Last year the UK recorded a record high number of businesses going into administration. The retail and construction sectors were hit by some of the biggest losses in business and sales. The number of firms collapsing into administration across England and Wales rose by almost 5% last year, but don’t let your business drop into the same pitfalls. The high street witnessed the majority of losses to business in 2019.
Prepare for success
Dummies have listed a few top tips on how to ensure your business avoids breaking point. They say that a business will ultimately fail if they have any of the following attributes:
- Lack of a long-term company vision
- Failure to establish clear goals and objectives
- Misunderstanding what customers want
- Underestimating the competition
- Inadequate financial planning
- Lack of strong leadership
- Ineffective procedures and systems
- Absence of critical business skills
- Inability to change
- Failure to communicate the plan
This is absolutely true, the best way to avoid failure as a business is to do everything in your power to help it succeed. Administration is on the rise and for many companies it is inevitable in this day and age, but there are still things you can do to battle against it. There are multiple things you can do as a business owner to give your company the best chance of success. The first step is to make sure you create a strong, detailed business plan before giving your business the green light and going forward with your idea.
Having a long term vision for your company will be reflective of the quality of your business plan, this is the starting point for your idea and should therefore help you to plot out a potential future. Edinburgh Live recently interviewed a young entrepreneur, asking him for his expert advice on how to become successful. The entrepreneur in question was Jamiesh Holait, founder of NXT Wave, which is a company that conducts face-to-face sales and marketing for some of the UK’s most loved and up-and-coming brands. His tips on achieving quick success include, finding a role model that can act as a mentor to you, taking calculated risks, and investing in yourself. Going into these points in more detail gives us a clearer understanding of exactly what Holait means by this.
When talking about taking calculated risks, he says, “With risk comes reward. Don’t be afraid to go against the status quo. You’ll be judged regardless of what you do, may as well be judged whilst trying to achieve something great. If you never shoot you’ll never score”. Expanding further on his point about finding a mentor, he states that you should find an example of someone you see as a success, and follow their career path. The best way to do with this is obviously by communicating with them personally, so try to make your business role model someone you can achievably speak too in some way.
When Holait speaks about investing in yourself, he means it in every sense of the phrase. He states that it’s important to consume the right kinds of media, such as podcasts an television that will give you information that allows you to better yourself in a business sense. He also speaks about keeping your technology updated so that it doesn’t become slow, ultimately slowing you down with it.
Know your options
If you’re the owner of a company that is faced with going into administration, it’s important to know that all is not necessarily lost. You have options and different routes you can take to potentially save your business, or at least soften the blow of the loss of your company. There are different methods of potential business rescue that you can pursue. Distressed business finance maybe one option, it allows a quick inject of cash into the business.
The Guardian have stated that insolvency practitioners can be a good option for businesses that are under financial threats. They say, “There was a particular increase in insolvencies in the third quarter of the year, during which 420 firms went into administration including the fashion brands Jack Wills and Karen Millen and the travel firms Late Rooms and York-based Super Break”.
The insolvency process can be a highly achievable option for business owners wishing to give their company another go, hoping to get things right for the business this time. If you’re struggling to fund your business or cover fees that are due, contacting licensed insolvency practitioners may be the best option for you.
Business Insolvency Helpline is a market leading company when it comes to the insolvency procedure. Their experienced team of experts can guide you through the best options for your personal business situations, so consider contacting them today via their website.
GOV UK state that liquidation is a possible route for business owners that are facing the unwanted closure of a company. They state:
A director can propose a company stops trading and be liquidated (‘wound up’) if:
- the company cannot pay its debts (it’s ‘insolvent’)
- enough shareholders agree
They also claim that it is practical to receive a shareholders’ agreement, writing:
You must call a meeting of shareholders and ask them to vote. 75% (by value of shares) of shareholders must agree to the winding-up to pass a ‘winding-up resolution’. Once the resolution is made there are 3 steps you must follow.
- Appoint an authorised insolvency practitioner as liquidatorto take charge of liquidating the company. You can find an insolvency practitioner
- Send the resolution to Companies House within 15 days.
- Advertise the resolution in The Gazettewithin 14 days.
Employees facing administration
If you’re an employee working for a company that is about to enter administration, you’re likely worrying about the potential state of your career and where it will go from this point onwards. While you have every right to be fearful of the future at this point, it’s wise to take your time and calculate exactly what’s happened before moving onto the next phase of your working life.
The HR Director writes, “The first 14 days of the Administration period are crucial for employees. If you are made redundant during this time you become an ‘ordinary creditor’ whereby you will be in the last category to receive monies owed, although your entitlement to outstanding wages and redundancy payments remains. On the other hand, if you are retained beyond this two-week period you become a ‘preferential creditor.’ This puts you in a better position should you face redundancy later on. It means you have priority over ‘ordinary creditors’ and stand a better chance of recouping monies owed to you”.
There are laws that allow companies to take a longer amount of time to pay you than it normally would however, and as a company enters administration it is aided by said laws to allow it some financial breathing space.
Wikipedia gives this explanation, “Under UK insolvency law an insolvent company can enter into a company voluntary arrangement (CVA). The CVA is a form of composition, similar to the personal IVA (individual voluntary arrangement), where an insolvency procedure allows a company with debt problems or that is insolvent to reach a voluntary agreement with its business creditors regarding repayment of all, or part of its corporate debts over an agreed period of time”.
There are a series of legal actions you can take as an employee to ensure that you’re paid the money you were due to be paid before the company in question entered financial troubles. It is highly recommendable that you seek legal advice in this scenario.
Keep in mind
It is important to know there are other routes for you to go down if you’re a business owner facing financial problems. While in some cases going into administration is unavoidable, it is often possible to divert from it, finding yourself a different solution. Plan well before starting a new business venture and if it comes to it, asses the possible ways you could rescue the company before completely giving up on it. The administration process can be a stressful time, and one that is best avoided where possible.
Should you require more information on business finance and how it can avoid your company entering administration, simply complete the enquiry form below.