Till death do us part?
It seems every week another fashion business collapses under falling sales and excessive debts. But can these dark clouds mark the first steps towards a bright new future? Matthew Nolan shows how to breathe new life into businesses facing fashion's grim reaper.
Life doesn't have to end at death, at least not for a fashion business. If you act early enough, handing over control to an external manager may also be avoided.
Life support
When the situation moves beyond your ability to resolve the problems, it's time to be pro-active and call in a business turnaround specialist (BTS). They'll let you retain a measure of control but also give you the hard advice that's needed. This early action will importantly minimise the likelihood of secured creditors such as your bank taking control of your business. These business turnaround specialists start by assessing the current state of your fashion business to see if it's likely that it can be saved.
Intensive care
For the many businesses that are found to still have signs of life, a more detailed review will then be undertaken to assess business assets, debts, cashflow and staff. This enables the specialist to recommend the restructuring that needs to be implemented in order to save the business. These initial actions will also include addressing the most pressing needs, such as seeking additional time from the bank and trade creditors. After staving off imminent death, the BTS can then also get the business back to its fundamentals, shedding unnecessary products, equipment, staff and costs. It's also an opportunity to improve day to day management that may have contributed to the situation, including a change in practices and some management positions.
Stepping into the afterlife
If debts can't be met through any means and there's simply no options left, a business owner can reluctantly hand over control of their company and its future to an administrator. Appointing a voluntary administrator at least avoids immediate closure or creditors imposing their own administrator. Going into voluntary administration does not necessarily spell the death of your business, instead it can buy valuable time to make the necessary changes and give the business a second lease on life.
The path forward
In these circumstances the best thing you can do is swallow any sense of resentment and assist in every way possible. If those now in control think you're a serious impediment to the future survival of the business, it could unnecessarily be placed into liquidation. The businesses financial accounts will be their first priority. Make sure all the financial records are neatly arranged and available, with supporting information such as invoices and bank statements on hand for verification.
Have a list of any bank accounts and borrowings so that these can be reconciled and control assumed where appropriate. Stock controls will need to be put in place immediately to prevent shrinkage, so having a current accurate list of stock and ensuring stock is clearly labelled will assist enormously.
If you can provide guidance on any stock that can be quickly converted to cash this will also be of interest. The administrator or receiver will additionally need an accurate list of business assets such as equipment, buildings, leases, patents or trademarks. Some may be underutilised and others converted into much needed cash.
As the business owner, no external manager can match the rapport you'll have with employees, giving you a crucial role in preventing staff panic and retaining their much needed commitment, hard work and patience amidst the angst and uncertainty.
Second life
For those with an underlying viable business and who can assist during the difficult process of external control and restructuring, the opportunity exists for a second lease of life. The problems which caused the initial downfall will typically have been resolved during this process, enabling the business to move forward with the management and debt structures suitable for a sustained existence.
You personally know the key suppliers, customers and financiers involved in your business and each of these are a pivotal source of support through this process and afterwards.