Seven signs your business is going to fail

By Allon Raiz

Most businesses don’t fail suddenly. They fail slowly, quietly and politely – while everyone stays very busy.

Revenue might still be coming in. Staff are working hard. Clients haven’t disappeared. From the outside, things look… fine.

But underneath the surface, the foundations are cracking. You likely know it but are probably in some stage of denial.

Here are seven signs your business is heading for failure – not because the market is cruel but because leadership hasn’t embraced what is needed to avoid this disaster.

1. You remain too operational

If your business cannot function without your personal daily involvement, you don’t own a business – you own a job with overheads, responsibilities, built-in guilt and untold commitments.

Being operational feels productive. It’s tangible. You answer emails, solve problems, approve decisions and rescue deadlines. The dopamine hit is real. Working in the business is, ironically, your comfort zone – no matter how uncomfortable it may seem from time to time. It is the place where you operate with a sense of confidence. Where you seem to know what you are doing, and where you feel the highest form of agency.

But every hour you spend in the business is an hour you are not working on the business.

Operational leadership keeps things running. It ensures that what you promised to your customers gets delivered. But operational leadership does not build the business – it maintains it.

Strategic leadership builds the future. And the future is relatively unknown which makes it a scary place to be making decisions. So, we avoid making choices about the future. Do we invest in choice A or in B or is there a choice C, D or E that we know nothing about? And so, we avoid the choices and the required new build that come with those choices. Why? Because we are busy. Busy delivering on operational promises. And that feels important. And if you have no desire to grow, then it is important.

Businesses fail when founders confuse operational activity with progress and mistake busyness for growth.

2. You have no real vision – only a vision statement

A vision statement on a wall is not a vision. It is a lazy sentence that 92% of CEOs and 99% of their staff cannot recall when randomly asked what it is. It’s lazy because once you have developed your vision statement, you somehow believe that is where your need to build your vision and explain your vision ends. Nine times out of ten, vision statements are simple, uninspiring ego statements that often start with words such as “We want to be the most well-recognised brand in Africa” or something equally trite. No one knows what it means, no one knows what to do as a result of the vision statement, and most often no one cares.

A real vision is an inspiring, comprehensive description of a future state. It forces strategic trade-offs; in other words, it forces the organisation to make choices. If your leadership team cannot independently describe the same future state of the business – in practical terms – you don’t have a vision; you have division.

Without a clear vision, there is no strategy. The organisation becomes reactive, priorities change constantly, and the organisation defaults back to operational survival. Some months are good; most are bad.

Survival is not a growth strategy.

3. You don’t have a culture of brutal truth

Most leadership teams are polite. Very few are sufficiently honest about what is really going on.

If meetings are safe, agreeable and frictionless, you should be worried. A culture of brutal truth allows facts to outrank hierarchy. It creates space for uncomfortable conversations about performance, strategy and leadership itself. It is the CEO who must signal a culture of brutal truth. They do this by inviting constructive criticism, debate and a culture of challenging the status quo.

When truth is suppressed to protect egos, politics fills the vacuum. Problems become personalities. Symptoms are treated instead of causes.

Businesses don’t collapse because of bad news or the truth. They collapse because leadership refused to hear it early enough.

4. You have no real differentiator

If your competitive advantage can be copied in six months, it isn’t a competitive advantage. It’s a temporary respite. And to those entrepreneurs who use price and personal service as their differentiators, I have bad news.

Price differentiation is temporary. It is a race to the bottom. I think most people understand this concept.

Personal service is not expected; service is. Let me elaborate. When entrepreneurs use personal service as their differentiator, most of them mean that they, themselves, are providing the service. The clients want and demand to see them. And they comply. But how does that scale? How, with finite hours in a day, can the entrepreneur provide personal service to hundreds or thousands of clients? They cannot. So, the answer is to build service into systems and culture and allow other people in your organisation to deliver the service. Let your team and systems provide the “personal” service.

A real differentiator or USP (unique selling proposition) is derived from your core competencies. Core competencies are, in short, a chosen set of competencies into which an organisation strategically decides to invest time, money and resources to ensure that they build a higher level of competence in this arena than their competitors. Unfortunately, most businesses don’t take the time or effort to invest in these competencies and therefore don’t have a truly sustainable differentiator.

When differentiation is weak, growth becomes expensive. Marketing costs rise, sales cycles lengthen and margin erodes. Eventually, the business competes harder for less market share.

That is not competition. That is exhaustion.

5. Your organisational structure is not built for growth

Most businesses build out a clichéd organisational structure; the five usual suspects become the departments. Sales and marketing (often combined), finance, HR and operations. What such entrepreneurs miss is the fact that the organisational structure should be optimised to deliver the strategy. The organisational structure should include departments that relate to the core competencies. For example, if an organisation is building out a core competency in training youth, then there should be a Youth Training department.

By creating a department and making someone accountable for that department’s targets and strategic objectives, you are committing to deepening the capacity and competency of that department. In other words, by creating a department for a chosen core competency you are deepening your USP, deepening your differentiator.

So, by being thoughtful about your organisational structure and constructing it to support strategy, you increase your business’s probability of success. When you construct an organisational structure in the clichéd five-usual-suspects manner, you blunt your competitive edge and increase your probability of failure.

6. Your “collective noun” remains the same – culture

Most small businesses call themselves a family. “Welcome to the family” is an often-used phrase for newbies. Family implies intimacy, trust, kinship. And in most small businesses of around eight people, this is an appropriate collective term. But is family the right collective noun for a business of 250 people? Probably not. Tribe, community or another term might be more appropriate for a larger organisation.

The reason this matters is because scaling organisations require systems and controls. Systems and controls often imply or are interpreted as “we don’t trust that you are going to do what we expect you to do.” But the reality is that in a scaling business, where the leadership naturally becomes more distant from the majority in the organisation, systems and controls are used to guide and to provide feedback. No business can sustainably scale without them.

When a larger organisation calls itself a family, my guess is that it’s just an empty, warm-and-fuzzy word and that underneath is a more structured approach. Growing businesses must be aware that at some point on their growth path, their collective noun and the expectations resulting from that noun need to change.

7. You don’t evolve as a founder

This might be the hardest requirement of all. Founders are great in the founding years but few adapt to the less exciting corporate stage. And between those two stages lie many others for which the founder must adapt their leadership style. Each stage not only requires a new type of leadership, it also needs some deep introspection by the founder about whether they have the competence to lead the business through the next stage of growth. This echoes the idea that everyone grows to their level of incompetence and if you are a leader who is incompetent for the next stage of growth, then the right thing is to step down and let someone with the requisite competence step into the role. Ego must not prevail.

Businesses don’t fail because founders are weak. They fail because founders stay the same.

The uncomfortable conclusion

If you recognise more than two of these “signs” in your business, the warning lights are already flashing – albeit softly. If you see three signs, something must change – and soon.

To recognise the signs requires honesty and a deliberate openness to change.

Growth is not about doing more. It is about becoming different.