My Business Is Failing: What Should I Do?

If the worry that “my business is failing” is running through your head at the moment, you’re not alone. Running a business is tough, and the economic climate over the past few years has made this especially difficult, leaving many business owners struggling to keep their heads above water. The good news if you’re reading this article is that you’re clearly aware of the problem and are addressing it head on. It’s all too easy to bury your head in the sand, allowing the problem to escalate. 

So, if my business is failing, what should I do? The first step is to consider why it might be failing. This could be down to a range of factors including:

• Poor cash flow management
• Growing too quickly & inaccurate forecasting
• Ineffective marketing
• Extending too much credit & struggling to collect invoices
• Unexpected costs 
• Theft or fraud

If your business is struggling due to any of these factors, you’re likely to notice the following warning signs:

• High staff turnover rates
• Plummeting sales or fewer customer enquiries
• Facing constant pressure, including from creditors
• Unable to pay bills on time 
• Loss of ‘buzz’ surrounding your business
• Insolvency (your liabilities outweigh your assets)

Once you’ve asked yourself the potential reasons that my business is failing, it’s time to consider your options. At this stage, it’s important to seek the advice of a licensed Insolvency Practitioner (IP) who will be able to advise you on the best course of action. It’s essential to emphasise that if your company is struggling but not insolvent, it’s still crucial to contact an IP. This will not discredit your company, harm your credit rating or influence any creditors. The IP will be able to assess in detail your company’s individual circumstances, and advise on the best path forward from there. 

If My Business Is Failing Can It Be Recovered?

If your company is in trouble, that doesn’t necessarily mean that it’s the end of the road. Based on the advice of your IP, it may be possible to implement one of the following recovery strategies:

Time To Pay Arrangement: If you’re struggling to pay your tax bills then it may be possible to reach an agreement with HMRC to repay the debt over an agreed period of time (typically 12 months). 

Company Voluntary Arrangement (CVA): A CVA is a binding contract between a company and its creditors to pay back some or all of its liabilities over a specified period of time. The benefit of a CVA is that it immediately alleviates creditor pressure, is not publicly advertised, and enables directors to remain in control throughout the process.

Administration: Administration provides a moratorium which temporarily prevents any legal action from being taken against the company. This provides the business with the breathing space that they need to restructure and recover. 

Refinancing: This involves  restructuring or replacing existing debt with debts on more favourable terms, such as better interest rates. This may include issuing new equity to pay off debts through asset refinancing. 

My Business Is Failing & I Need To Close It: What Are My Options?

If your business is insolvent, then it may not be possible to recover it. Equally, you may simply feel that it has run its course, and you wish to close it regardless of if it is officially insolvent yet. The best options for closing your company are:

Creditors Voluntary Liquidation (CVL): This is the liquidation process for insolvent companies. When a company enters a CVL, creditor pressure is lifted and any further legal action against the company is prevented. The process enables redundancy and other statutory entitlements to be claimed, whilst ensuring the affairs of the company have been wound up correctly.

Members Voluntary Liquidation (MVL): This is the liquidation process for solvent companies. This is suitable for business owners who want to close their company whilst extracting cash or assets in the most tax efficient way, with peace of mind that the business has been wound up correctly with HMRC clearance. 

If you are concerned that “my business is failing” and would like advice on the next steps to take, our experienced team of insolvency practitioners at My Liquidation are here to help. Don’t hesitate to get in touch with us in order to discuss your options.