5th March 2019
Daniel Booth, director at Leonard Curtis Business Solutions Group, talks about business rescue and recovery and lessons to learn. Are you making money, the effects of disputes, youth versus experience and getting the best deal for all.
What creates a business failure? Why do seemingly decent businesses encounter difficulty? Often the problem lies within.
Are you making any money?
This is frequently the first question I ask business owners who come to us looking for help and a surprisingly high percentage say they don’t know. Seems crazy but it’s true. It’s obviously a straightforward balance sheet issue, but it is often the case that the tail is simply wagging the dog. So a meaty, all-consuming contract ends up making a loss, or high cost suppliers and bargain-hungry customers put the squeeze on profit. Either way there is a lack of control, with too much focus on product and not nearly enough on management structures.
This of course is a red flag moment for all businesses. Why are we losing money and what needs to change?
We’ve seen all scenarios at Leonard Curtis
There are many factors in play. It could be a poor management, the quality of people, wrong folk in the wrong jobs, or competitors undercutting you. You might not charging enough for your products and services or paying over the odds to key suppliers. Whichever it is we have seen pretty much every scenario going. As any accountant will tell you it always boils down to the simple principles of balance – what’s coming in versus what’s going out and does that stack up? If not why not?
Business disputes are never good news. It’s similar to an unhappy couple arguing all the time and taking their eye off the rest of the family. Good parenting or good business management goes clean out the window. Disputes, disagreements and falling out puts immense pressure on management and can often set up the catalyst for an insolvency. So if there is a disagreement followed by opposition to something important in your business, try and resolve the reasons for the disagreement as soon as you can before it escalates.
Youth versus experience
While it is true that you don’t necessarily need years of experience to start a profitable business – the website www.startups.co.uk – is full of such success stories, you do need experience to spot when things start to go wrong and be able to act quickly. So you might have built up a sizeable empire, but when you make a mistake it is a percentage loss of a big number and can become very hard to turn around. I sometimes say to multi-generational family businesses listen to your elders. Previous generations may not be in charge day to day any more, but they do usually have a weather eye on the bottom line. Use their experience. Grey hair and wrinkles are there for a reason.
Keep great people
It’s always good if you can keep great employees in a business. Whenever we can we try to make them part of a successful recovery story, redeploying them in a stronger management set up. So if we are selling or merging businesses we take the best of both to create something different, which is more sustainable for the long term. Saving jobs and improving the future prospects of a company are definitely the most satisfying parts of my role.
Media scrutiny – a help or hindrance?
While most deals go by unnoticed there are times when your work is in the spotlight. Intense media interest in an apparently failing business can change the dynamic before you have even begun. If the business also happens to be a social media giant with millions of followers you know this is not going to be an easy ride. I have learnt the value of having a pretty robust media liaison strategy and I think we are getting better at it. Media interest is always a double-edged sword and while it can rock the boat on occasion most of the time that sort of attention makes an asset more valuable, which is hopefully good news for creditors and employees.
Getting the best deal for all
Ultimately, you have to look at what’s important in difficult circumstances, whether you are a haulage contractor from Sunderland, restructuring your business under the radar, or a world-leading social media brand, with all eyes on every step. The key things to get right are safeguarding people’s livelihoods, creating future value and getting the best deal for all