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Business and the credit crunch - time for critical self-appraisal?

The credit crunch has made it more important than ever for business owners to address viability and solvency issues early. Delays in taking remedial steps now will only result in more pain and fewer options, and will give you less time to act later on. 

Directors and managers concerned about their business should carry out an ongoing and in-depth assessment of the company, asking themselves the following five key questions:

  1. Where can I improve cash generation or legitimately defer outgoings in order to improve the retention of cash in the company? 
  2. Where are the main risks in the business? What would I do if I lost that valuable customer, or the bank were to withdraw its support? 
  3. Are there any costs which can be moved from being ‘fixed’ to ‘variable’? 
  4. Are there any areas of business that should be pruned back or sold? Is that person, department, service or product adding real value at this point in time? Can I afford to take a long term view without increasing risk? 
  5. What can I do to cut my drawings from the business?

You need to be brutally honest with yourself. If you are at all unhappy with the answers to these questions, you should re-assess all of your available options, which could include restructuring the business using formal or informal routes. Now is not a good time to defer that re-assessment.



Date: 7th July, 2008
Author: Peter Godfrey-Evans


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