Restructuring your business - another way to adapt and survive

The various crises and their consequences will be the biggest challenge the current generation of managers and directors have faced. Probably bigger in scale and lasting effects than the financial crash and great recession of 2008/09.


Restructuring your business can be another way to survive and adapt

This is why asking for expert business turnaround advice and support will be so critical at this time. Being able to soberly and objectively guide directors through a critical period of quick strategic evaluation and decision making under pressure and suboptimal circumstances.

 

Dealing with the first part of the Covid-19 outbreak and lockdown was difficult enough.

 

Seeking emergency loan support, arranging staff furloughs under CJRS and remote working operations, speaking with creditors and suppliers to arrange payment holidays or flexible terms was stressful enough in the first phase of the international crisis.

 

We’re now entering the second phase when businesses are reemerging from enforced hibernation or reduced circumstances to tackle the busy Autumn and Winter/Christmas holiday periods.

 

March to August will have exposed any underlying issues and fault lines within a business such as weak cash management or lax payment periods, which will need to be identified and a solution identified along with other key issues.

 

Turnaround the To-Do List

 

  • Update business plans and cash-flow forecasts

 

Even the most expertly sourced predictions for the year will have large Covid-19 sized holes blown in them through no fault of the business but they will still need to be repaired. Beginning with 13-week rolling cash flow forecasts and revised yearly predictions will be a good start or having a full Business Viability Review.

 

  • Financial stress tests

 

Most companies should be congratulated for surviving the worst of the pandemic aftermath to this point. Only to this point however – what happens if economic circumstances deteriorate further instead of getting better?  What happens if there is no vaccine developed and second or third waves of the virus necessitate future lockdowns and the disruption they will cause?

 

Medium and longer-term forecasting will also have to take into account emergency funding repayments if any was accessed.  It was useful and essential at the time but loans are temporary and have to be repaid at some point in the future.

 

Any new financial projections and figures should build in theoretical redundancies and scenarios with the hope that they are never needed.

 

  • Workforce flexibility

 

A lot has already been written about redundancies caused by the coronavirus and with the CJRS winding down at the end of October, decisions about furloughed staff will need to be taken now along with planning for remaining workforce structures.

 

Similarly, if business picks up and accelerates, is there a plan to ensure sufficient staffing when it’s required most? A stalled recovery at this particular time might be too much of a hurdle to overcome if more agile competitors are able to recruit quicker.

 

  • Supply chain management

 

Any temporary arrangements made with suppliers in the lockdown will need to be revisited to see if they can continue or change to benefit both parties.  If you secured payment holidays or extended credit and delivery terms, will this continue and for how long?

 

If business is improving then will suppliers be able to cope and restore a more normal delivery and payment schedule if required? This might be the perfect time to research new potential supply relationships with more preferential terms and conditions than previously available.

 

Longer term logistics

 

In the same way that office life might be permanently changed following Covid-19, so might the structure and operations of the business itself.

 

Some products or services might need to be reluctantly discontinued and core areas of strength focussed upon to maximise profitability and incoming cash.

 

If the business survives, they can be looked at again in the future but right now everything has to be pared down to the basics to secure the immediate future of the company.

 

The role of a business restructuring and turnaround expert is to help directors consider the longer term strategic options rather than the day-to-day tactical decisions they are used to taking.

 

A professional opinion and dispassionate view rather than somebody with a financial and emotional investment in the business might be able to see opportunities and space to grow and strengthen than somebody whose main focus is keeping the daily wheels turning.

 

Several businesses have used administration and insolvency procedures to their advantage this year to their advantage.

 

Cath Kidston and T M Lewin have moved from having physical outlets to becoming online only digital retail operations. Oak Furnitureland and Harveys Furniture have been sold as part of pre-pack administration processes which allowed them to emerge without debts and with their main profitable business units intact.

 

Others such as Pizza Express and Poundstretcher have used a Company Voluntary Arrangement (CVA) in conjunction with their creditors to secure their immediate future and provide their supportive creditors with a better chance of returns from stronger businesses in the future.

 

The key to any successful business turnaround or restructure is seeking expert advice and taking action early.

 

Get in touch with us to arrange a free, initial virtual consultation with one of our expert advisors. 

 

The earlier a company seeks aid and advice, the better as they will generally have more options rather than leaving it too late.

 

Seeking help is a sign of strength – there’s no stigma in survival.

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