In the first quarter of 2012 there were over 4,000 compulsory liquidations and creditors’ voluntary liquidations in England and Wales, according to The Insolvency Services. A flatlining economy is adding to many companies’ worries but there are common mistakes that a struggling business can make that are more likely to make it a statistic.

Delaying action

Except in the most dramatic of circumstances, very few businesses go bust overnight. It is usually a more gradual process and there are usually warning signs. A sustained drop in sales, problems with cashflow, issues with banks and funding and internal strife and low morale can all be signposts that a business is in trouble. There are often steps that a business can take if it becomes insolvent but recognising a problem and taking steps to deal with it early can often help a company recover before it reaches that point.

Failing to recognise the problem at all

Even worse than being slow to react to building problems is failing to recognise that there is a problem at all. It may be a case of simply not recognising the signs or it may be a case of burying your head in the sand and refusing to recognise that the business is struggling and take appropriate steps. Waiting for that next big contract or a miraculous upturn in fortunes is rarely better than taking positive action.

Failing to get appropriate advice and help

If a company has a strong, opinionated leadership, especially one that has built the business from the ground up, they are often reluctant to seek outside help. Turnaround practitioners and other experts can bring a more objective, less emotionally involved view to a business, and may help to identify problems and solutions that are not always clear from close up.

Failing to implement suggestions

Solutions offered from outside can often be painful to implement, especially if they involve restructuring ingrained business practises, selling assets and downsizing staff. It’s never an easy thing to let people go but sometimes the solutions offered are the only alternative to eventual liquidation, which is usually a far worse outcome for all involved.

Slipping back into bad habits

If a business has been turned around by restructuring the way it operates, it generally makes sense to retain those successful practises. This doesn’t mean that you can’t, for example, rehire or expand but if over-extension was your root problem to begin with, avoid making the same mistakes.


Joe Edward

Joe Edward