How To Know If Your Business Is Failing in New Zealand

Not a month goes by where I'm not sitting across from a business owner, or jumping on a Zoom, and having to have an honest conversation about the state of their business. So, Phil and I decided it was time to get a bit serious and talk through the warning signs that something's wrong — not to scare you, but because every single one of these is fixable if you catch it early enough.

I know "is my business failing" is heavy language. But in our experience, by the time a business owner reaches out to us saying "I need help," we can usually look at their P&L or balance sheet and see every single flag that led them there. It's almost a face-palm moment — if only they'd come to us (or looked at their own numbers) six or twelve months earlier.

Here's what I'm watching for.

You're Behind With The IRD
This is the big one, and I think it's become a bit of a Kiwi business rite of passage — like you haven't earned your stripes until you've fallen behind on GST or PAYE. I get it, but it's not a badge of honour. Every time we see a client getting behind with the IRD, it's normally a sign that something inside the business needs fixing. With the right pricing, margins, and cash flow discipline, you shouldn't need to lean on the IRD as an informal lender.

PAYE in particular is the one to watch — there are director responsibilities attached to it, so don't let it slide. And if you do get behind, don't bury your head in the sand. Get on the phone, flick them a message through myIR, and be upfront. In our experience, the IRD is far more supportive when you're proactive than when they have to come chasing you.

You Can't Pay Your Suppliers On Time
If you're incurring bills on credit and you're not confident you can pay them when they fall due, that's a solvency red flag. The Companies Act is broadly built around being able to pay your debts as and when they fall due — so if you're not sure you can, you've got to ask yourself why you're still buying. It's also a trickle-down problem: if your customer doesn't pay you, and you can't pay your supplier, the whole chain starts to wobble.

You Can't Consistently Pay Yourself
Business owners will almost always find a way to pay their staff, even when things are tight — but they'll quietly skip paying themselves. If you can't pay yourself consistently, that's a sign of real inconsistency in the business, and inconsistency breeds fear, anxiety, and pressure at home. If, at the end of the month, after wages, suppliers, GST and income tax, there's nothing left over in the bank — something is broken. A healthy business should be stacking cash over time, not needing to be topped up.

You're Living In Overdraft
An overdraft is supposed to be a temporary form of finance for a temporary situation — not a permanent address. If you ask a business owner how long they've been in overdraft and the answer is "oh, we're normally always in there," that's a problem. The goal should always be to get back above zero and treat an overdraft as exactly what it's meant to be: short-term.

You're Chasing Shiny Objects
So many business owners get distracted by something glittery off to the side that looks better than what they're already doing — a new idea, a new venture, a new platform — and it pulls their time, energy and focus away from the thing that's actually working. It's fine to explore new ideas, but not at the expense of the business that's already paying the bills. Get the right advice before you chase it.

You're Busy But Broke
If you're wearing fifteen hats, doing all the things, and still not making any real money, ask yourself: what for? Being frantic isn't the same as being profitable. And a related trap — "my sales are growing" doesn't mean anything if your costs are growing just as fast or faster. If the margin doesn't work, growing sales can actually make things worse, not better.

Your Data Is Telling You Something And You're Not Listening
If you're running Xero, MYOB, or a point-of-sale system, the data is there for the taking — sales, units, margin, trends over time. If sales are trending down over weeks or months, that's a flag. If margin is trending down, that's even more serious, because eventually it shows up as nothing in your bank account. Track it. Don't guess it.

No Business Development, No Pipeline
If you've got no forward pipeline and you're not doing any form of marketing or business development, your plan is essentially hope. And hope isn't a strategy. I've had this conversation with tradies for years — "what's your pipeline look like?" "Oh, hopefully we get another job once this one's done." Hoping the phone rings isn't a growth plan.

Your Team Tells A Story
Sick leave, engagement, turnover — these are all reflections of your culture, and your culture is a reflection of how you're running the business. If the market is interacting with disengaged employees and having a poor experience, it will show up in your numbers eventually.

You've Got No Calendar Reminders To Work On The Business
The business owners who carve out dedicated time — weekly or fortnightly — to step back and look at the bigger picture tend to be ahead of problems rather than constantly reacting to them. If you're never doing this, you're more likely to be caught by surprise when something breaks.

No Processes, No Systems
If everything in your business feels different every time and there's no repeatable process, that inefficiency will show up in your margin. And a word of caution the other way too — software and SOPs are a tool to help you take action, not a replacement for taking it. Having a system in place that nobody actually uses doesn't move the needle.

You're Avoiding The Honest Conversation With Yourself
A lot of business owners have sharp intuition — they already sense something isn't right, they just don't want to listen to it, because acknowledging it means admitting vulnerability. Give the warning signs the attention they deserve. Think of your business like a house: a leaking tap, a cracked window, a leaking roof — you wouldn't ignore those in your home, so don't ignore them in your business.

You're Dreading Mondays
If you're actively disengaging from your business, feeling burnt out, or telling people you hate it, that's a sign worth sitting with. It doesn't make you a failure — business can run its course, and that's okay. But don't ignore how you're actually feeling about it week to week.

Final Thought
If you think about a business as a house, the warning signs are rarely hidden — they're right there, flashing like a dashboard light. The difference between a business that survives and one that doesn't often comes down to whether the owner was willing to look at the sign and do something about it, rather than putting a plaster over the top and hoping it goes away.

None of these are fatal on their own. But string enough of them together and ignore them for long enough, and that's when businesses end up in real trouble. If you're reading this and a few of these hit a little close to home, that's not a reason to panic — it's a reason to get into your numbers and have the honest conversation sooner rather than later.

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This article is based on insights from the Next Advisory podcast, where Luke and Phil help New Zealand business owners navigate economic challenges and build better businesses. Visit nextadvisory.nz to find out how we can help you.

Checkout more of our blog content at https://nextadvisory.nz/podcast