To ensure that your situation doesn't get worse and prevent your construction business from going under, here are some early warning signs to look out for. These are signs that you need to deal with the situation as soon as possible.

Constant Shortage of Cash

In any business, cash is king. So if your business expenses are higher than your earnings, expect to experience some problems in the long run unless it is well-funded.

Don't let your cash flow continuously stay negative for extended periods, as it can imply that cash in the bank could be running low and eventually lead to bankruptcy.

Falling Profit Margins

Long-term survival requires sustained profits. Falling profit margins may mean that costs are increasing and income is declining. 

If your business struggles to earn good profits, it may be challenging to keep it running smoothly and may cause added pressure to your cash flows.

Delayed or Defaulting on Payments 

If your business has to delay payments to its creditors continually, some suppliers may be forced to halt the supply, leading to delays in your production or service delivery. 

Also, it is not unusual to forget or miss a payment. However, if it is becoming too frequent, this is a warning sign of business failure.

Higher Interest Payments

If lenders are not confident of your business viability or see your business as high risk, funding debt will cost more and interest payments will be higher. Because high interest can put added pressure on your cash flow, this will likely worsen your situation.

Difficulty in Raising Capital

Do you find yourself in constant need to borrow or ask investors to inject more capital into your business? If so, this is a glaring sign that your business is finding it challenging to self-sustain. Now is the time to re-evaluate your enterprise and check if it is viable in the long-term.

Employee Turnover and Stress in Management

Businesses in financial distress have increased employee turnover rates or reduction in headcount to cut down on costs. Also, significant changes in senior personnel and stress management are key indicators that your business is in trouble.

Market Risks and Other External Factors

Economic downturns, changes in market trends, the loss of a significant market or critical customers, loss of a franchise or license, among other external factors, may also put friction on your profitability. While these conditions are often inevitable and beyond your control, it is vital to be aware of these risk factors and stay ahead of these changes and disruptions. By doing so, you will effectively manage them and cushion their impact on your business.

Is Your Construction Business At Risk?

If you find your business showing any or some of these early warning signs, it's time to take action. The faster you act, the higher your chances of turning things around.

While nobody knows your contracting business as well as you do, seeking expert financial advice right away is crucial for your survival in the face of insolvency. For a free initial assessment of your business, feel free to get in touch with me.

I look forward to chatting with you, and hopefully not only help you understand your current situation but also help you consider your options, implement concrete action plans, and minimize your exposure to further risk through practical strategies.