You won’t always have access to enough info to tell whether a top competitor is struggling. If you pick up on one or more of these four warning signs, however, it could mean some of a competitor’s best customers are vulnerable (and ready to consider a change):
- Key employees leave and aren’t being replaced: Obviously, this isn’t an easy sign to spot. But if your HR people regularly monitor (or post on) job sites, chances are they’re tuned into employment trends, including which company’s employees are currently testing the job market the most. That info could be extremely valuable, especially if your company happens to interview candidates who confirm your suspicions (i.e., a top competitor is struggling to remain afloat).
- Downward (or outward) communication has slowed: If a company has slowed or stopped mentioning new initiatives, special offers and other company news via the Web (e.g., Facebook, Twitter, company blogs, corporate web sites, e-mails, etc.), it could be a sign that forward progress and/or production has stopped for the time being. Consumer (and industry) message boards are a great source of chatter about such things … albeit a somewhat unreliable one. If it’s a publicly-traded company, you may want to keep an eye on quarterly reports to see if you can spot any negative cashflow trends.
- Salary/hiring freezes: Sure, in many cases this has been a fairly common and effective way for companies to ride out the economic downturn. But the telltale sign at this point will be monitoring how competitors respond as the recession continues to lift. If most of the companies in your industry/region have returned to business as usual, yet one or two remain stuck in spin, they may not be in a position to fully recover. If that is in fact the case, chances are some of their best customers have already felt the impact. That could spell opportunity for proactive salespeople.
- Expenses/Amenities rolled back: Clamping down on expenses may seem like an effective cost-cutting measure on the surface. In fact, 10-15% of companies have scaled back their expenses to some extent over the past two years. But a recent IHS Global study revealed for every 1% the average company cuts its T&E budget, it experiences a 1.7% decrease in sales. In other words, cutting your T&E budget isn’t only a dangerous gamble, it could be a very slippery slope that leads to more losses. Other signs T&E cuts are more than just a sign of the times: Competitors’ corporate events reduced or canceled as the company regains its footing, and/or competitors’ reps are no longer a fixture at popular trade shows and conferences.
Of course, none of these signs is a surefire indication a company’s about to go under. Still, if you notice one or more of these red flags starting to pop up, it may be worth investigating further. There are valuable business opportunities at stake for companies that can spot – and capitalize on – these warning signs early and often.
Based in part on “How to Tell if a Company’s in Trouble,” by Glenn Curtis, Investopedia.
