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Monthly Archives: December 2017

Avoid Business Liquidation

1. Identify potential cash flow

This should be the first step that you take towards saving your business from failure. Go over your current assets and find out what potential cash flow options you have and whether they can do anything much to save your company. High cost items in your possession like vehicles and property can save you if you are bold enough to sell them and you are able to release the monetary potential they hold. You actually have the option of selling the physical property and retain the lease of the business sits on the property so that you do not have to relocate. As for any business vehicles, why not sell and consider hiring so on a temporary basis until business improves? A smart move can be all you need to pay off debts and save your company from liquidation.

2. Sell you inventory

No inventory is too small to save a financial situation for your business. If you are faced with the insolvency situation and you have excess products or stock you should consider selling it off as fast as you can to free up some money. By looking at balance sheets, it is easy to tell which stock is not bringing in any profits and you can sell it fast and use the money to get more successful and profitable stock that can help save your business from liquidation.

3. Offer stock on wholesale

If you are not sure how to go about this, start by contacting professional stock seller. The professional seller will be able to tell you how much the stock is worth and even help you find buyers for any stock type and quantity that you have. The thing is that you have to remember to put the money generated from the sales into good business use. It really does not make any sense to release your investment value only for you to forget the reasons behind why you had to go that far in the first instance.

Administration and Receivership

Administration is a formal procedure where an insolvency practitioner is appointed to control a business as a whole. They will be appointed by a court, the company’s creditors or its directors. The administrator will be charged with achieving the best outcome for all of the creditors of the business.

At this time the administrator is in control of everything and can choose to sell off parts or the whole of the business, enter into a pre-pack or liquidate the company. Once an administration order is granted the business is protected from further creditor action for around eight weeks or so.

Receivership however is generally asset based. This means that a creditor will appoint a receiver to take control of the asset but obtain value for the creditor with a charge alongside any preferential creditors. This is typically when an agreement has been entered into, such as a loan which allows the creditor a charge on an asset or group of assets in the case of default.

The receiver does have one significant difference from an administrator, he is only concerned with realising the cash to pay for the administration and pay back the company’s indebtedness to the creditor he has been appointed by. This means that the receiver has no interest in the value returned to unsecured creditors and this is a point that any large unsecured creditor may need to bear in mind if they hear of the prospect of receivership for one of their debtors.

Receivership will happen when a company defaults on a loan or agreement it has in place with a creditor. This can be as simple as not paying monthly payments due or going over an agreed overdraft limit without permission and making little or no attempt to pay the facility down.

Some loan agreements have rules, called covenants, that the company must abide by. These will include things like maintaining a liquid capital ratio, a maximum creditor balance or others related to turnover and profitability. The firm is usually expected to report on these, either monthly or quarterly and if the company breaches the terms, legal action can naturally follow.

The assets can be named, specific items such as a building or large items of plant or often, especially in the case of a loan or overdraft can be a floating charge. This means that the creditor has a charge on either all assets or on a particular pool.

Sometimes the agreement will include a clause that will allow express appointment meaning that receivership can be effected very quickly indeed and from the directors’ standpoint without enough warning.

In some cases receivership is survivable, especially if the assets that are affected are not vital to the company’s operations. However there will be an inevitable downgrading of the firms credit score and of course once word gets out it would certainly affect the firm’s reputation.

The distress sale of assets is rarely advantageous and typically the transaction is at a knock down price to get cash in the door quickly. Remember that the receivers’ interest is purely to return value to the bank that appointed them. It’s important also to be aware that the bank at this point will be concerned with reducing its exposure to the debt and they will not be interested in saving jobs or the firm in any shape unless it has a better than reasonable chance of survival and paying back the totality of the debt.

Limiting Small Business

The Self Fulfilling Loop

The ability to work in your business and work on your business are two very separate things. You may be the best at working very hard, doing long hours and motivating your staff, if you have any. But this doesn’t translate to growing your business. Growing your business is something different. It takes a whole new skill set.

If you’re stuck in the process of being a ‘worker’ in your business, you’re not moving your business forwards. You must step out of the roles which worked when you were an employee. Things which make a good employee are: turning up on time, working hard, delivering to deadlines and thinking of ways to achieve the maximum output for your boss.

Things which make a good business owner are entirely different. Knowing how to grow your business is about marketing. You need a whole new skill set and new ways of thinking in order to do this.

The Skill Set Of Online Marketing

Online marketing is vital to grow your business. Whatever kind of business you have, you need some kind of marketing engine driving it forwards. With new technology comes a new type of marketing. Before the internet there was traditional advertising: yellow pages, newspapers, flyers, billboards, television and radio.

Online marketing is a fantastic opportunity for business owners. But with it comes a few problems. The main one is not just learning the skills to create online advertising, but rather our mindset, or more importantly our industrial age thinking.

Industrial Age Thinking

We have been brought up with a lot of baggage. Our minds hold ideas which our forefathers embodied in their lives. Many of us are limited by old thinking patterns which no longer serve us. This is true in many areas of our lives but none so much as with growing a business using online marketing.

A poverty mindset always thinks of reasons to cut back and avoid spending. It is based on a presupposition that ‘there is never enough’ – a self fulfilling prophecy! Of course this is often well founded based on the past. But as a business owner this can be your biggest limiting factor to forward growth.

If our very thinking is based on our past and what it has taught us in terms of our income, we hold back and tend to be careful with our money. This is for good reason of course. But with online marketing your long term plan should be to be spending more and more on advertising, not less and less. This is a major roadblock to business growth.

All about Competitive Advantage

Then addressing his men before the battle began, he said, “You see the boats going up in flames. That means that we cannot leave these shores alive unless we win! We now have no choice. We win or we perish.” As it was told, they won.

Our case as entrepreneurs is much like this story, we either succeed in our business or we perish. One of those factors that “kill” businesses is the COMPETITION.

It will not matter how good you are if your competitor is better, so you need to find out what your competitor is offering. Find out your competitor’s advantage over you and how she goes about it.

Everyone has competitors. Do you know yours?

You will need a visit to your competitor to have a deep feel of her offer. You need to understand what gives her an edge over you. It’s probably just customer service, a better knowledge of the product or service, promo given to customers etc.

You can achieve this by paying a visit to your competitor as a potential customer. You can order for the service or product being provided and then you can criticize or make a complaint as a customer to see how they respond.

Sometimes it’s about a visit to their online store or website to rake in ideas that will eventually work for you.

Sometimes, you could even ask directly if you have relationship with your competitor.

If the idea works, you can replicate it in your own business.

Now you must learn to focus on your own advantage eventually.

There is something that other business is doing that you are not doing, locate it and focus on it.

Some people tend to get jealous of big businesses and wish they fold them.

Recently, the NCC wanted to force communication giants to have a high data rate. That means that data we used to buy for #1,000 might now go for #2,500. They claimed they want to do that so that small businesses can have a chance to succeed.

Small businesses fail to compete against bigger firms because they want to compete with the bigger firm on what the big firm is known for. They do not have to do that, they will continue to fail if they do that.