If asked five to ten years ago, many business owners wouldn’t have expected to be mourning the death of their own dearly beloved business.
However, flash forward a few years and the economic tsunami is continuing to leave casualties in its wake.
There are always corporate failures, but this time it’s different. No longer is it the infant businesses operating for just a couple of years, or companies lacking good management, that are running into trouble. Now, we are seeing established businesses that have never had any problems before sending out an SOS.
The profile has changed. All sectors are suffering. Businesses with strong management teams – the linchpin of any successful company – are also failing and struggling to maintain their cash flow.
Competition is high and budgets are being cut, having a knock on effect on all suppliers and clients. It can now only take one or two bad years for a company to lose its uphill battle.
There are more volatile and tough years ahead and it is vital that business owners don’t leave it too late and take advice as early as possible. This could be the difference between saving and closing a company.
When losing someone or something dear to you there are five stages of grief. Many business owners tend to get stuck at stage one – denial. By being in denial they can be burying their heads in the sand and mourning something that is not yet lost.
Care homes are the most recent example of a sector getting into difficulties, owing mainly to local authorities having less money. Blue chips are also failing to withstand the force of the tsunami.
The unforeseen is happening. We are in unforgiving and brutal times where nobody really knows what lies ahead. There is talk of a double dip recession, but we have never really got out of the first recession. We are still in it. We are perhaps looking a few years ahead for any real growth to happen.
In many ways there is nobody better placed to go into a business and do a non-executive type role than an insolvency practitioner (IP). Having an independent external party in a company provides a no-nonsense sense and health check.An IP’s preferred role is to be able to evaluate a business, work with the management and ultimately throw a much-needed lifeline. The business then undergoes surgery. There may have to be amputations in some parts to save the rest of the business, but the main body and heart remains, albeit a stripped down version.
All it takes is for a business owner to admit they need help. By discussing problems and taking advice early businesses and jobs stand a better chance of being saved. * Bryan Jackson is a member of the ICAS insolvency committee and partner with PKF