If your business is starting to fail, it can be difficult to know what to do. First, take a step back and assess the situation. What are the main factors that are causing your business to struggle? Is it lack of customer demand, high overhead costs, or competition from other businesses?
Once you have identified the root cause of the problem, you can start to develop a plan to turn things around. If customers are staying away, you may need to rethink your marketing strategy or invest in new product development. If costs are too high, you may need to streamline your operations or renegotiate contracts with suppliers. And if you’re up against tough competition, you may need to find a way to differentiate your business.
Whatever the cause of your business troubles, there’s no easy fix. But by taking the time to diagnose the problem and develop a plan of action, you can give yourself the best chance of turning things around
What is the main reason for business failure?
The main reasons for a business failure can be seen from or list below, some are common reasons and some are less clear to spot, especially without thorough analysis of the companies’ books and operations. However, a few of the most common reasons are as follows:
- Poor financial management
- Extending too much credit and struggling to collect on outstanding invoices
- Growing too quickly to what is sustainable and manageable
- Unexpected costs
- Sudden change in business environment
- Ineffective marketing
- Products outliving its life cycle
- Bad luck
- Theft and fraud (this is common and happens when the first one on the list is true)
- Supplier increases out of your control such as energy markets
- Never recovered due to Covid-19
Advice for a business which is failing
Any business owner knows that the key to success is customer satisfaction. If your customers are unhappy, they will take their business elsewhere. So, what can you do if your business is failing?
First, take a step back and assess the situation. What are your customer’s main complaints? Is it the quality of your product or service? The price? The level of customer service? Once you have pinpointed the problem, you can begin to take steps to fix it.
For example, if your customers are unhappy with the quality of your product, consider ways to improve manufacturing or create a more stringent quality control process.
If price is an issue, see if there are ways to cut costs without compromising quality. And if customer service is the problem, try to find ways to make the experience more personal and efficient. Remember, it’s always easier to retain a satisfied customer than it is to attract a new one. So, if your business is failing, take action now to turn things around.
How to avoid business failure becoming insolvency
To avoid a business failure becoming insolvency you will need to carry out a program of turnaround and restructuring within the company.
Things to consider include:
- Total visibility of your company’s finances – ensure you work with your accountant in order to gain accurate, current information.
- Is the business model still relevant? – Are there new competitors in the market with stronger USPs?
- Are your customers offered the best value proposition? – How could you do this better?
- Be ruthless but wise – when it comes to cutting costs
- If control has been lost – take it back.
- Fresh liquidity – Introducing fresh cash into the business can allow a breathing space.
- Have you the support of employees and customers? – To survive, they have to be with you 100%
- Don’t be a creature of habit – Change is good for a business, get a fresh pair of eyes to help you implement change.
What happens if a business fails?
If a business fails, there are several potential consequences. The owners may lose their personal investment, and they may also be responsible for debts that the business has incurred. Employees may lose their jobs, and suppliers may be left unpaid.
In addition, the failure of a business can have ripple effects throughout the economy. For example, if a small business closes its doors, the local community may suffer as a result. The loss of jobs can lead to reduced spending, and this can in turn lead to other businesses failing. The failure of a business can therefore have far-reaching implications.
There are a number of options available if the business needs to close its door, these are through HMRC, and via insolvency practitioners.
They include the following
Time to Pay Arrangement – This is a structured repayment plan offered by HMRC, usually over 12 months, to help you pay your tax bill.
Company Voluntary Arrangement – If you find yourself in a situation where you cannot pay creditors, the CVA is a formal payment plan, it can only be arranged by an insolvency practitioner.
Going into Administration – offers a moratorium from legal action while an insolvency practitioner can attempt to turn the business around through restructuring to avoid liquidation.
Finance / Invoice Finance – Alternative finance is simple to obtain and can be in place within two weeks, Invoice Finance helps businesses that have a poor cash-flow cycle.
Sell the business – If your business is failing you may want to sell the underproforming company, this will allow you to walk away and concentrate on a new venture.
Need more help
If you are worried about your business filing and need more information on implementing turnaround or your insolvency options, simple complete the online enquiry or contact us via the telephone number today.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.