Strategy | TGBA - For companies with financial difficulties

Business Turnaround isn’t all about Bad News

02/07/2013 By

A Case Study to give hope for companies in trouble

In late 2012 one of the banks approached us to see if we could help one of their struggling customers.

The business was owned and managed by a husband and wife team which at face value was quite prosperous but behind the scenes was fully utilising their borrowing facilities and often running into excesses. The bank manager was quite worried that the account could go through an escalation process which might trigger an insolvency procedure.

On our first visit to the client, which was conducted free of charge, highlighted a number of areas of weakness so we obtained the agreement of the Directors;

To change their working routine to increase the supervision in their workshop
To look at all potential areas of waste

Our next task was to undertake an in-depth examination of their sales invoices to compare their charges with their competitors. From this, we discovered they were under-pricing some of their work to a major customer which had the potential for a significant increase in their gross margins.

Returning to the areas that the Directors agreed to look at, we soon discovered that an unnecessary amount of overtime was being worked by the staff and in the following weeks revealed a large amount of raw material wastage.

Our work continues with them but already they are working well within their borrowing facilities and are on track to repay all borrowings by early 2014. In addition, the Directors have repaid some personal loans which they were using to support the business.

Recently, one of the Directors has said to us that they were on the verge of closing the business before they met us. Now their life has change completely and they are looking at an expansion programme.

If your business is suffering from any of these symptoms, call Phil Stanyer on 07809 448115 or email him on phil.stanyer@tgba.co.uk

Are new business support provisions fit for purpose?

07/02/2012 By Mushroom Internet

The Government is in the forefront of encouraging new business support provisions for SMEs. It has reorganised Business Link and done away with the local one-to-one advice provided from trained advisors and replaced them with a website.

In a recent Forum of Private Business (FPB) poll only one in ten of the respondents indicated that the support provided was adequate while 20% said it was not. Further, more than half thought that the information was inadequate to aid growth.

Mentoring and coaching now appear to be favoured by government as the best way to support SMEs and are supporting organisations and individuals who give their time free of charge. However some restrictions are placed on what they do. This means for instance that coaches cannot give advice! Whilst there are, no doubt, many good people providing good support amongst these organisations, the overall quality of these coaches and the services they provide may not suit the majority of SMEs seeking practical help and advice. For instance many of the coaches recruited are retired bank managers and the like. By the very definition bank managers have never run a business and it seems doubtful that they could assist a company that is ambitious and wants to grow but need help to develop a strategic marketing plan for instance.

The private sector provides a range of business support services. These organisations are staffed and run by business people who have run their own businesses (and by definition of being in the private sector, still run their own businesses) and are highly qualified in a range of different disciplines. Ambitious SMEs are willing to pay for quality help, support and advice as they know that the return will be substantial and will benefit their business in both the short and long term.

If you would like to explore how business support can help your company contact Bob Francis on 07941 426807 or email at bob.francis@sgba.co.uk

Deficit reduction or growth – which is the chicken and which is the egg

25/01/2012 By Mushroom Internet

Small business that get into trouble by over-borrowing, end up making no money, or even worse, making a loss because the cost of borrowing gets to be greater than their profit.

Where do they go from there?

Growth: you need money and resources for that and if there is none, you have to find it.

Deficit reduction: cost reduction is an absolute must for businesses in this position to free up some cash.

Restructuring: this is the White Knight option – someone, often a predatory acquirer, comes along who will take on the debt at a lower rate of interest – not many of those around today.

Default: for some companies going into Administration is the only option, with a pre-pack to take out the best bits and leave most of the debt behind. Shame for the the creditors, especially the tax man and the small shareholder.

So what about the National Debt?

Default – think of Greece.

Restructuring – think of the ECB and the IMF.

Deficit reduction – think of the UK and other realistic national plans to reduce government spending.

Growth: we need some or all of these to work if Government funding is to be available for growth.

So where does that leave us small business owners?

Sure, the government is doing its best to find some money, but we can’t rely on that really. It is being highly targeted, and there just ain’t much available, realistically.

So for most of us we are on our own. We have to find the resources from somewhere to grow our own businesses, and if there isn’t much cash the only thing we have is time, and making the best use of that.

Chicken or egg?

I’d argue that the egg is growth – its the future produced by the old chicken! Look after the chicken!

Posted by Peter Johnson, business growth advisor with SGBA. Contact Peter on peter.johnson@sgba.co.uk if you would like to discuss your business with an experienced advisor and fellow business owner.

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