A Scary Australian Business Health Report, Could It Be You Too?

A fascinating report just published by RSM reveals that more companies are going broke: in the past year the number of official liquidations has shot up by 31.9%. More worryingly, there is a big growth spurt in what RSM calls ‘the living dead’. These are companies hanging on by the skin of their teeth. They are vulnerable to changes in interest rates or in fact just about any unfavourable market condition. One push and these dead men walking will just topple over. They will take with them jobs and spray unpaid debts across the landscape – a truly gruesome sight.As if that isn’t bad enough, the reasons for this growth in just-about-dead companies are truly dismaying:

It is attributed

• not so much to aggressive action by the ATO (though that is certainly on the increase), which is put at a mere 11%;
• not so much to high tax (6%), high wages (9%)
• or even competition and market conditions (16%).

Instead the two leading causes for companies getting themselves into such a state that they’re hanging on by the skin of their teeth are…

• inadequate cash flow (23%);
• and inadequate data/systems for good decisions and poor planning (21%).

In other words, more than four in ten of these companies are highly unlikely to survive even the mildest of setbacks. And they are going to die because of entirely preventable causes!

Why, when A Business Health Check Can Pay For Itself?

It’s like dying of a minor infection because you won’t pay for antibiotics.We, in the Network of Consulting Professionals, interact with many businesses that typically start by saying: "We do not have the cash to seek the help we need". Yet in most cases, just 90 minutes of a Business Review can reveal how the business could find that cash. And it can also shows how such advice could pay for itself five or ten times over within the first year!One such example was the company that had an inadequately managed interstate sales person. As a result that person was bringing in only about a quarter of the revenue the equivalent person at HQ was delivering. This poor management was costing the business hundreds of thousands of dollars in lost revenue every year. And since these were long term sales, that meant that in the second year the loss doubled, and in the third year trebled… And yet the company’s owners were concerned about the relatively paltry cost of putting in place a solution to this appalling drain on the business’s profitability!

What About Your Own Business Health?

Fingers crossed, yours isn’t a ‘walking dead’ business. If it is, it’s too late for you to seek help! And if you are a director you need to take care in case you are already trading insolvently.Assuming you’re not in this dire situation, in the Intensive Care bed nearest the door, it’s still worth asking yourself this question: if your business went belly up tomorrow, what would be the reason you’d give? And having identified that reason, are you convinced that there’s nothing you could or should do about it?If you’d like a no-commitment, no-cost 90 minute Business Review Meeting, call me on 0423 793887 and I’ll arrange for a colleague to come and visit. What have you got to lose?

Steve Carey