Published: 21/10/2020 By Jane PriceMost people launching a new business do so with hope and optimism. While only a handful expect their business to change the world, all hope it will succeed. But most also know that along the way they will experience challenging times. Keeping an eye on the ‘decline and recovery curve’ could help you distinguish between a temporary dip and terminal decline.
There is still a ‘failure stigma’ attached to just asking an Insolvency Practitioner for advice.
Insolvency for businesses and individuals remains difficult to talk about. There are many reasons for seeking advice and it’s important to remember that while this advice can include putting a business into a formal insolvency procedure, not every visit to an IP leads to insolvency – it can involve advice that saves a business.
While it is almost impossible to act too early to save a business, it is very easy to leave it too late. This is a problem compounded by business owners being reluctant to contemplate assistance from an IP.
Is your business in distress?
If no remedial action is taken, an underperforming business can quickly slip into distress, entering what is sometimes known as ‘the insolvency zone’. Remember that this is a distress situation and not yet a crisis. At this stage it is far from certain a business is bound to fail or indeed bound to enter any formal insolvency process. If owners haven’t acted to restructure or resolve potential problems, this is the time to. Having entered into a situation of distress, it is more likely than not that some external assistance will be required for the business to survive and get back to performing as it should.
The earlier you spot the signs of distress in a business and start to take action, the better. The higher you are up the decline curve, the more time you have and the more assets and wherewithal you have to be able to make the changes necessary to save and turn the business around.
Taking advice sooner rather than later and speaking to a licensed IP can make all the difference. If you visit the IP at the last minute, as you are defaulting on an HMRC Time to Pay arrangement or can’t pay your wage bill or, meet the demands of another creditor, it might be difficult for the IP to avoid a formal insolvency process.
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