Business News

GUEST BLOG: How to turn around a company facing a financial crisis

By Business & Finance
27 April 2016
closed business Bryan Mills

By Keith Tully, business insolvency expert and partner, Real Business Rescue

Anybody who takes on the responsibility of leading a company will generally be aiming, above all, to avoid a situation in which their business is facing a financial crisis and the prospect of insolvency.

However, when financial problems are taking a serious toll it is important for business leaders to make the right choices wherever they can.

With that in mind, here’s a look at some of the ways in which company bosses can help to give their operation the best chance of survival during a crisis.

1. Seek out a broader perspective

When a company is facing a financial crisis there can be a natural temptation for its bosses to work harder in an effort to turn things around – but this can actually be counterproductive.

The point here is that simply doing more of the same isn’t always the answer. It’s important for a company’s leadership to understand and identify fundamental problems and unsustainable financial dynamics, and to take positive steps towards putting things right.

2. Get all stakeholders on board

There are situations in which a company simply cannot be sustained and its position is such that insolvency is inevitable. But until this reality has come to pass, it is always likely to be in the best interests of the directors of any company to have all relevant stakeholders on board with a particular strategy, and pulling in the same direction as much as possible.

3. Communicate a clear plan of action

A company that’s facing a financial crisis generally needs to be restructured in some important ways before it can begin to be turned around in earnest.

So there is an imperative for the company’s bosses to create some sort of turnaround plan – and communicating the details of this strategy clearly to all stakeholders, including employees, makes it much more likely that its implementation will be successful.

4. Dispose of non-essential assets

A company in financial crisis should generally look to shed all or most of its non-essential assets in order to raise cash and fend off the prospect of insolvency.

Deciding precisely what are and what are not essential assets is not necessarily straightforward, but doing so with a degree of urgency can be an absolutely vital process for any company that’s in danger of being forced out of business.

5. Make job cuts where necessary

This is perhaps the toughest aspect of a business recovery process, but it is one that unfortunately cannot always be avoided.

The reality is that if a company becomes insolvent then its entire workforce will be in danger of losing their jobs anyway – so making cuts to avoid that scenario is actually a positive step, and one that can serve to protect jobs in the longer term.

6. Consider the various financing options available

It is very important, in the context of trying to turn around an ailing business, that all funding options are considered by the directors involved.

There are many more business financing solutions available today than many company bosses realise, and some are designed specifically to meet the needs of organisations faced with an ominous financial position and for which other forms of credit would be difficult to access.

A company that’s facing a financial crisis generally needs to be restructured in some important ways before it can begin to be turned around in earnest

Photo (above): Bryan Mills

About the blogger

Tully Keith newKeith Tully from Real Business Rescue is leading corporate insolvency specialist. He knows what it takes to keep struggling businesses afloat and what qualities are required of company directors. Keith has been involved in insolvency since 1992, during which time he’s worked for both independent and national business rescue firms.

He is knowledgeable in an array of business-related topics, but his specialties include acting on behalf of financial institutions as well as negotiating with HM Revenue and Customs to arrange time to pay schemes.