Skip to main content

Turning it Around

ReSolve's Cameron Gunn highlights ten things to check if your business is finding the economic conditions tough

In tough economic times it's crucial that companies take a look at every part of their business and ask "Are we fit enough to still be in the game when the market picks up?" For some, the answer is - sadly - that it is not, but in the first of a two-part business advice series Cameron Gunn, a partner at ReSolve Partners LLP, offers ten points to take a serious look at.

ReSolve Partners is a specialist recovery and restructuring practice and was recently appointed to help turn around the fortunes of a Nottingham-based videogame developer, managing to find a buyer for the business and its assets in six weeks, whilst saving approximately 45 jobs.

1: Warning Signs - Act Quickly

If your business is in trouble or you are not sure how you are going to survive the next twelve months you must act now. Not acting or acting too late could cost you dearly. If you can't meet your bills as they fall due you are technically insolvent. You urgently need to take some advice.

2: Get General Business Advice

Speak to your accountant. Get the complete picture of your assets and liabilities, and the positions of all stakeholders in your business. Work through all the issues and likely outcomes.

Set clear, realistic business objectives for the next six months and beyond. Set KPIs (Key Performance Indicators) and monitor performance closely. Agree the plan at board and shareholder level and then communicate it to all levels within the company.

Regularly review your performance against clearly defined business objectives.

3: Cash Management

Hold on to cash. Manage inflows and outflows meticulously. Consider aggressively managing payments to creditors (suppliers) and speeding up receipts from debtors (customers).

Some examples include making informal arrangements with creditors, talking to your landlord and suppliers, etc. You could also offer discounts to customers for prompt or early payment. This may seem obvious but we've seen too many cases where a business has failed to put these simple, practical measures in place in time.

4: Recession Planning

Only the fittest businesses will survive the dire economic climate so it's more important than ever that a business gets fit and stays fit.

A light exercise routine may not be enough. Directors need to look at the business as a whole and assess which parts are performing and which are not.

Prepare a 'worst case scenario' - what's the minimum requirement that the business needs in order to still be in the game when the market picks up?

Consider all options - this could include raising fresh capital for the business, or a more pragmatic approach such as merging with another business with complementary skills, resources and customers.

It could involve reducing salaries or working a three or four-day week. In extreme circumstances it could even involve more unconventional methods such as temporarily closing the business.

5: Management Information

Make sure that you get accurate management information on a regular basis. In larger businesses this can be daily or hourly.

Check that book-keeping, payroll and VAT accounting is all up to date - if these basic functions are not done properly you may be unaware of problems or making decisions based on the wrong information.

Remember 80 per cent of your problems come from 20 per cent of your business, and nearly 100 per cent of your profits come from just one or two customers.

6: Banks

Pro-actively manage the relationship with your bank. They may not give you any more money but a passive and informed bank is usually better than a hostile one.

7: HR & Employee Relations

Work out who is most important to your business and consider addressing those that are not. Work out the costs of any potential redundancy plan to the business.

It's vital that you communicate with your staff on a regular basis; even if it is bad news at least you will gain respect for delivering it.

8: Sales & Marketing

Keep selling. In a contracting market fewer deals are done. Be realistic about your prospects and keep selling to buyers. It may be six months before their cheque book comes out again so make sure that you are on the top of their list.

9: Cutting Costs

Cut at least 10 per cent of the cost of running your business - look at everything. From stationary to IT support. Make the savings.

10: Specialist Advice

In certain instances you may benefit from advice from a restructuring or turnaround expert. Also known as insolvency practitioners, they can provide a fresh view of your business and offer a number of potential solutions to complex financial problems.

Recovery and restructuring experts have specialist skills, and are equipped to deal fast moving and often hostile situations that involve director disputes at director level, bank negotiations, personal guarantees, creditor pressure, and pressure from The Revenue and Customs, landlords and more.

Solutions can include making formal arrangements with your trade creditors to ease cash flow (Corporate Voluntary Arrangement), or organising a pre-arranged sale of a business and its assets before an Administrator or Liquidator is appointed. This latter option is often referred to in the press as a 'Pre-Pack'.

Recovery and restructuring experts are connected to corporate financiers, business angels and other investment sources that potentially can offer a way forward.

If the business really is in trouble and disaster cannot be averted an Insolvency Practitioner can manage an orderly termination via an Administration.

This article was written by Cameron Gunn, a partner at ReSolve Partners.

Read this next avatar GamesIndustry International is the world's leading games industry website, incorporating and
Related topics