Daniel Booth of Leonard Curtis Business Solutions Group (LCBSG) discusses how SME owners and their advisers can access specialist advice in a challenging financial climate.

SMEs are the cornerstone of the UK economy. They represent over 99 per cent of businesses, provide 60 per cent of private sector jobs and account for almost 50 per cent of all private sector turnover.

So the support and positive strategic advice we provide them is essential.

Over the last 23 years, we’ve worked with hundreds of companies in every conceivable quandary. But two factors always remain the same. Firstly, however complex the situation, the advice we give is always simple and non-judgemental. Our approach is ‘hands on’ and practical. Secondly, when it comes to rescuing a business, spotting the warning signs early is key.

Act quickly

By knowing what to look out for – and what steps to then take – a business has more time to react. The longer it takes to acknowledge difficulties, the quicker they accelerate. Often, by the time debts are unable to be repaid, options are very limited.

Even at this stage, we must remember that distress doesn’t mean disaster. It’s important to bear in mind that from time to time, we are all posed a question or faced with a situation that we don’t know the answer to.

Ask for help

We shouldn’t be afraid to ask for help as without it, we don’t – and often can’t – succeed. The number of British businesses collapsing hit a four-year high last year. One in every 330 fell into an insolvency process. A significant proportion of these could have been saved had issues been recognised and specialist advice sought earlier.

This data emerged just days after the downfall of construction giant Carillion – the UK’s biggest corporate failure in a decade – after announcing it was in trouble and losing money, with mounting debts, last July.

Confusion surrounding the insolvency process – and fear of repercussions from seeking advice from a corporate recovery professional – means that many owner managers often leave it too late to get help. There is a misperception that asking an Insolvency Practitioner (IP) for guidance will automatically lead to the closure of the business.

On the contrary, our priority – and that of all restructuring firms – is always to try to save it if possible. Where we are referred early enough, we can usually develop a practical strategy to put the company back on a steady footing.

It’s very easy for an owner-manager to fall into the “hoping for the best” trap whilst watching an ever-decreasing sales pipeline, a falling working capital number and a cost base that remains stubbornly high. The alternative is too awful to contemplate. Sadly, it is this reaction that is most likely to lead to the failure of their company. And even if a formal insolvency process becomes necessary, it doesn’t always mean the end of the road.

It can happen to the ‘big boys’

Only last week, Toys R Us and Maplin entered administration, reportedly putting over 5,000 jobs at risk. Their downfall is attributed to increased competition from online retail and the ongoing pressure faced on the High Street. Unfortunately, with limited options and time, failure was inevitable.

And not long ago, many thought Carillion was too big to fail and yet it went down with £2bn of debts and a £900m pension deficit.

So if it can happen to the big boys – Carillion employed 43,000 globally, including 20,000 in the UK and with contracts worth £1.7bn – it can happen to the best of SMEs.

We often see SME owners diversifying their business activities as they feel this ‘de-risks’ and removes ‘eggs from the basket’. What we saw with Carillion was over-diversification – a business that started out digging holes expanded their operations to serve school lunches. Our advice is to keep it simple and do what you’re good at. As the saying goes, stick to the knitting.

It’s what we do

The five key issues faced by respondents in a recent survey by the Academy for Chief Executives were people, managing growth and change, government regulation and understanding and managing uncertainty and increasing costs.

They correspond with those that we most frequently come across at LCBSG. Clients approach us for specialist advice and assistance on a wide range of operational and financial issues.

Every day we talk to SME owners experiencing contract or client losses, delayed payments or difficulties accessing investment, affordable funding for growth together and legal advice.

It’s our multi-disciplinary approach – where each case is assessed individually and the best solution is developed across all of our service areas – that makes our rescue and recovery offering so strong.

In the last three years we’ve safeguarded over 14,000 jobs, secured approval of over 150 Time to Pay (TTP) proposals – repaying more than £26m to HMRC – and raised over £250m in finance.

These successes are down to our understanding of the constant demands on business owners and our tireless approach to finding solutions for them.

There really is nothing we have not seen and we hope that’s reassuring for business owners and their advisers. We know how to steer just about any situation into calmer waters where business owners can take a breath and work towards the best possible outcome – whatever that might be.

From 15 offices across the UK, LCBSG’s national team of restructuring specialistslawyers and financiers provide positive strategic advice and solutions to SME owners and their advisers – enable them to retain control of their businesses and their futures.

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