There is no guarantee of success in the corporate world. Sometimes, businesses go through rough patches that ultimately lead them to insolvency and liquidation.
Without rescue, a failing business would eventually liquidate due to its chronic financial losses, dwindling market share, and management issues.
The good news is that such businesses can and should develop new strategies to reorient themselves toward success by taking the help of financial advisory restructuring services.
Even if your company is on the verge of collapse, a successful recovery is still possible with appropriate solutions that are adapted to your situation.
To assist such businesses through challenging times and emerge stronger, this article outlines six practical strategies to help them survive and thrive in a difficult business environment.
Practical approaches to combating insolvency
Business is challenging and the first few years are where many fail, but it’s also through those challenges that businesses learn to adapt.
Here are six strategies that can be implemented if your small business is experiencing challenges:
1. Analyse the root cause of failure
The first and most important step in getting your company back on its feet is figuring out what went wrong. Business owners are often emotionally invested in the outcome and cannot make an impartial assessment. In such a situation, looking for a reliable outside advisor, such as a company that offers business restructuring services, is wise.
Before anything else, go back to a period in your company’s history when things were going well financially. Determine when the downturn started and what internal and external causes contributed. Possible causes include increased competition, less promotion, or an attempt to break into new markets. Once you figure out what’s causing your company’s problems, you can start fixing them.
- Act quickly
Business owners often get too caught up in administrative and operative tasks to pay close attention to the state of their finances. However, the key to avoiding insolvency lies in early intervention. The sooner you take charge of your finances, the higher your company’s chances of making it out unscathed are. Early intervention can ensure that small debts do not snowball into major issues.
Many business owners choose to ignore dwindling funds and delay taking action in an attempt to retain brand value, the confidence of customers and the reputation of directors. Understanding and acknowledging your company’s current financial status can help you create recovery strategies, get funding, and alter your product offerings before it’s too late.
- Enter informal agreements with creditors
One of the worst things a failing business can do is ignore the issues.To avoid insolvency, proactively sit with every one of your creditors and devise a plan to pay them back. It might come as a blow to your creditors to hear that you’re struggling financially, but they would much rather hear it from the business than be left in the dark about their money. Involving your creditors in the repayment plans also means they might be more willing to offer you more time to repay the debt than threatening legal action.
- Create a turnaround plan
Once you have identified the cause of failure, it’s time to look at ways to make a turnaround and stabilise operations before looking towards growth and expansion opportunities.
The Corporation Act was amended in 2017 to incorporate the “Safe Harbour” legislation (section 588GA), which protects directors and boards from personal liability, provided they have taken reasonable steps to prevent insolvency. However, to meet the criteria for this protection, several obligations must be met. To discuss the best possible options for turnaround and adherence to the safe harbour legislation, it is recommended for businesses to speak to an insolvency firm to discuss their options.
- Make good decisions
Making good decisions under pressure is not easy. The best way forward is to own the situation, seek help and then work a way through it. There are people who can help.
How a business restructuring company can help
When a company is going through tough times, trying to solve the problem from within can be tempting, however, getting help from professionalbusiness restructuring services or debt restructuring services is the more responsible option.
If you’re struggling, take the decision to reach out to a team of professionals that can help you. Not only will they work with you to find solutions but you’ll find that opening up about the problem and getting some expert advice will ease your mind as well.