1 July 2004
It is a paradox of business that the inherent qualities entrepreneurial directors need to start and grow a venture are often the exact opposite of the traits they need to keep it on a steady course over time.
The self-belief, determination, enthusiasm and energy that helps to create a successful start-up can become negative influences on a business heading for the rocks, says Andrew Andronikou, partner at our London office.
What is needed, in these circumstances, is the detachment to take a dispassionate look at the eight key signals that indicate problems - and the humility to accept that outside professional help may be needed to solve them.
Andronikou's eight red lights are -
1.
Complaints from suppliers over late payments. Significant debt aged beyond 90-120 days.
2.
Reduced credit worthiness, purchasing reduced to a pro-forma basis
3.
The arrival of writs and notices of impending legal action
4.
Difficulties in meeting PAYE, NI and VAT payments
5.
Customer complaints about protracted delivery - high turnover of the customer base
6.
Pressure from financial institutions to reduce or restructure borrowings
7.
Diminishing employee morale
8.
Stress-related health or personal problems among senior management.
"To the outsider these signals are crystal clear," Andronikou warns, "But naturally self-reliant and resourceful bosses often choose to delude themselves that these are just business anomalies, not indicators of potentially fatal malaise. The optimism that gets entrepreneurs airborne in the first place, can be the burden that brings them crashing down.
"It takes a different kind of guts to admit that you may need expert help to turn your business round. Biting the bullet often involves surrendering your pride.
"The medicine may be just a matter of restructuring the borrowings or factoring invoices for a time. Leasing capital equipment or sale and lease-back of other assets may be the answer. Even having a cool, realistic external appraisal of the businesses' prospects can provide a helpful respite. Turnaround techniques have become very sophisticated these days
"The critical decision is to ask for help before it's too late. There's no point in crying for help when the wolves have already reached the door," Andronikou says. "If your business has even one of the eight symptoms, get help from a turnaround practitioner as soon as possible. It won't burden a faltering business unduly to work out a rescue plan - and it could avert a personal and business calamity."
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