes will be apparent. The recent coronavirus pandemic, for example. However, whether you can immediately identify the root cause or not, the answer will lie in the numbers. So, it’s time to start work on the spreadsheets and do some what-if analysis. Would increasing your prices ward off a disaster? Which products make the least margin? Could you survive if you let some staff go? Where can you cut costs and remain in business? These are only a few of the questions you should be asking yourself.

4. Fail to Seek Advice

When your business is in serious financial difficulties, it is best not to try to handle the situation alone. So, talk to your accountant, and talk to your lawyer. Your accountant will be able to help you formulate a recovery plan. Your lawyer will be able to advise you on any legal implications of continuing to trade while technically insolvent. You may also want to seek advice from a trusted fellow business person who has been through a similar situation.

5. Borrow More Money

Do not be tempted to borrow more money before you have a realistic recovery plan in place. Taking out a short-term business loan or factoring your sales invoices might give you a short-term reprieve. But, if you do not address the underlying issues, you will be back where you started in no time at all, but with even more debt to service. Plus, there may be legal implications for you if you borrow money when you know that there is the possibility that you will be unable to repay it.

6. Invest More Money

Plowing in more of your money to a failing business is never a good idea, either. As with borrowing, you may be able to prop up your business with your personal funds, but you still need to fix the underlying issues. If you are not careful, you will find yourself continually making “just one more loan” to your business and drain your personal reserves. As an entrepreneur, you must learn to separate business and personal. Remember, if you keep your own funds intact, you could always start again if the current company goes out of business.

7. Sell What You May Not Be Able to Deliver

Be careful not to sell anything you cannot reasonably expect to deliver. You might be tempted, for example, to sell products that you do not have in stock on the assumption that you can then buy those products for the cash realized from the sale. However, when a business is struggling, there are many demands on the cash flow. So, you could find that you do not have enough money to buy the products you have sold when it’s time to ship them. This type of practice could also cause you legal problems and possibly make you personally liable for the debts of the business.

8. Go Public?

Try not to walk around with your head in your hands, telling anyone who will listen to you about your financial problems. Talk to professional advisers, and perhaps trusted business acquaintances, but otherwise, keep the news on a need-to-know basis. Word gets around fast when a business in trouble. If customers discover that your company is experiencing difficulties, they will go elsewhere.

9. Neglect Your Health

Managing a struggling business is stressful, but try to get some downtime, and try to get some sleep every night. Also, do not be tempted to drown your sorrows in alcohol! You will need to be in top form if you are going to manage your way out of a crisis.

10. Quit Too Early

Finally, do not throw in the towel until you have explored all the options. If your business was once viable, it could be again. Even a company that is currently experiencing difficulties will have valuable assets that are worth saving. You will have physical assets, like equipment and machinery. And you will have intangible assets, like the goodwill of your customers. If you quit too early, you will lose all those assets. So, get advice from your accountant before you shut the door and turn out the lights on your business.


When it is your business that is facing difficulties, it can be easy to take it too personally. The overriding theme of all the above points is to try to take a detached view of the situation and try to keep a cool head. If in doubt, sit back, and ask yourself what your advice to a friend would be if they faced a similar situation.