Companies do not enter crisis overnight. There are early signals that, detected in time, allow action before the situation becomes irreversible. We identify the five most common.
Companies do not fail overnight. Before crisis arrives, there are months — sometimes years — of gradual deterioration that, in retrospect, was perfectly visible. The problem is that early warning signs are subtle, and the entrepreneur who lives with them daily tends to normalise them.
This is the most treacherous sign because it creates a false sense of normality. The company keeps billing the same — or even slightly more — but earns a little less each year. The danger is that the entrepreneur easily justifies it: “it’s the market,” “competitors have dropped prices.” All true, perhaps, but the cumulative result is a company dangerously close to breakeven.
Action: Analyse margin by business line and by client. Identify where margin is being lost and why. Act decisively.
The company reports profits but cash does not flow. Monthly tension to cover payroll and suppliers. Increasing use of credit lines. This disconnect usually indicates deteriorating collection periods, excess inventory, or overinvestment in fixed assets.
Action: Implement weekly (not monthly) cash monitoring. Enforce strict collection policies. Review inventory levels.
When good people leave — the ten-year commercial director, the warehouse manager who knows every process — it is a serious alarm. Good professionals are the first to perceive a company’s deterioration and the first to find alternatives.
Action: Listen. Exit interviews are invaluable. If multiple key employees cite the same issues, there is a real problem to address.
The entrepreneur knows equipment should be replaced but defers it. Knows an underperforming manager should be let go but avoids the conflict. The effect is cumulative: each postponed decision generates a larger future cost.
Action: Make an honest list of deferred decisions and evaluate the cost of continued postponement. If you lack the resources or energy to address them alone, seek help.
A single client at 30% of revenue. A single product generating 50% of margin. A single person who knows the critical process. Concentration is the most dangerous risk multiplier in an SME.
Action: Diversify actively. Set maximum concentration limits. Document processes. Develop alternative suppliers.
These five signs have one thing in common: they are visible with enough advance warning to act. The problem is not lack of information — it is lack of action. If several of these signs are present, it may be time to consider bringing in a capital partner or exploring a company sale before options narrow further. A proper due diligence process can help clarify the real situation.
Dirk Manuel Martens Jimenez Founder, Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.