startup strugglesEntrepreneurs are actually proven to be happier and healthier than employees who work for someone else. It is uniquely rewarding to own and grow a business.

That said, there are plenty of obstacles in the way. This is why failures are so common. As a business owner, it’s important to monitor the health of your growing company to spot warning signs—a fractured team, negative customer reviews, poor customer retention, and a lack of creative innovation.

In this article, I’ll explore these how to spot and reverse these problems.

1. A fractured team

Hiring is a minefield for startups, but with the right approach, you can recruit top talent. No matter how carefully you consider recruitment, the team can become fractured under pressure. If the culture doesn’t feel right and your team isn’t synchronized, this may highlight a dysfunctional workforce.

Some of the indicators of a dysfunctional team include:

Communication breakdowns

Communication channels themselves can foster a toxic culture. With the wealth of tools at your disposal, bad practice will fester if you don’t set guidelines for how and why to communicate. The team must buy into company messaging systems (e.g. Slack), and know the policies for communicating on email and project management systems.

Low morale, lack of understanding, or even bullying might happen within a fractured team. You must be fully aware of the landscape by talking to team members regularly, on a one-to-one basis, and providing a safe space for honest conversations.

Lack of trust

If your team doesn’t trust you as a leader or they don’t trust each other, don’t share workloads, or if they dread spending time together, this is a problem. In this case, you need to cultivate a better team culture. Scott Gerber’s useful article about building team culture features 13 tips by business leaders, from hosting out of office meals to improving transparency.

High turnover rates

Losing talent is one of the clearest indications of a dysfunctional team. If multiple employees are leaving, this needs to be addressed. Their reasons for departure may be unrelated, but they might also be related to dissatisfaction with pay, stress levels, lack of direction, poisonous culture, or something else entirely. Collect candid feedback from outbound staff to get a handle on their true reasons for departure so you can recognize and address trends.

In an article on the Forbes magazine, leadership expert David Kruse points to organizational psychologist Liane Davey’s advice on how to counter dysfunctional team dynamics. Davey says it’s important to take steps to recognize and appreciate your team on a regular basis. But she also says healthy, respectful disagreements that consider multiple viewpoints can actually build a culture of collaboration and openness.

2. Negative customer reviews

Sometimes your business, product, or service is going to receive bad reviews. They don’t mean all is lost and you should close your doors immediately, but you should pay attention and respond to negative feedback. As Emily Washcovick of Yelp points out, 53 percent of customers expect a reply when they write an online review.

Analyzing your bad reviews will help identify patterns and see where you fall below expectations. A study in 2016 by Capterra revealed that 52 percent of customers are actually more likely to trust of a product or brand if it has a few negative reviews. However, it’s not a good sign if the majority are bad reviews—this indicates a fundamental problem that needs to be addressed immediately or it will affect your sales.

So, what should you do if you notice that your reviews are increasingly negative? First, you should respond to all reviews, positive and negative. This highlights great customer service and protects your brand’s reputation.

Simultaneously, identify the reason(s) why you’re getting the bad reviews. Are your customers complaining about the same issue? Does this signify a bug in the software? Are the complaints isolated incidents, or do they reflect a pattern? Aim to take the detailed conversation off the public forums and always provide satisfactory compensation when appropriate.

Too many startups ignore them and suffer the consequences. Whether or not all the negative feedback is valid (and fair), your customers’ feelings of disappointment are real. This might mean that you’re framing your value proposition wrong, setting unrealistic expectations, or not delivering on promises. Don’t take the bad reviews at face value. Look deeper into whether they reflect a broader problem with your product, your positioning, and your customer service.

3. Depleted cash reserves

Cash flow is critical. According to studies, 90 percent of failed small businesses closed their doors due to poor cash flow management.

To build a fiscally strong business, you’ll need robust invoicing processes so you can avoid situations where you’re not getting paid on time or at all. Depleted cash reserves are a signal of difficult times, but are often avoidable.

How can you keep on top of the finances from the start of your startup journey?

Document projections

Document all financial projections, and record all transactions so you can compare and address any gaps quickly. Seek the advice of a financial professional to create accurate cash flow projections and determine where you can make the most impact. You can stay on top of your financials, comparing your forecast to actuals using simple Excel spreadsheets, but a financial dashboard tool that integrates with your cloud accounting solution can make it easier and save you time.

Maintain strict budgets

And stick to them. As a startup, you will need to factor in the possibility of unforeseen situations so delayed payments or extra expenses aren’t catastrophic. There’s always a risk, especially when investing in recruitment and marketing, but staying within your means will minimize the impact of mistakes.

Save for a rainy day

Plan the quiet times of the season when revenue drops. Also, prepare for emergencies. This could be a natural disaster like flooding, storms, or a technical failure. An unplanned pivot will drain cash quickly, so it’s important to have reserves.

How can you reverse cash flow problems when they hit acutely?

Find the source

Determine the source of your pain, and plan targeted action against it. Are late payments hurting you? Has there been an unexpected expense? Have you been affected by fraud? Are you paying more recruitment fees than expected? Is there a downturn in new customers?

Change your terms

If you invoice customers or clients, look at whether the terms are too generous. Be proactive with payment collection. Offer a discount for early payment as an incentive. Streamline the payment process; automate if possible. If you’re on a subscription model, determine whether this is working for you in the long-term.

Maintain lender relationships

Lenders are important for businesses in their earliest stages. In most cases, lenders are brought on board in a timely and considered manner. However, sometimes they come into play when a startup needs urgent cash. Build trust over time, and keep solid relationships.

Reduce overheads

Audit your current outgoings and determine where to make short-term cuts. This doesn’t always need to be drastic, but unnecessary expenses add pressure.

4. Poor customer retention

For a startup, it’s critical to work on customer retention to ensure repeat revenue. If you notice that the number of happy repeat customers is dropping, it’s time to investigate where and why.

Customer service is a key player here; perhaps more influential than marketing. It’s normal to have some unsatisfied customers. However, these can be turned around into loyal long-term advocates. Avoid long waiting times, train support staff to an expert level, and invest in great CRM and customer service communication software.

Poor customer service combined with a lack of added value will undoubtedly result in bad retention levels. You must have a retention strategy in place, delivered with the sole focus of keeping customers on board for the long-term.

Consider incentives such as a loyalty program. Exclusive discounts, cumulative benefits, gifts, or random rewards need to be put into the mix. Be sure to acknowledge customer loyalty milestones. Use your loyalty programs to foster direct communication with your customers so you can hear what they really think straight from the source.

Ask your customers what they think using surveys, social media, or even formal interviews. These insights are critical to planning product or service updates and will help you improve the quality of your offering. Transparent communication is key here.

5. A lack of innovation and agility

Startups are known for their innovative and agile approach to business. Creativity, thinking outside the box, and a modern mindset is essential. If you’re not innovating, you’re probably in trouble. Think about how you can make your internal processes more efficient and less costly. But don’t forget that innovation doesn’t have to be earthshaking—it can be the long-term commitment to evolving your product or service into the best it can be for your customers.

Innovation starts with your capable team. Give them space to discuss new ideas, products, and methodologies. Your team will feel more empowered, excited, and like you trust them to help you make the best decisions for your company. Micromanaging will lower morale, erode trust, and shrink thinking space.

Especially encourage new team members to bring fresh ideas to the table and commit to diversity in terms of expertise, cultural backgrounds, and experience.

Not every idea can be executed. But everybody should feel safe to push innovative thoughts forward. If there is a fear of embarrassment or shutdown, fewer people will be willing to take the risk to speak up.

Consider new methods of working. Perhaps one or two days of remote working will provide more innovative thinking space for team members? Or maybe a more streamlined and efficient process for project management would alleviate stress and allow for more creative conversation.

Summary

With the wealth of data at your fingertips, there is no better time to track the health of your startup business—look for patterns that indicate opportunities or issues that need to be addressed. Potentially fatal problems can be spotted early, and mitigated before they threaten the success of your enterprise.

Above all, it is key that you focus on your customers’ pain points. With a customer-centric approach, you will increase retention, improve reviews, and generate new revenue. You will be able to develop your product or service to meet the needs of the most valuable customers. This success will breed a positive atmosphere on your team, and allow for time and space to think creatively. In the end, addressing the needs of your customers will reverse negative trends.

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Fionn Concannon
Fionn Concannon

Fionn Concannon is the co-founder and managing director of KITE. He is a lover of all things creative, inspiring, and innovative. After working in technology for many years, he co-founded KITE, a software solution for print-on-demand, zero inventory merchandise, and photo print goods catalogues. Fionn is a tech enthusiast, and remains fascinated by the disruptive nature of entrepreneurs, startups, hardware, and software. You can connect with him on LinkedIn, and follow him on Twitter.