How can I save my business from going under?
As a result of the Covid-19 Pandemic, and its associated lockdowns, there is a real danger that many businesses will go under. So what can you do to save your business?
Most businesses fail due to the following reasons
- Insufficient start up capital
- Failure to react to rapid changes in the market or competition
- Poor cashflow control and inadequate financial reporting
- Not having a plan for the future
- Relying on too few customers
- Straying from what they do best and chasing other avenues
So what can be done to save your business?
- Go back to basics and analyse what is going wrong. It could be a particular product or service that is dragging down the business
- Look closely at the costs in the business. See our page on cost cutting to help with this.
- Could your finance be too expensive? - It is worth noting that invoice finance and factoring companies get get nervous if they think the business is struggling and the costs can go up hence creating a vicious circle.
- Get advice and ask someone to reality check the reasons why the business is struggling.
- If the situation is critical and your face an immediate threat from creditors such as HMRC then get advice immediately!
I have heard about CVAs - what are they and how do they work?
If you want to save your business from going under then we can help. However, you must not underestimate how much discipline you will need to do this. A Company Voluntary Arrangement or CVA allows the directors to stay in control and pay off creditors over time. The CVA protects the company against unsecured creditors from taking action against the company. Secured creditors, most usually the bank, will need to be convinced that the business will succeed and their position is not compromised. This is where we come in. We have an excellent record ensuring that the banks stay on board. In addition we can persuade HMRC, who are an unsecured creditor, that the business is viable and that they should support the company's restructuring plan.
In order for a company voluntary arrangement to work the directors need to be absolutely focused on saving the business. This means that they will need to have a daily cashflow model, costs will need to be cut dramatically, and very importantly the directors must have a realistic view of potential future sales. Part of a preparation of a CVA is to put together financial forecasts for the business. Our finance team can help in putting this together.
So how can a CVA stop a business going under?
- CVA's can improve cashflow and cut costs, quickly.
- Stop pressure from tax, VAT and PAYE while the CVA is prepared.
- Company voluntary arrangements can terminate employment contracts, leases, onerous supply contracts and all with NIL CASH COST.
- You can terminate landlords leases with NIL cost with a well written CVA! Unilaterally walk away from the lease, using our expertise.
- You can terminate directors or managers contracts too.
- Board and shareholders generally remain in control of the company.
- Much lower costs than Administration or Receivership.
- Finally, it is ALSO a good deal for creditors as they retain a customer and receive a dividend on their debts.
Print out our flowchart on CVAs here
The main reason why this process is not used so much, is that there is much ignorance and prejudice around the process. We have a page called CVA worries that seeks to challenge these misconceptions.
Case studies where a CVA has saved the business
If you have read the case studies and the CVA worries page then please call us on 08009700539
Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide was mostly written pre Covid-19 and there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.