How To Protect Your Business Against Insolvency
Gavin Gibbons
Private Investor | Adviser & Partner On Scaling Your Business To Exit | Mergers & Acquisitions | Managing Partner at Next Level Ventures
As the economy moves into a period of global uncertainty, many businesses are beginning to feel the strain.
There are a common set of challenges facing business owners, from labour shortages and supply chain issues, through to rising costs and seismic shifts in consumer behaviour.
One of the biggest threats to many business owners during these times will be insolvency. And while there is no silver bullet, there are a few things you absolutely must get right, to avoid severe consequences.
?? ADVANCE PLANNING
Make sure your business regularly undertakes comprehensive planning and forecasting exercises. And make sure the senior management team is briefed accordingly (or is included in the process).
Not everything is going to be within your control. But all changes need to be included in your advanced plan in real-time. For example, if you are taking on new staff, received changes to your order book, or anything that will affect your costs in any way, it needs to be reflected in your planning straight away.
?? EARLY WARNING SIGNS
Make yourself aware of the early signs of insolvency. Most likely your gut will tell you something is wrong, so don't ignore it. Making late payments, cash flow issues, and rising debt levels are obvious signs. Don't stick your head in the sand and seek help and advice early on.
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?? USING FINANCE
Depending on what actions you have already taken, the clever use of finance can provide a safety net if things go sideways. There are numerous options available, but be careful where you get advice. Borrowing money (in all its forms) brings its own risks. Ask yourself if creative finance is part of a clear plan or if it's simply kicking the can down the road..?
?? TURNING THINGS AROUND
Once you've identified there is a problem, you need to have a short-term plan for steering clear of trouble. That might be taking measures to address cash flow issues. Beyond that, you need a longer-term plan for improving the financial health of the business and avoiding similar situations in the future. This might involve working with a strategic partner to turn around and grow the business. Or it could mean finding a new owner for your business.
?? PREPARE FOR THE WORST, HOPE FOR THE BEST
Although it's not something anyone likes to think about, it's important to be prepared for the worst-case scenario. If your business does become insolvent, you'll need to know what to do in order to minimise the damage and protect your personal finances. Speak to your accountant or a trusted business advisor to understand your options.
Insolvency is a serious risk for any business, but by taking some simple precautions, you can minimise the chances of it happening to you.
Founder & Mentor at Crème Talent. Trying To Shape a Better World.
2 年My question is what if your company is failing because of a new highly competitive copycat company that has been introduced in your sector?
Manager per la Digital Transformation e la Sostenibilità | The People & Business Connector | Circular Economy I BtoB I > 25 yrs of Sales, Marketing, Management and New Business Development
2 年It's well-known that successful entrepreneurs failed multiple times before they experienced success. One failure won't define you and one win will not make you rich forever.
For most people, when things fall apart, they get into panic mode. A great reminder of what to focus on even when things are going well.
CEO & Founder at Cognetiks Consulting
2 年"Focus on learning" is one of the simplest but smartest and most important things to understand. For all successful ventures across the board.