A warning light can equal danger or opportunity

6 min read.

Article Summary:

• Watch for business warning lights early.
• Act fast in tough times to protect cash.
• In good times, grow carefully and manage risk.

Respond to turbulence correctly

If warning lights are flashing and your company is struggling in the current environment, it might be a small comfort to know that you aren’t alone.

Those who have been through turbulence have “seen this rodeo before” and have learnt hard lessons. One critical indicator of whether you should try to “stay alive” is whether your company’s warning light is blinking red, yellow or green. CEOs must be able to recognise when their company’s warning light is flashing, as each colour suggests a different set of issues and requires a different response.

Red Warning Light – DANGER

Businesses with a red warning light are in the danger zone right now. They may have paid their employees their entitlements, closed down, and are hibernating. Some are trying to negotiate lower rent with their landlords or a reprieve from rent for a period of time. Banks may have provided relief on mortgage and interest payments. It’s important to remember that this relief is temporary; it is not “free”. At some time in the future you will need to pay back the rent or the deferred mortgage and interest payments. But sometimes a little relief is all you need to get through. So talk with your landlord and your banker ASAP. Be honest about your current situation and future prospects. Meanwhile, don’t forget to explore all the government assistance programs that are available.

Take an honest look at your company

As you are doing all this, look at your company from the perspective of an investor. Because that’s what you are. You are investing your time, energy and money in this business. Be honest about what will be required for it to be viable and ask yourself whether you are willing and able to make the changes required for it to re-open and start again?

If your answer is “no, not really”, then give yourself permission to close it down and spend time thinking about what you want to do with the rest of your life.

If your answer is “yes” and you believe the business is viable, then use these next few months to plan a “do-over” for the company. Engage remaining employees to help you look at your products and services. Identify changes in customers or what they are asking for. Develop a new layout or new systems. Think through a better marketing strategy or refresh your website. Stay positive and think of this “hibernation” as a gift of time to make positive changes.

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Yellow Warning Light – CAUTION

A lot of companies are looking at a yellow warning light. As the leader you need to take this turbulence seriously and not think “she’ll be alright”. You mustn’t look the other way in “benign neglect”. Lack of attention could be fatal if the light turns red.

Begin with your financials. Study your accounts receivable, payable, P&L, and Balance Sheet. Project your cash flow for the next few months. How long before you run out of money and can’t pay staff and other expenses? Work on collecting receivables and think through how many expenditures you can delay.

Focus your efforts on selling what customers want and stop trying to sell the rest. Figure out how to make more of what customers want. For example, put on a second or third shift or be willing to pay overtime. Stop selling to customers who cost you money.

Be honest with your employees. If you are over-staffed for the current volume of work, engage with them to come up with some solutions. Such as taking holiday, reduced shifts or job-share.

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Green Warning Light – GO FASTER

There are some companies and some sectors for whom a green warning light is signaling “go faster”. Some companies can benefit during turbulence.

One of our CEOs in the manufacturing sector wrote, “We have a record number of orders and are exceptionally busy. I have daily meetings with operations, finance and sales to monitor the rolling monthly forecast. We are identifying any orders in the production grid that may be at risk…and are projecting the impact that could have on budgets and timing. We are constantly reviewing our sales pipeline for changes and any signs of deterioration. I am running as much overtime as possible and shipping everything we can, as quickly as possible! If we do have a recession, I want to have as healthy a balance sheet as possible.”

This CEO is not just “lucky” but smart to respond to the green warning light positively. They’re doing what a leader should do at all times by seizing opportunity, because turbulence can also offer an opportunity to grow.

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Rebound and grow

In difficult times, CEOs first need to ask themselves whether the company has a chance of surviving. What would it take to rebound and grow again? If it could survive, then take notice of your company’s warning light. Be prepared to make some tough decisions about people and strategy. Make the changes required to strengthen the company so it can rebound and grow again.

Like this article? Try: ‘How to lead during a crisis‘

Article updated November 2026