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 Emergency room: * 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. Palliative care:* 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 MGRPicture source
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