Business resuscitation and rescues

Businesses are like people. They have issues, they get sick, they have the good times and certainly the bad. So how do you know when your business needs a health checkup?

There are some key ingredients and vital signs that must be present for any successful business rescue or restructure. Many businesses will need resuscitating out of the financial coma caused by the lockdowns. Whilst some did very well, others have accumulated large debts to pay, have slow paying customers and are now faced with higher costs of materials, energy, petrol, and interest. As well as staff shortages and supply chain delays. Early diagnosis and expert help from a business doctor can save viable businesses. Unmanageable debt can be legally compromised and extinguished through a rescue plan. Sick patients must act quickly for recovery. If a business still has a pulse and can be rescued, these vital signs must be present, and pulses resuscitated before the patient black lines:

1. A responsive body of capable management and staff

• Competent and willing management is essential. Companies can’t rescue themselves without them
  Business workouts are draining on management and staff are less likely to work without good leaders and willing staff that have the support of customers and creditors
• Ethical behaviour and a good track record give credibility to win acceptance of a rescue plan from stakeholders.

2. A cash flow pulse

• Working capital is the pulse of any resuscitation and rescue of a business
• Without working capital, most businesses will be unable to continue to trade through a
  rescue plan
• If there is still some working capital left, or finance available, the business is more likely to
  be rescued and its breathing restored.

3. An early diagnosis and rehab plan with expert business doctors

• Seeking help too late can be fatal. The longer it takes to get to the emergency room, the less options there are to turn things around
• While debts continue to increase, directors potentially open themselves up to an insolvent
  trading liability and exposure to personal guarantees and director penalty notices
• Stress and adverse health of the business owners and staff can be avoided or reduced by
  acting early
• Seeking expert advice may provide a lifeline to distressed companies or sole traders and
  enable them to continue
• An expert will assess the position of the business, consider options available, and critically assess the viability of rescue plans and forecasts to determine if it can be saved.

4. A viable business that can function off life-support

• Change is essential for a business to be rescued
• Wasting time and resources ineffectively and incurring more losses can be deadly
• Bigger is not necessarily better. Profit should be the objective.

5. A family of customer support to help and approve the rehab process

• Reviving a business is a creditor driven process. Creditors will likely assist if the debtor is open, has credible proposals and if they have a chance of recovery
• The support of main stakeholders; creditors, staff, unions, banks, customers, and regulators is necessary
• It is best and most efficient to deal with creditors all as a group, equitably rather than on a “spotfire” basis.

If your client’s business starts struggling financially, you should immediately seek advice from a qualified insolvency and turnaround practitioner. Contact PKF for a free initial health check to assess the current situation and provide options to set a path forward. Seeking early advice can be the difference between a business surviving or flatlining.