Avoid waiting too long to save your business

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“Companies wait too long. They tend to wait until they’re without resources to be able to apply resources to get the turnaround going, and they think business rescue is a ‘magic wand’ that can save them where really business rescue is a step between failing and a hope to save jobs,” Business911director and turnaround specialist, Louis Van Niekerk, told CNBC Africa.

“You tend to see that there’s no corporate governance, there is no shareholder looking over their shoulders and they wait too long. They involve the rescue practitioner or the turnaround specialist and, as much as you try, often you don’t have the resources – that’s the challenge. Don’t wait too long, there’s no harm in asking someone, ‘Do I need a turnaround’.”

Business911 aims to provide recovery services in an environment that poses many unexpected challenges to businesses.

Van Niekerk indicated that there are a number of ‘red flags’ to look out for when assessing whether or not a business is in need of a rescue strategy.

“Companies start missing their lease payments. They start missing their Pay-As-You-Earn and VAT payments – those are the first red flags,” he explained.

“The idea is where liquidation was, before, the only option for an ailing company, business rescue was brought in, under Chapter 6 in the South African Companies Act to allow for a means to save jobs – that’s the prime objective.”

Van Niekerk did however caution that not every company that is in need of a rescue strategy can be rescued.

“The courts are not allowing everybody to go into business rescue. There are two objectives: saving jobs but also protecting creditor value. I’ve been in many matters where we advised against business rescue and we say, ‘There is no way you’ve got an ailing business model and there’s nothing we can do to save you, it’s best to protect creditor value by going into liquidation’,” he said.