How to spot early signs of trouble at your startup!

As a startup employee, dealing with uncertainty is something which everyone experiences. Maybe in the early stages of your startup life, you might not understand what the reasons are – but just like everyone, you will feel and live through the uncertainty. The uncertainty of direction changes, market feedback, fundraising conversations – it will be everywhere. But the most concerning, is the uncertainty of where the startup is heading overall. Is it doing well? Is it going to survive? Is my job safe? Here are some key ways to spot early signs of trouble at your startup.

Money matters

One obvious way to spot early signs of trouble is to pay attention to the company’s financials. How much money is the company making? As a private company, there is no obligation to publicly share this information with everyone (and that is usually the case), but you can still go to the MCA portal, take help from a CA/CS (or do it yourself) and download the company’s financials (Cost: Rs 100). On the other hand, if you are lucky to be part of a startup which shares this information freely with its employees – do spend some time on the numbers! Financial performance is one of the most critical indicators of a company’s health, and as a startup employee, it is essential to understand and monitor the company’s financials. For example, if you are working in a company that has set a revenue target of USD 1mn for the year and it’s already halfway through the year, but the company has only made USD 200K, it could be an early sign of trouble. (If you don’t know this years target, benchmark it to last years number) Similarly, if the company is experiencing a rapid increase in expenses, without generating too much additional revenue, it could lead to financial strain. This can be a warning sign that the company may run out of money before it can achieve its goals, and it may need to raise more capital or cut costs. Another aspect to keep an eye on is the company’s cash flow. It could be that the company is generating revenue, but it’s not collecting money from customers fast enough. This will lead to cash flow issues, further leading to more cash burn. If the company is spending money faster than planned and has a limited runway left, it could be a warning sign that it needs to make some significant changes in the way it operates. In some cases, a startup could be experiencing challenges in raising capital, which could be another sign of trouble.

People matters

A very clear way to spot early signs of trouble is to get a sense of the people’s morale. Are employees, especially good employees, leaving the company at an alarming rate? Is there constant conflict or tension among team members? Is there a lot of churn at the senior levels? Are employees feeling overworked and stressed out? Is the workplace becoming toxic? These are sure shot indicators that something is not working well within the company. Let’s take a very common example: A fast-growing startup usually has a culture of working long hours, often encouraging employees to work on weekends and holidays to meet deadlines. While this initially works when employees are new, employees soon start to burn out, leading to a few key employees leaving the company due to the intense workload. The company does not realize the impact until it’s too late and then struggles to retain their remaining employees. Sounds familiar? Let’s take another example. A startup had a work-from-home policy during covid times with a lot of employees joining and working remotely over the last 2-3 years. But post covid and especially in the current economic scenario – the management team has started forcing people to come to office everyday, expecting them to be available till late in the day. This is leading to employees feeling overworked and stressed, which is resulting in a dip in productivity and morale. (This definitely must be sounding familiar!) In both these examples, there are early warning signs of trouble in the form of employee turnover and complaints of overworking. While both situations can be managed by a smart and proactive leadership team, as an employee, it is essential to keep an eye out for such changes in the workplace culture and morale. You can also, in your own capacity, suggest ways to address these issues, such as implementing flexible work policies, conducting team-building exercises, or hiring additional staff to alleviate the workload.

Reducing communication

In the early stages of a startup, everyone needs to be on the same page and have a clear understanding of their roles, responsibilities, and goals. Without clear and consistent communication, it’s easy for misunderstandings to occur, which can lead to missed deadlines, lost opportunities, and even project failures. For instance, imagine you’re working in a startup where your team leader has stopped communicating with the rest of the team as frequently as they used to. They may be unresponsive to messages and emails, or they may not be providing updates on projects as often as they used to. As a startup resource, this is a key signal you need to watch out for. It could be that your leader is facing difficulties at his level, or he could even be trying to ensure that the pressure does not percolate down to you. Or let’s say you’re working for a software startup that has been growing steadily for the past year. The team has been very communicative, holding weekly meetings and daily stand-ups to ensure that everyone is on the same page and that tasks are being completed on time. However, in the past month, you notice that the level of communication from the CEO has decreased significantly. The weekly meetings have become bi-weekly, and the daily stand-ups are not happening as frequently. Your leader is not responding to emails or messages as quickly as they used to, and you’re not receiving updates on projects as often as before. You also notice that there seems to be some tension and a lot of closed door leadership meetings. While it will still be speculation to conclude that something is wrong – if you see that some other people are also frustrated with the lack of communication, while others seem to be avoiding discussing any issues openly, then it is a sure warning sign that something may be wrong within the company. You may be dealing with a financial crunch, a potential change in leadership, or other issues that are affecting the morale and communication within the team.

Lack of leadership & focus

The success of a startup relies heavily on the leadership team’s ability to make strategic decisions, provide clear direction, and lead the company through its various stages of growth. If the leadership team is not up to the task, it can quickly lead to the startup’s downfall. For example, let’s say you’re working in a startup and you’ve noticed that the CEO is making poor decisions regarding product development. They are not conducting proper market research, and the products they are launching are not resonating with the target audience. Or let’s say they are trying to do everything and have a lot of people reporting to them – without delegating tasks and taking all decisions on their own. Alternatively, the leadership team may not be providing clear direction, which can lead to confusion and lack of focus within the company. If the company seems to be shifting its focus frequently or is pursuing too many initiatives at once, it could be a sign that it lacks a clear direction. This can lead to wasted resources and lost opportunities. For instance, too many product launches. Being too opportunistic. Or simply, taking up all projects that you can – even at the risk of missing out on predefined targets or goals. As an employee, you can provide feedback to the leadership team or suggest solutions that align with the company’s vision. But if you feel that the leadership team is not up to the task, it may be time to re-evaluate your position within the company.

As a startup employee, many things will not be in your control and even if trouble is heading your startups way, there could be very little you could do about it. What is important though – is awareness. Awareness about the company’s goals, the financials, the people’s morale and the leadership behaviour. So that you don’t get blindsided by sudden decisions, which unfortunately have become far too common now a days. This means asking questions and seeking out information from your colleagues and seniors, so don’t be afraid to speak up and voice your concerns or suggestions. In case you find yourself in an environment where questions or voicing concerns are looked down upon – then you are in a one-way street and it’s probably time to move on.

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