This book is intended for the owners/managers of small and medium-sized businesses who may have had little or no formal management training and, worse, no formal training in how to deal with a business that is getting into difficulty. It has been written with two main purposes in mind. To act as a business:

Business difficulties are widespread throughout the whole UK. During the recession of 1992, company liquidations were running at over 6,000 a quarter. Even during better times significant numbers of businesses still fail: company liquidations were running at about 3,500 per quarter in the mid-1990s and that figure does not include those partnerships and sole traders who also went out of business.

If you are in difficulty, therefore, the first things to realise are:

• you are not alone
• there are specific skills and techniques that can be used to avoid failure
• that other people have been through this and survived – there are ways out, particularly with help!

 

Note: To avoid unnecessary complexity in the examples given in this book, VAT is ignored in all cases unless specifically stated.

Figures shown in brackets, e.g. (45) are negative sums.

Preface To The Second Edition

There have been many positive developments since the publication of the first edition in 2002 in the growth of what is known as the ‘rescue culture’, together with the development of the turnaround profession.

In reforming the insolvency regime with the Enterprise Act, the government has actively attempted to encourage business rescue and turnaround. Meanwhile there seems to be an increased awareness and acceptance by business people of ‘turnaround’ as a normal part of a business’s lifecycle. There is also increased realisation that specific skills are needed and to a degree with some strong caveats, an increased availability of funding to support rescues.

However at the same time one could argue that ‘turnaround’ as an activity is becoming more difficult.

Firstly both professional practitioners and those directors trying to do it themselves face ever increasing risks as the standards by which directors are judged are raised higher and higher by both the courts (such as the ongoing development of directors’ disqualification case law) and legislation (such as the ‘moral hazard’ clause of recent pensions legislation). It is truer now than ever that this is an area where you need to know what you are doing, or to obtain support from people you are confident do know.

Which brings us on to the second problem, which is that as turnaround becomes more accepted as an activity, it has ironically become more difficult in some ways for those seeking expert advice to find the real experts they need.

It has always been the case that there have been those seeking an opportunity to make a fast buck from distressed directors and/or to pick up a business at a knock down price of whom directors have had to be wary. When I described myself as a ‘company doctor’ a few years ago, few people had any idea what I was talking about. But as turnaround has become fashionable the ‘company doctor’ profession has become a victim of its own success as now every self-employed consultant and interim manager lays claim to turnaround expertise.

This is why I am delighted that the Society of Turnaround Professionals (STP) has endorsed this book. As the only body in the UK currently acting to accredit turnaround professionals, STP and its placement and introduction service represents a way for businesses to ensure that they are obtaining appropriately qualified and experienced help, that will have credibility with key stakeholders such as the banks.

As with the first edition, rather than being prescriptive, much of this book is set out in the form of structured sets of questions for you to ask yourself about your business. These should lead you through a process that will help you to create and implement your own tailored plan.