When your business becomes distressed, it can be difficult to see how you can turn it around. It might have fallen victim to a global event such as the Covid-19 pandemic, lost a key client or funder or be part of a larger group that is facing financial problems, but the core business may well be sound. The existing management team could also be extremely capable of leading the business in normal circumstances. However, in this unusually pressurised situation, they may lack the knowledge or expertise to guide it back to profitability or simply need dedicated help in this critical period.
An objective view
At Zed Capital we’re used to working with businesses in just this kind of position. We understand the complex issues that need addressing and the best ways of dealing with them.
As outsiders, working with the management team, we are often in a privileged position. We can look objectively at the way the business is structured and financed. We have no strong ties to how the business has been run previously, so we can start with a clean slate. And, most importantly, we focus purely on what needs to be done to get the business back on its feet, so we aren’t afraid to take difficult decisions and stretch the boundaries if that is what’s required. These are the five key issues we always bear in mind:
1. Is the business viable?
This may seem obvious, but it is essential to assess if the business can be revived. One of our main priorities is to do this as quickly as possible, as this is in both our and the business’s best interests. We work closely with the management team to assess the business, offer expert advice and come to a swift decision. Even if we decide not to do a deal, the business benefits from the valuable insights we provide. On the other hand, if we opt to step in, we will act fast to start turning things around.
2. Secure the funding
If a distressed business is viable, getting the right funding structure in place to revive it is paramount. We are in the rare position of combining a deep understanding of the measures needed to turn a business around with links to a funder dedicated to supporting distressed, but viable businesses. This means we can access the funding the business needs fast and start reviving it straight away.
3. Make tough decisions
No matter how capable the management team is, they can often be too close to the business to make difficult decisions. Yet the ability to act quickly and decisively is essential when you’re trying to revive a distressed business. That’s where our experience can be an advantage. We’ll not only see the best way of handling clients, suppliers or employees, but our position as an outsider allows us to have these often difficult conversations and go further to achieve the right outcomes.
4. Forget what’s gone before
The ability to make tough decisions quickly on major issues relies on your capacity to focus purely on what is best for the business. You must be prepared to take the organisation out of its comfort zone in order to produce the right results, so you have to ignore its history. This can be extremely difficult for an established management team, no matter how capable they are, as experience may cloud their judgement and stifle their ability to prioritise. Our lack of ties to the organisation’s past means we can often take a more positive, upbeat view of its potential future, while offering pragmatic, independent advice on the best way forward.
5. Look at both short and long-term
When a business is in a perilous position, it’s easy to concentrate on the immediate need to save it. However, you have to remember that if you make the right decisions now, they should be able to stand the test of time and become part of the organisation’s DNA for years to come. One of our strengths is that we combine swift, decisive action to revive businesses with deep, creative thinking that sets a course for their long-term success. This includes supporting management teams if, in the future they want to sell the business or buy back our holdings.
Talk to us
At Zed Capital, we know how business works, how to help viable business back on their feet, have access to immediate funding they need and are dedicated to helping those businesses take control and build stability.
To find out how we can help you, contact our Director, Andy Raynor.