Recognize And Counteract The Business Crisis At An Early Stage

Running a company also means mastering the crisis. There are numerous causes that can trigger a business crisis. Above all, it is important to recognize signals and first signs of the crisis at an early stage and not to close their eyes. After that, it is important to take swift and determined measures that can result from the business crisis. There are programs to support professional advice through grants. Click to read more

When is a company crisis?

Economic definitions refer to a business crisis as an unplanned and unintentional as well as temporary situation, which puts the continuation of the company into question. In order to prevent a business crisis, the question of crises and causes of the business crisis is of particular relevance to founders and entrepreneurs. As a rule, a corporate crisis does not fall from the sky but is characterized by precursors.

Business Crisis

Certainly, a corporate crisis can also be triggered by factors that cannot be predicted in advance. This is referred to as exogenous shocks that lead to a corporate crisis. These include, for example, macroeconomic problems – keyword recession – as well as unexpected legal changes which could not yet be taken into account at the time the business was established but also illness or damage can cause exogenous shocks.

On the other hand, there are so-called endogenous causes of the enterprise crisis which are based on business miss performances. These often follow specific patterns or phases so that a company crisis can be identified early and thus also prevented. In a separate chapter, we have compiled a variety of causes for the corporate crisis.

In the following, we briefly present the central stages of a corporate crisis. With the categorization of the different stages of a corporate crisis, direct countermeasures can be derived.

  1. Potential or developing business crisis

Before a company crisis manifests itself in declining figures in the operating business, it is often the case that the general success factors of the company can be mistaken. For example, goals and projects in the organization, personnel, production, procurement, sales, marketing or finance are not achieved. This is often also a strategic business crisis. As a rule, there is still a greater scope for action to react to the emerging business crisis.

  1. Deferred corporate crisis

As soon as an entrepreneur does not recognize the first signs of the business crisis or does not take any countermeasures, the company’s weakness leads to profit problems. Income problems consume equity and thus ring the next stage of the company crisis. Further consequences are then payment difficulties and indebtedness of the enterprise. The need for action in this phase is now considerably greater whereby the scope for action is becoming smaller.

  1. Acute business crisis

With the liquidity difficulties already beginning at this point, the scope for the necessary countermeasures of the corporate crisis is severely restricted. The risk of insolvency, associated with over-indebtedness, and the following insolvency is very large. Comprehensive restructuring and restructuring is generally necessary and should be carried out with professional assistance. Click to read more

Of course, a business crisis does not always follow this pattern. And often the failure of an important customer can lead to an acute business crisis. Nevertheless, mistakes have also been made in this case, which has led to this great dependence on a few customers.