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Rescue mission: how to get a struggling business back on its feet
How do you go about saving your business?
Firstly dont bury your head and hope problems will go away. Ites very easy for a business owner to fall into the hoping for the best trap, as the alternative is too terrible to contemplate. Sadly, it is this reaction that is most likely to lead to the failure of their business. Ites essential to take stock of where they are, whates happening in their market, bringing the senior team together to decide whates been learnt so far and how they must adapt. This should be done when problems are first recognised and then at regular, ideally monthly, intervals moving forwards. Even if a formal insolvency process becomes necessary, it doesnt always mean the end of the road.
Secondly, act quickly. By knowing what to look out for - and what steps to then take - a business has more time to react. The longer it takes to acknowledge difficulties, the quicker they accelerate and more problematic they become. Often, by the time debts are unable to be repaid, options are very limited. We recommend that companies use what little forbearance is left to their advantage and benefit from the extra time to get a plan in place - rather than waiting until the last minute in the weeks and months to come. We also meet with many business owners who, when they really think about it, dont want to re-build their business. For many, they recognise that it wasnt particularly viable prior to the pandemic. Others find themselves at a life stage where starting back from scratch isnt what they want to do. We often ask business owners what good looks like for them and we formulate a plan from there. Even at the later stages, distress doesnt mean disaster.
From time to time, we are all faced with a situation or posed a question that we dont know the answer to. By working with specialists, however, youre best placed to find a solution.
Thirdly, dont be afraid of the insolvency process - rescue is always the priority. Confusion surrounding the insolvency process - and fear of repercussions from seeking advice from a corporate recovery professional - means that many owner managers often leave it too late to get help. There is a misperception that asking an Insolvency Practitioner (IP) for guidance will automatically lead to the closure of the business. On the contrary, our priority - and that of all restructuring firms - is always to try to save it if possible. Where we are referred early enough, we can usually develop a practical strategy to put the company back on a steady footing.
What are the harsh truths of the process?
Sadly there will be a lot of companies facing a rude awakening this year. And it will be across all sectors. If you consider average numbers of insolvencies pre March 2020 were c 16-17,000 per annum, we think that could break 20,000. We know there are a lot of businesses that are not in great shape and if you are not ready to react to this latest round of challenges 2023 will not be a good year, especially given the 6 monthly increasing trend of corporate failures and now a faltering currency. What we have noticed is that in the last 24 months people have zoned out and ended up in a place which is not the norm, but very much feels like it. So they have become complacent and are taken aback now by having to pay bills, satisfy HM Revenue, start repayments on loan schemes.
Brexit, followed by Covid, and now rising inflation, has been tough on business owners. Covid papered over many cracks which gave businesses a false positive. And now we have got various geo-political issues going on affecting energy prices and destabilising the supply chain at a time when there is not much support around for business owners.
Those that will recover will be the business owners who have got a decent business and a proper understanding of the numbers and their place in the market. These people know what is going to happen as everything goes back to normal and they will be looking after their biggest assets. For others there will be a continued exposure to harsh realities.
Who can support, advise and deliver such rescue missions?
Well ites what I call our everyday and we have people across the UK and Channel Islands, experienced teams with a great understanding of how to mount a rescue mission working with locally-based accountants and lenders who we know and trust.
We speak with SME owners experiencing contract or client losses, delayed payments or difficulties accessing investment, affordable funding for growth or legal advice. There is nothing we have not seen.
We take a non-judgemental, multi-disciplinary approach where each case is assessed individually and the best solution is developed across all of our service areas - restructure, legal and funding and this is what makes our rescue and recovery offering so strong.
There really is nothing we have not seen and we hope thates reassuring for business owners and their advisers. We know how to steer just about any situation into calmer waters where business owners can take a breath and work towards the best possible outcome whatever that might be.
Are lenders there to support?
In the main yes but one of the reasons we are seeing so many businesses in distress now is that it has been too easy to get cash in the last two years and businesses have spent it a bit too easily. So undoubtedly banks and other lenders are more cautious now with lending and focusing on how they will get it back, and of course alarming stats about non-repayment of CBILs does not build confidence around fresh lending.
We dont think access to cash has been that difficult, but we are benchmarking it now on how easy it has been in the recent past. Just 18 months ago you could secure £50K in a matter of hours. There is a reason why you cant do that now. We are now back to as we were pre-Covid, where you have to work a bit harder to get funding and be aware that if you cant pay a bill, or a supplier, or your staff, there are consequences. Business owners will also need to be mindful of the rising cost of borrowing as the Bank of England and Treasury work to tackle inflation‚Ķmaybe it was a bit too easy for too long.
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