Businesses have faced difficult trading conditions for at least eighteen months, some may say significantly longer. Whilst there are some small positive trends businesses are still failing with depressing regularity. Recent statistics suggest that companies employing between 26 and 50 people are particularly at risk.

Businesses that have made it this far may think they have nothing more to learn about surviving a recession. However, we are not out of the woods yet and some prompt action now may mean survival in the future.

So what should you look out for to survive?

Diversify

When the recession started many companies found that the one product they supplied, possibly a “luxury item”, was no longer required. In a number of cases, sales dropped dramatically and business failure was inevitable.

A mortgage broker I know found that the mortgage business died. Many lenders would not lend and where they would, clients did not want to borrow. They could have failed, instead they developed a second business as insurance brokers. This has grown significantly over the last two years and now that mortgages are becoming easier again they have a stronger business.

The same applies with customers. Have you a small number of large customers on who you rely? What will happen if one of them stops buying or, worse still, fails? Don’t rely on them all continuing. Spread the risk by sourcing and developing new markets and opportunities.

Cut Costs

You may have done this already to some degree. However, many businesses are understandably reluctant to reduce their largest cost, staff. This will often cost them their business.

Business can be about making tough decisions. If you are employing people who are not fully productive ask yourself if you need them. Can you put them on short time? Is this a cost you can do without? I appreciate that there may be redundancy costs to be faced and with long serving employees these can be significant. However in the long term it can increase profitability and benefit the other stakeholders in the business, creditors, the remaining employees and the owners.

Keep People Informed

On many occasions, following a business failure, I have been told by creditors, customers and employees that if only they had known what was going on they would have been prepared to help to some degree. When companies cease all these parties suffer, employees lose their income, customers lose a trusted supplier and creditors lose money. Of course, you have to be careful as to what you tell them but in my experience if they have an idea of what is going on creditors will accept regular, smaller payments against accounts so long as their exposure is not increasing.

Debtor Collection

It is very easy to work for a customer and not get paid. If you think that your terms are being exceeded then ask for payment. Remember that all I have said so far could apply to your customer. If you make a nuisance of yourself then you can get to the front of the queue. If necessary, accept payments on account but do not then be tempted to advance further credit until the account is back in terms.

If you are not getting anywhere yourself then use a solicitor, Mason Hayes come highly recommended!

Don’t work for nothing!

If you are experiencing problems with your business it is a very stressful time. Many directors decide to waive their salaries to support the company. However, if you do this are you simply postponing the inevitable? Your job has become a very stressful hobby.

If you believe in the business then you may choose to do this as a temporary measure but do not let this impact significantly on your personal debts. Losing the business is one thing, then having to contend with large personal debts is quite another.

What if the business can’t survive?

Despite your best efforts you may find yourself with a business that is insolvent. It is very important that at that point you take advice from a Licensed Insolvency Practitioner. This advice should initially be free and does not automatically mean that the business will be wound up. He or she will be able to provide sound and practical advice as to what options are available and what to do next. If followed, this may lead to your business surviving, albeit possibly having entered a formal insolvency procedure and come out the other side, leaving you with a stronger business and an income stream into the future.

For further advice on this article please contact Ian Williamson, Licensed Insolvency Practitioner, of Campbell Crossley & Davis. Telephone 01253 349331 or e-mail r.ianwilliamson@crossleyd.co.uk.