As an entrepreneur, your business can quickly slip into the negative. A major customer breaks away, slow sales time, too high costs. Just three of many examples. Our guide will show you how to save a business in crisis with three crucial steps.
It is important to keep the helm to save a business in crisis. Take care of your opportunities to get fresh funding, so that your company will be preserved for a long time to come!
These are your next 3 steps
Clarify the situation
How low are you in the minus? What are the causes? How much money do you need roughly? Look into your numbers – with a cool head. That will not be a letter from the tax advisor or an overview of your income and expenses. You need an overview to save a business in crisis, and a sense of how your business is getting back on track. An experienced management consultant can help with this.
Develop a restructure concept
For the bank to give you money, you need a clear plan. You need to prove that your business is worth continuing. You need to identify the vulnerabilities and explain how you can do better in the future. The consultant draws up such a restructure concept with a clear roadmap. The paper is the basis for all further negotiations with the Bank.
Save your company
You then implement your refurbishment concept piece by piece to save a business in crisis. The consultant will help you with this. The goal: You write black numbers again. You’ll get more revenue with less cost – and save your company. This is a hard piece of wrk to save a business in crisis. But it has to be. Because you yourself never want to experience such a situation again.
How to get out of the crisis
On this hard and rocky road you can get support to save a business in crisis. Experienced management consultants will help you out of the crisis. The consultants specialize in medium-sized companies. They are experienced merchants and know how to convince banks. There is funding for the restructure consultation. This makes the consultation very favorable. The management consultant will help you with your application.
- More security thanks to many years of experience
- Less cost due to good preparation
- Founder expert on site
What can an experienced consultant help you with to save a business in crisis?
Rehabilitation
Credit and financing
Funding and grants
Winning customers
Other
Restructuring, insolvency: Where do you stand to save a business in crisis
Every entrepreneur bears a lot of responsibility and does a good job. But people also make mistakes. This simply cannot be prevented. Especially not when you are your own boss as an entrepreneur and have responsibility for yourself and to save a business in crisis.
- Your company is making less and less profit? Or are you already writing red numbers?
- You need to do something to save your business – but you don’t know how and where to start in person?
- Are you looking for information on refurbishment concepts expert opinions and appropriate advice?
- You want to prevent insolvency proceedings? Creditors are already on the doorstep?
There are three different situations in which companies are stuck when they have problems:
- In crisis: In this situation, a business makes less profit. Example: A major customer has broken away, there is a seasonal hole, through infrastructure or traffic fewer customers come. But their operation is still profitable. They are still writing black numbers. Such crises also occur in the case of company followings.
- In the restructure: A remediation case usually exists if your company is already writing red numbers – and permanently. Current accounts or loans are already fully utilized. The entrepreneur himself recognizes that he is in trouble, but knows no way out.
- In insolvency: In the event of insolvency, the company is insolvent. An insolvency administrator is responsible for winding up or restructuring the company. It therefore conducts insolvency proceedings and serves the creditors. The owner himself has very limited opportunities to act.
Often the situation of one’s own company changes slowly. Gradually, the feeling grows that you have to do something to save a business in crisis.
Checklist restructuring: How to proceed?
In the case of a restructure, each management consultant takes individual work. It also always depends on the situation of the company. If there is a short-term, urgent liquidity squeeze,it looks different from the slow-moving signs of a crisis.
- Step 1: The personal conversation. First, the management consultant speaks personally with the entrepreneur and company boss. Together, the situation is analysed. In addition, the consultant gets a first impression of the practical processes in the company.
- Step 2: Look at the numbers. Next, the consultant looks at the numbers. Figures such as the gross profit margin, the personnel cost ratio or EBITDA play an important role here. In the case of smaller companies, these figures often have to be worked out only because they are not available to entrepreneurs.
- Step 3: Talks with banks. The consultant is next working to restore lost trust in banks, but also in suppliers, key employees or the insolvency administrator. The company can only be saved if everyone pulls along!
- Step 4: The restructuring report. In the next step, an extensive restructuring report or a restructuring concept will be prepared. The concept must be a realistic basis to create the turn-around. It is based on a clear analysis by an independent third party such as a management consultant.
- Step 5: Restructuring. If the restructuring plan is approved by the bank or, depending on the situation, by the insolvency administrator, the restructuring will take place. The company is being put on its feet with the aim of making it profitable again in the future.
Restructuring to save a business in crisis
Daniel Voigt is a management consultant. For many years, he and his team have been supporting entrepreneurs who run their business through a crisis, have to organise a restructuring or are facing insolvency. He also advises young entrepreneurs and start-ups. He also advises on a company purchase or a sale. Many founders slip into an economic crisis after a few months and write red numbers.
In the interview, he talks about how companies are creeping into trouble, which metrics are crucial in the crisis – and how to regain confidence in the bank.
Mr Voigt, what is your impression: how do entrepreneurs deal with this when their own company is in crisis?
Voigt: Most entrepreneurs understand a lot about their craft. They have built up their company and experienced successful years. Nevertheless, there can be business crises – for example, because the market is changing, because there are increasing liquidity problems or because operational processes (unnoticed) cost too much money.
It is a difficult situation for the entrepreneur. Many do not want to admit that their business faces existential problems if they do nothing. They are ashamed of the situation. As a rule, the bosses try to solve the problem on their own. It costs them to reach out to outsiders and ask for support.
As a result, many entrepreneurs are increasingly using their credit line or current account framework. The reason for this is that we are in a difficult or special phase. In this way, the company is getting closer to the abyss bit by bit. It is often a creeping process.
What are the consequences if the problems are not resolved?
Voigt: A very clear signal will sooner or later come from suppliers or banks. They question the creditworthiness and are concerned that the liabilities will no longer be paid. This loss of confidence weighs heavily and can cause the lights to suddenly go out very quickly.
For me, as a management consultant, an essential task is to restore confidence in the suppliers, the bank or even the insolvency administrator. Most of the time, the company has a future. But you have to change it in principle in order to uncover the mistakes of the past and to look for structural solutions.
It is also about the entrepreneur himself: if he does not act or acts too late, it may be that the banks end up saying: “We will only save the company if the boss leaves.” That would be his personal end. But that does not have to happen.
When is a company in crisis – and when is it a restructuring and insolvency case?
Voigt: A company is in crisis when it is constantly making less profit than in previous years, but it is still fundamentally writing black figures. The company itself is therefore still profitable, but is losing more and more strength and competitiveness.
A restructuring case exists when the company writes permanently red numbers and faces liquidity problems. Insolvency occurs if the liquidity problems have led to insolvency or if there is an over-indebtedness.
In all three situations, as a management consultant, you go to root cause research: Is there a seasonal variation? Has the market changed permanently? Is there something wrong with the products or services? Is it down to the entrepreneur himself? Have certain cost blocks exploded? Has too much money been taken out of the plant?
What do you do when you advise to save a business crisis or assist in the restructuring or insolvency proceedings?
Voigt: First of all, I have an intensive, personal conversation with the entrepreneur. We often go through the company together and talk in detail about workflows. I want to get a sense of how the entrepreneur and his business are ticking.
Next, I look at the key metrics. These include the gross profit margin, the personnel cost ratio, working capital development and EBITDA.
The third step is to hold talks with the banks and, if already available, the insolvency administrator. If this side still offers the company a fundamental opportunity, a refurbishment concept can be drawn up and remediation measures can be initiated.
Do such metrics that you have mentioned already be available in companies?
Voigt: For slightly larger companies, these figures are usually available and monitored. Unfortunately, a small medium-sized company usually does not know or pay attention to these figures.
Many small business owners also run their business from the stomach. They are technically phenomenally good. But they lack in depth commercial knowledge.
In good years, commercial deficits may play a minor role, because the result is correct. But in times of crisis, these metrics are crucial to identify the problems and also for banks or insolvency administrators. It is part of the consultant’s work to work out these figures, to evaluate them correctly and to derive measures for refurbishment from them.
Can you explain the terms in a simplified way?
Voigt: The gross profit margin is sales minus material use. The personnel cost ratio over time indicates how personnel costs have developed in relation to turnover. EBITDA is earnings before taxes, interest and depreciation and amortization.
Working Capital Development indicates the difference between outstanding receivables and delivery liabilities. It is precisely the last indicator that is crucial for companies that have to pre-finance services or products, for example. Perhaps the company basically has a very good margin. But if the money goes out in between, i.e. between purchase and sale, it is still insolvent.
What does a rehabilitation concept or a rehabilitiation report look like?
Voigt: There is a standard that meets the legal requirements for a report. For example, the report must carry out an inventory, assess the remedial capacity and draw up a concrete recovery plan with measures.
How much does a professional consultation cost?
Voigt: This depends on the situation of the company and the necessary commitment of the consultant. Even without support, we must not forget that it is much more expensive for the entrepreneur to pull the plug, close the company and then reorient at it. Many have become self-employed because they want to be their own boss.
However, cooperation between companies and consultants rarely stops when it comes to concept creation. Many entrepreneurs want to be supported and advised for several years on the basis of the trust and the added value of the consultant. Together, we will go through the important steps of the rehabilitiation and implement the measures until the company is back on track. There are also funding pots for these further deliberations, which are provided by the federal states.
What is behind the crisis report?
IDW stands for Institute of German Auditors. According to its own data, There are strict standard in every country for the requirements for the preparation of an administratation concept when a company needs to be rehabiitated in crisis.
This standard meets the legal requirements imposed on such an opinion. The Federal Court of Justice (BGH), for example, has passed several judgments on what such an expert opinion should look like.
Requirements include:
- Consistency: The concept must be coherent and workable. It must therefore not be wishful thinking or an airlock, but must be derived from the figures in concrete terms.
- Schedule: The company must be able to be rehabilitated in a manageable time. So we need a timetable. General promises with a view to the distant future are not enough.
- Third person: The capacity for recovery must be determined by an objective person, i.e. an uninvolved third party.
However, it is also clear that the standard is a kind of outline, a frame, or a pattern. Similar to a table of contents of a textbook. The actual content is still empty and needs to be filled with life by the respective consultant and the company.
Reason and options to save a business in crisis
Too high costs
Many medium-sized enterprises have been accumulating ever higher costs over the years. New employees are being hired, existing processes are being maintained, although there have long been cheaper options for doing so. In some companies, too much capital is gradually being taken out for private matters – money that the company then lacks and reduces liquidity.
Solution approach: A refurbishment concept or refurbishment report explains how costs are permanently reduced. This often requires painful cuts. However, this is the only way to save the company as a whole. In addition, it is necessary to introduce permanent controlling so that such commercial errors no longer happen.
Liquidity bottleneck
The company slips into a financial crisis in the short term or permanently, because invoices can no longer be paid. So the company is no longer liquid, so it no longer has enough money in the business account. Liquidity is fundamental for any company, even more important than future profits. It is the most important task of the entrepreneur to secure liquidity and to provide liquidity.
Solution approach: Liquidity can be increased, for example, by selling fixed assets or current assets (such as goods in stock) as quickly as possible. Shorter payment terms or the collection of outstanding invoices also increases liquidity. Other options include increasing equity or taking out new loans or loans. However, it must be clear that the company will be competitive and profitable in the future. This is elaborated in the refurbishment concept.
Market change
Many medium-sized companies are currently experiencing a radical market change. Younger customers buy differently and new entrants emerge. This can be a big chain, an online portal or even a smart founder who puts on better marketing. As a result, profits are gradually shrinking. As an entrepreneur, you have the task of constantly keeping an eye on the market.
Solution approach: The restructuring concept determines whether the company is still in principle marketable. This can be done, for example, by establishing new products or services in the market – or optimizing existing services. The basis for this is a professional competitive analysis.
