Market Overview

Is Your Company In Trouble? Here's How to Tell – and Stay Afloat


Most startups fail. We know that, but we roll the dice and join anyway for big upside potential. Plenty of mature companies also fail. Sharper Image lost out to Brookstone. Washington Mutual succumbed to the housing crisis. And Enron died due to fraud.

With the worst of the global economic crisis behind us, it’s still worth recognizing some telltale signs that your company is in trouble. Read on to learn more – as well as strategies to help you land on your feet.

5 Signs Your Company Is In Trouble

1) Perks begin to disappear. In hard times, the first to go are all extraneous benefits such as free drinks, food, dry cleaning, and so forth. After a company has sucked out all the little things, they’ll start tackling the larger things like tuition reimbursement, or matching 401(k) plans.  

2) Your company’s value is down. If your company’s share price is at 52-week lows, layoffs are for certain. If you work at a private company and your competitors are raising down-rounds, or shutting down, be very aware that your company could be next. Also be cautious if senior management is aggressively selling stock.

3) Financial metrics are no longer growing. For startups, top line growth is more important than anything. If the rate of growth is steadily declining or actually going in reverse for an extended period of time (three or more months), alarm bells should be ringing. For established companies, top line and bottom line growth are important. Watch for operating margin contraction as well as a cut in dividends as well. 

4) Management no longer provides updates to employees. Proud management openly tells employees how great the company is doing. There will be milestone celebrations, announcements of revenue and/or profits during quarterly town halls, and so forth. If these announcements stop, ask: what’s going on?

5) Your immediate supervisor and superstar colleagues start leaving. Watch what top performers in your company do because they have the most choices. Sure, they might be getting poached by other firms for mega bucks, but they also have the most to lose if they leave as well.

5 Strategies For Landing On Your Feet

1) Turn into a financial analyst. If your firm is public, you should read all you can about the latest quarterly results and dial into the analyst call. Listen to what the analysts are asking and how the management is answering. If you work for a private company, consider asking your immediate supervisor or others with a potential financial stake about the latest results. Also, keep abreast of negative company news reported in the press. 

2) Befriend a head hunter. It’s always a good idea to know your market worth, and to cultivate relationships with competitors and headhunters when you don’t need anything.

3) Moonlight until the sun comes up. Who knows? You might be able to start a little business on the side that eclipses your day job income and allow you to do whatever your heart desires.

4) Be the first to leave. If you know your company is in trouble, it’s time to plan for an amicable exit. Those people who got laid off first during the 2008-2010 downturn got the largest severance packages. As layoff rounds proceeded, people got less and less. 

5) Consider not exercising most of your options if you leave. In order to exercise your options, you have to pay for them (loss of liquidity) and you may be stuck with a tax bill (AMT tax). These are harsh realities if you can’t later sell your stock at a profit – even if you can offset taxes later. 

Every Firm Is One Big Gamble

Some of us join firms because we have no other choice. There is no gamble in this situation. Others have options of not only choosing between the stable route and the risky route, but also between various risky routes. 

In the end, every employee should always think like an investor and ask themselves whether they’d put new money into their firm. If the answer is “no,” then why are you still there?

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Personal Finance


Related Articles

View Comments and Join the Discussion!