How to Avoid A Business Crisis

Business crises rarely come out of nowhere—they build over time. In this video, Steve breaks down the early warning signs most leaders miss, from strategy missteps to cash flow red flags.

He explains how these issues quietly grow into full-blown crises—and more importantly, how to catch them early. You’ll walk away with practical tools to stay ahead of trouble and keep your business on solid ground.

If you're serious about protecting what you’ve built, this one’s a must-watch.

TRANSCRIPT:

Let me ask you something. When's the last time you did a deep dive in your company to evaluate your operational and financial performance? If it's been a while, it's important to benchmark yourself against your competitive set and your industry to determine whether you're earning above industry average profits. Because here's the deal, if you're not earning at or above industry average profits, it may mean that you don't have a competitive advantage and it may be an early indicator that trouble is ahead.

In this video, I'm going to explain how problems unfold in most organizations in three distinct phases and what you could do to avoid them within your own organization. Let's go ahead and jump in.

In the first phase, organizations start to experience a strategic crisis.

What happens is that business leaders mistakenly believe that they have a strategy, but oftentimes that strategy either is the wrong strategy. In other words, they're not making the right choices to overcome their strategic problem or it's a bad strategy because it's really a plan with a list of initiatives, but it's not a cohesive set of choices, which helps the organization to win.

So when an organization doesn't have a strong strategy, there's a lack of clarity and alignment and accountability, which leads to poor results.

And if companies don't fix this and put in place a solid strategy framework, and I walk through this framework in other videos, I'll link that down below in the description, then what happens is the strategic crisis emerges and it leads to the next phase, which is a profitability crisis.

So a business doesn't have a good strategy and because they don't have a good strategy, they're going out into the marketplace, they're trying to compete, they're trying to make decisions, they're not serving their ideal customer profile well, there's disruption in the marketplace and there are all these forces that are trying to steal their profit. And because they don't have this plan to overcome their strategic problem and to fight against these forces, what happens is that profits begin to decline.

Now this may begin with sales decreasing. Sales may decrease because of big macroeconomic trends and shifts in the economy or because of micro issues such as customers no longer understand and are willing to pay for your value proposition. So as a result, sales decline.

Organizations may try to cut their costs, but if they don't cut their costs strategically, they may cut very important activities out of the business that drive greater value. And then as a result, sales drop again and it creates this perpetual problem and profits begin to decline.

So what you'll notice in your organization if you're in this phase is that profitability is decreasing period over period because sales are dropping or because costs are going up or some combination thereof.

If you're in the profitability crisis and you don't fix things, it leads to the next phase which is liquidity crisis.

Liquidity crisis is when you start running out of cash. You have a hard time making payroll. You're not paying your vendors. Your accounts payable balances are continuing to increase or accounts receivable is increasing and you're not collecting on that cash.

But liquidity is a result of poor cashflow. Now this stems oftentimes because of bad profits. So profits fall which impacts cashflow or you're not managing working capital correctly and it's just exacerbating this entire problem.

So this is how problems unfold within organizations and I can tell you it all stems back to not having a solid strategy.

That's why I'm so bullish on strategy and finance and when you combine those two things together, you drive value.

When you don't have a good strategy and you just focus on driving profits in the short term, I can tell you it oftentimes leads to a profitability crisis because you're making decisions about your cost structure or sales that is harming the long-term viability of your profits in which you'll be able to generate into the future which leads into this liquidity crisis.

If you don't fix things in this phase, in this last phase, you'll go bust.

70% of companies that go bankrupt are profitable when they close their doors and this happens because they run out of cashflow.

So if you could catch it early on by first evaluating your strategy and asking yourself, are you following a cohesive system? Because strategy is a process, it's not a one-time event.

But if you have a cohesive system in place, then you measure profitability on an ongoing basis, then you'll catch things before you fall into the liquidity trap.

If you need help with this, you can go to Coltivar.com. I'll drop a link in the description below. You can take a free course called The Million Dollar Strategy Blueprint where I'll walk you through the principles you need to know in order to avoid falling into any of these traps. It's completely free.

You can go on there. You don't have to sign up for anything. There are no gimmicks involved.

Literally, I want to help you if you're struggling in any of these phases so you could get to a million dollars in annual profit and grow beyond that.

Also, be sure to check out this next video for more tips on how you can build a solid strategy in a profitable and iconic business.

I want to hear from you. Does this make sense? And if so, can I get a yes in the comments box below?

Also, don't forget to subscribe if you want to be notified every time a new video like this is dropped.

In the meantime, I wish you all the best as you go out there and you apply these principles in your own business. Cheers.