This year, as I predicted, there will be more business failures than last year (which was a record year and not in a good way!)
For the business owner, admitting there may be an issue is always the first hurdle to overcome – just as no-one every really wants to admit they may be ill.
To allow you to act before it’s too late, a proactive review of your business on an ongoing basis must be worth some serious consideration. Regard it as a “BUPA” health check if you like.
* Is your hardcore overdraft increasing and your account rarely moving into credit?
* Have your creditor days reached unrealistic levels?
* You lease rather than buy assets, which is what you always used to do.
* You think breaking even is good news.
* Your credit report is getting worse.
* The bank is never off your back and have asked for personal guarantees.
* Key staff are leaving.
* You are paying suppliers on the drip.
* Your VAT and PAYE are in arrears.
* Suppliers are asking for pro-forma payments.
So, now what do you do if the diagnosis is not favourable
The issues mentioned require a two-pronged approach: emergency-room action; and long-term palliative care
* Stop spending anything, unless absolutely essential.
* Beg, borrow (not steal!) funds from every available source.
* Talk to your staff, customers and suppliers and ask them to stand by you and explain what you are doing and why you are doing it.
* Cut costs everywhere.
* Take advice and do what the professionals recommend.
* Revisit and change your management structure and even style.
* Recognise the mistakes you made and put in place procedures to prevent it happening again.
* Reposition your business and maintain a competitive advantage.
* Line up new investment for the future.
* Expand your market and your products and services.
* Get the best financial advice and systems.
* Don’t overtrade, sell on quality and service, not price and only to people that will pay on time.
* Finally, if the end looks inevitable try and leave with some integrity.
I realise that pre-packs have become the norm but reputations are what businesses are usually sustained on. Don’t lose yours and don’t lose yourself.
Jo Haigh is head of corporate finance for MGR