Description
This document about strategies to deal with a sharp decline in your business.
Strategies to deal with a sharp
decline in your business decline in your business
Catalyst Management Partners
• We work with business owners to create
valuable companies, not matter what the
starting point is and the current life cycle.
• We are an experienced ‘portable management • We are an experienced ‘portable management
team’
…freedom and wealth from your business
Business Life-Cycle
Performance
Growth
Maturity
Business Transformation
Start-Up
Turnaround
Insolvency
Entrepreneurial
Management
Traditional
Management
Turnaround
Management
Sharp decline in business turnover?
1. Diagnose the ‘malaise’
2. Assess the best course of action
3. The various strategic solutions to implement
4. How to use legal instruments to recover 4. How to use legal instruments to recover
from the decline
5. The Contractual Voluntary Arrangement -
CVA
Diagnose quickly and position your business on the risk ladder
Tight Cash Flow
Not Insolvent
Tight Cash Flow
High Risk of
Becoming Insolvent Becoming Insolvent
Tight Cash Flow
Border line
Insolvent
Tight Cash Flow
Insolvent
Are you insolvent ?
Assess the situation through the Assess the situation through the
three methods for insolvency
3 METHODS TO DETERMINE INSOLVENCY
1. The cash flow test – Can the company
pays its debts when they fall due?
Late in paying PRSI/PAYE and VAT when they
fall due? fall due?
Extending your 30 days granted credit to 90 to
120 days?
(Directors responsibility to manage insolvency risk)
3 METHODS TO DETERMINE INSOLVENCY
2. The balance sheet test –
Do you owe more than you own? Or
Do your liabilities exceed your assets?
( Beware of obsolete stock and work in
progress, non collectable debtors)
A ‘true and fair’ picture of the business must be
represented when making your assessment.
3 METHODS TO DETERMINE INSOLVENCY
3. Legal Action test –
Any statutory demand from creditors that have
gone beyond 21 days and a risk that a creditor may
petition to wind up the company?
Position the ‘malaise’ and create distinctions
UNDERPERFORMANCE?
DISTRESS?
CRISIS?
TOTAL INSOLVENCY
The signs for underperformance
• Losing market share – you are not doing so well
against competitors
• Customers complaints - service or product delivery
is failing
• Turnover reducing – this has happened over a
period
• Profits declining - going into losses
• Banks ask for security and information.
The signs for distress
• Increased borrowing – the gap is widening in your
working capital requirements
• Staff turnover is increasing – people are unhappy
and not feeling safe and underperforming
• Losses are accelerating
• Cash flow is extremely tight
• You can’t deliver all services or products
• Pipeline has shortened substantially
The signs for crisis
• Crisis management is taking precedent over
‘business as normal’
• Creditors liaison is using up all the time
• Risk of wind up petition(s) looming
• Cash flow has disappeared – no working capital • Cash flow has disappeared – no working capital
• Business is at a standstill
• Insolvency situation
• Bank seek to reduce exposure
• Senior staff leave
Likely Causes of Normal Downturn
INTERNAL FACTORS
• Weak control
• Lack of marketing and/or New Product Development investment;
• Poor accounting practice (inadequate control/poor working capital);
• Lack of planning and strategic thinking; • Lack of planning and strategic thinking;
• High cost structure;
• Big projects, over-trading, acquisitions… (under capitalization).
EXTERNAL FACTORS
• Receding industries and markets
• Loss of key customers
Additional Causes in 2009 - Irish recession
MACRO FACTORS
• Obsolete business models due to the collapse
of the construction sector.
• Dependence on construction sector • Dependence on construction sector
• Overall protracted market due to lack of
liquidity
Thereforethe big question?
• Bad management or bad business?
• Poor skills V outdated business model? • Poor skills V outdated business model?
Key requirement: Get Control!
“Be in control or be controlled”
External;
• Suppliers,
• Lenders,
• Competitors. • Competitors.
Internal;
• Shareholders,
• Employees,
• Management.
• Catalyst Management Partners is not part of
the insolvency industry, and has no
commercial interest in liquidation procedures.
• We distinguish ourselves through our unique • We distinguish ourselves through our unique
and experienced approach, that aims at
ensuring a company’s future at the pre-
insolvency phase, and protect all stakeholders’
interest.
“Business Health Improvement” (to re-focus and take
appropriate action to counteract the loss or downward
trend)
Objectives: Cut costs quickly and re-create a profitable
model while retaining core abilities to deliver the
services/products.
UNDERPERFORMANCE
BUSINESS RECOVERY PROGRAMMES (cont’d)
“Renewal Growth through transformation” to ensure
the business is repositioning itself in the market place
vis-a-vis its customers and its competitors.
Purpose: GAIN SPEED AND CREATE FAST
TRANSFORMATION
DISTRESS
Combined with
BUSINESS RECOVERY PROGRAMMES (cont’d)
CRISIS
Debt Management & Contractual Voluntary
Arrangement (Viability & Recovery)
Objectives: To buy time, ease the pressure from
creditors, allow the company to trade out of the
difficulty & repay its debt.
Combined with
“Renewal Growth” to ensure the business is maintaining
good will in the market, and that it is equipped with a
turnover build-up plan to ensure profit and strengthen
the debt repayment plan.
Purpose: CREATE SPACE TO TRANSFORM
Combined with
INSOLVENCY
Examinership/Liquidation (No Viability)
Objectives: To cease further trading, or to protect company
from creditors while restructuring - as the company is now
beyond viability & recovery stage as it stands.
BUSINESS RECOVERY PROGRAMMES (cont’d)
“Renewal Growth Programme” (For Companies in
Recovery Mode, post Examinership and restructuring )
Objectives: To help Directors regain confidence &
strategic vision; to create focus & enhanced control, in
order to grow again.
(CATALYST IS NOT INVOLVED IN THE
LIQUIDATION PROCESS)
Combined with
‘Renewal growth’ & transformation
Key aspects
• Create a new offering from a lower cost base that is still
in line with the brand and still offers high value benefits
to the customers (whose needs have changed) to the customers (whose needs have changed)
• Reposition the competitive stance in the market
• Create the new long term vision and look at the
strategic possibilities from the new re-positioning
Don’t wait for the future to happen.
Create it. Create it.
doc_810636616.pdf
This document about strategies to deal with a sharp decline in your business.
Strategies to deal with a sharp
decline in your business decline in your business
Catalyst Management Partners
• We work with business owners to create
valuable companies, not matter what the
starting point is and the current life cycle.
• We are an experienced ‘portable management • We are an experienced ‘portable management
team’
…freedom and wealth from your business
Business Life-Cycle
Performance
Growth
Maturity
Business Transformation
Start-Up
Turnaround
Insolvency
Entrepreneurial
Management
Traditional
Management
Turnaround
Management
Sharp decline in business turnover?
1. Diagnose the ‘malaise’
2. Assess the best course of action
3. The various strategic solutions to implement
4. How to use legal instruments to recover 4. How to use legal instruments to recover
from the decline
5. The Contractual Voluntary Arrangement -
CVA
Diagnose quickly and position your business on the risk ladder
Tight Cash Flow
Not Insolvent
Tight Cash Flow
High Risk of
Becoming Insolvent Becoming Insolvent
Tight Cash Flow
Border line
Insolvent
Tight Cash Flow
Insolvent
Are you insolvent ?
Assess the situation through the Assess the situation through the
three methods for insolvency
3 METHODS TO DETERMINE INSOLVENCY
1. The cash flow test – Can the company
pays its debts when they fall due?
Late in paying PRSI/PAYE and VAT when they
fall due? fall due?
Extending your 30 days granted credit to 90 to
120 days?
(Directors responsibility to manage insolvency risk)
3 METHODS TO DETERMINE INSOLVENCY
2. The balance sheet test –
Do you owe more than you own? Or
Do your liabilities exceed your assets?
( Beware of obsolete stock and work in
progress, non collectable debtors)
A ‘true and fair’ picture of the business must be
represented when making your assessment.
3 METHODS TO DETERMINE INSOLVENCY
3. Legal Action test –
Any statutory demand from creditors that have
gone beyond 21 days and a risk that a creditor may
petition to wind up the company?
Position the ‘malaise’ and create distinctions
UNDERPERFORMANCE?
DISTRESS?
CRISIS?
TOTAL INSOLVENCY
The signs for underperformance
• Losing market share – you are not doing so well
against competitors
• Customers complaints - service or product delivery
is failing
• Turnover reducing – this has happened over a
period
• Profits declining - going into losses
• Banks ask for security and information.
The signs for distress
• Increased borrowing – the gap is widening in your
working capital requirements
• Staff turnover is increasing – people are unhappy
and not feeling safe and underperforming
• Losses are accelerating
• Cash flow is extremely tight
• You can’t deliver all services or products
• Pipeline has shortened substantially
The signs for crisis
• Crisis management is taking precedent over
‘business as normal’
• Creditors liaison is using up all the time
• Risk of wind up petition(s) looming
• Cash flow has disappeared – no working capital • Cash flow has disappeared – no working capital
• Business is at a standstill
• Insolvency situation
• Bank seek to reduce exposure
• Senior staff leave
Likely Causes of Normal Downturn
INTERNAL FACTORS
• Weak control
• Lack of marketing and/or New Product Development investment;
• Poor accounting practice (inadequate control/poor working capital);
• Lack of planning and strategic thinking; • Lack of planning and strategic thinking;
• High cost structure;
• Big projects, over-trading, acquisitions… (under capitalization).
EXTERNAL FACTORS
• Receding industries and markets
• Loss of key customers
Additional Causes in 2009 - Irish recession
MACRO FACTORS
• Obsolete business models due to the collapse
of the construction sector.
• Dependence on construction sector • Dependence on construction sector
• Overall protracted market due to lack of
liquidity
Thereforethe big question?
• Bad management or bad business?
• Poor skills V outdated business model? • Poor skills V outdated business model?
Key requirement: Get Control!
“Be in control or be controlled”
External;
• Suppliers,
• Lenders,
• Competitors. • Competitors.
Internal;
• Shareholders,
• Employees,
• Management.
• Catalyst Management Partners is not part of
the insolvency industry, and has no
commercial interest in liquidation procedures.
• We distinguish ourselves through our unique • We distinguish ourselves through our unique
and experienced approach, that aims at
ensuring a company’s future at the pre-
insolvency phase, and protect all stakeholders’
interest.
“Business Health Improvement” (to re-focus and take
appropriate action to counteract the loss or downward
trend)
Objectives: Cut costs quickly and re-create a profitable
model while retaining core abilities to deliver the
services/products.
UNDERPERFORMANCE
BUSINESS RECOVERY PROGRAMMES (cont’d)
“Renewal Growth through transformation” to ensure
the business is repositioning itself in the market place
vis-a-vis its customers and its competitors.
Purpose: GAIN SPEED AND CREATE FAST
TRANSFORMATION
DISTRESS
Combined with
BUSINESS RECOVERY PROGRAMMES (cont’d)
CRISIS
Debt Management & Contractual Voluntary
Arrangement (Viability & Recovery)
Objectives: To buy time, ease the pressure from
creditors, allow the company to trade out of the
difficulty & repay its debt.
Combined with
“Renewal Growth” to ensure the business is maintaining
good will in the market, and that it is equipped with a
turnover build-up plan to ensure profit and strengthen
the debt repayment plan.
Purpose: CREATE SPACE TO TRANSFORM
Combined with
INSOLVENCY
Examinership/Liquidation (No Viability)
Objectives: To cease further trading, or to protect company
from creditors while restructuring - as the company is now
beyond viability & recovery stage as it stands.
BUSINESS RECOVERY PROGRAMMES (cont’d)
“Renewal Growth Programme” (For Companies in
Recovery Mode, post Examinership and restructuring )
Objectives: To help Directors regain confidence &
strategic vision; to create focus & enhanced control, in
order to grow again.
(CATALYST IS NOT INVOLVED IN THE
LIQUIDATION PROCESS)
Combined with
‘Renewal growth’ & transformation
Key aspects
• Create a new offering from a lower cost base that is still
in line with the brand and still offers high value benefits
to the customers (whose needs have changed) to the customers (whose needs have changed)
• Reposition the competitive stance in the market
• Create the new long term vision and look at the
strategic possibilities from the new re-positioning
Don’t wait for the future to happen.
Create it. Create it.
doc_810636616.pdf