Restructure saves day

How focusing on the core business saved an overstretched retail and manufacturing business.

The situation

A rapidly expanding small manufacturing and retail business was in trouble and had failed to get more funding. Its manufacturing was ill-disciplined with too many product lines. And while there were many customers and packed warehouses, the stores often lacked the things shoppers wanted. In addition, business expansion - plus £750,000 venture capital funding - had led a growth of unnecessary staff and overheads.

What we did

Nigel Paul, based at Atherton Bailey's Crawley office, was introduced to the directors. After satisfying himself the business was viable and the key directors competent, he began working with them to identify underlying problems. Meanwhile, the challenges continued to mount with creditors baying at the door and suppliers refusing orders.

While the directors had plenty of drive and energy, they lacked direction. So Nigel developed a plan to save the core business and cut off the rest. By spending time explaining the plans to directors, Nigel got them on board. While hard decisions had to be made - including redundancies - the directors began to steadily rebuild.

At the same time, Nigel talked to the creditors to persuade them to give the business breathing space. With creditors off their back, the directors began to concentrate on putting the problems right and properly managing the business.

The result

After nine months, profits were flowing again, cash reserves building, creditors happy to supply and debts on the way to being paid in full. At this point, Nigel's active involvement ceased. Within three years the business was sold on as a trade sale, returning the venture capital company's funding in full and making a considerable return for the directors and investors. Not all financially troubled businesses need to go into formal insolvency; sometimes an informal managed work-out can be achieved.