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Published 18 October 2012 04:18, Updated 18 October 2012 04:35
“Any business owner or management team needs to consider these criteria to consider whether a restructure can succeed,” Vantage Performance chief executive Michael Fingland says. “If you have these six things tied up, then ideally you won’t need a formal insolvency appointment.”
01PROVE THE UNDERLYING BUSINESS IS VIABLE: If the business itself isn’t feasible, even with stricter controls and better management, a turnaround is unlikely to stick.
02MOTIVATE STAKEHOLDERS: Key stakeholders – shareholders, customers, suppliers, staff and financiers – can make or break a restructure. Without their support, a restructure is unlikely to succeed. Effectively managing and motivating them through the process is critical.
03ENSURE MANAGEMENT HAS CREDIBILITY: If the key stakeholders don’t believe management has the credibility and competence to execute a recovery plan, it will be difficult to proceed. This is the reason chief executives are often replaced or why additional executive skills are brought in.
04BUSINESS REPUTATION IS INTACT: If the business reputation has been seriously compromised by either mismanagement, a product recall or a public relations disaster, it will be difficult to retain customers. If it can’t be repaired quickly, growth may not be feasible.
05 GET CREDIT FROM SUPPLIERS: Suppliers are the lifeblood of many SMEs and without recourse to credit, the business could quickly get into trouble. It’s important to communicate with key suppliers and keep them updated for this reason.
06ABLE TO SECURE ADDITIONAL FUNDING: Nine times out of 10, a turnaround will require additional funds at some stage. This can be achieved by selling non-core assets, using working capital more efficiently or raising debt or equity. Without the ability to raise the necessary funds it won’t be possible to execute the restructuring.