By Keith Tully, of Real Business RescueRunning a small business comes with its fair share of challenges and it is normal to experience a few bumps in the road from time to time. However, if it gets to the point where your problems go beyond the usual hiccup, you will need to look at practical ways of turning around your business’s fortunes and getting it back on the path to success as swiftly as possible.
A business going through a bad time is not necessarily a bad business. The most important thing to remember is that there are options out there and the sooner you face these issues, the greater the chance you have of effecting a successful turnaround with the minimum of damage to your finances, creditors and reputation. Here are our top tips to getting your business back on the right track:
Get to the root of the issueIt is only once you know what you are fighting against that you can begin to put a plan in place to combat it. During this process consider both internal and external factors. Are late payers affecting your cash flow, are your order numbers low, or are you simply not generating enough profit on the orders you do bring in?
Perhaps the market has moved on and there is an overall dwindling demand for your products or services, maybe competitors are pricing you out, or are offering added extras to entice customers. Once you know what is causing you problems, you can divert your resources to solving it.
Cut costs where you canWhen your business is experiencing financial difficulties, your instinct may be to trim your outgoings as much as possible to bridge the gap between the money coming in and the money leaving your business.
While this is an advisable step to take, before you make any rash decisions consider the long-term implications of cutting bits from your company and how your business would look without these elements in the future. While some things can be reintroduced when the company’s prospects improve, others, such as experienced members of staff, may be harder to replace.
Consider your funding optionsWhen you’re focused on cutting costs, taking out additional finance may not be at the top of your agenda. However, depending on the source of your problems, the right funding option could be just what you need.
If you are experiencing cash flow problems then invoice financing could help keep things moving, or if you are finding your current machinery is not capable of servicing the volume of orders you have, then asset finance may allow you to upgrade your equipment without a huge initial outlay.
Remain positiveBad news spreads fast and this can have a serious negative impact on your business. Stem the rumours as soon as you can to stop them escalating out of control; however, be truthful and if your company’s situation gets to a stage where it is insolvent, you should be extremely cautious about continuing to trade on. You have certain obligations as a director, particularly if you are a director of an insolvent company.
Once you know your company is insolvent you shouldn’t do anything which could worsen the position of your creditors. If you are in any doubt as to whether your business is insolvent speak to your accountant, an insolvency practitioner or another appropriate professional as a matter of urgency.
Celebrate your successFocusing on failures creates a bad atmosphere which will permeate throughout the company. Instead, keep morale high by celebrating successes. Whether you have managed to secure a new contract, successfully negotiated a better deal with your suppliers or hit a performance milestone, make sure you shout about it and make sure your team are aware of it; the old adage ‘success breeds success’ could not be truer than in times such as these.
Seek professional help
If you feel your problems go beyond those that you can deal with on your own, your first port of call should be your accountant. With existing knowledge of your business and its operations, they are likely to be able to give you useful advice.
Depending on your situation, your accountant may refer you to an insolvency practitioner for more specialist advice. Don’t be scared of this. While insolvency practitioners do liquidate companies, they are also highly experienced in helping turn around those businesses experiencing financial difficulties.
From negotiating payment terms with creditors, looking at injecting capital into the business, or restructuring elements of the company, the expert guidance an insolvency practitioner can bring could make all the difference when it comes to the future viability of your company.