Posted: 18 Oct, 2021
When a business gets into trouble, directors can feel overwhelmed by the problems they need to confront. It is common for directors to be in denial about the level of crisis their business is in and many hope the problems will resolve themselves.
However once a problem has arisen and cash flow is affected, knock-on problems such as not being able to meet payroll, pay creditors or buy stock can snowball. Rather than hoping problems will resolve themselves, early intervention from a turnaround consultant can be the difference between business survival and business failure.
But what should directors consider when choosing a turnaround consultant? There are several factors to consider.
The best turnaround consultants have a breadth of knowledge and experience across a range of disciplines. Many are highly experienced in managing and running businesses and can look at the business’s whole operation and understand how each area affects the others. While the business’s most pressing problem may be insufficient cash and impatient creditors, a good consultant will look for and advise on overall solutions for the business rather than just a short-term financial fix.
When calling in a turnaround consultant, it’s important that any recommendations they make are realistic and honest. It is therefore crucial to hire someone independent from the business or its creditors. That way their advice will be impartial.
Professional Membership & Education
Most respected turnaround consultants are members of the Turnaround Management Association (TMA) and/or have a Certified Turnaround Professional (CTP) accreditation from TMA Global (US) or the European Association of Certified Turnaround Professionals (EACTP). As members of the TMA or EACTP, turnaround consultants are required to adhere to a strict code of ethics and professional standards.
Skills & Knowledge
To come to their recommendations, a turnaround consultant will analyse the business’s statutory accounts, create cash flow forecasts and forecast trends. They will need to understand legal compliance requirements with HR and employment, especially if staff need to be made redundant as a means of saving the business. They should be able to identify viable parts of the business with potential for growth and be able to negotiate with clients, creditors, employees and union representatives, suppliers, HMRC, banks and, if relevant, insolvency practitioners.
Good consultants should also be able to deal with Winding Up Petitions, attempts to seize assets by Bailiffs or High Court Enforcement Officers and other action by creditors. This requires them to know the different procedures and the legal options for dealing with them.
Structure of Fees
When choosing a turnaround consultant, it’s important that the consultant’s fee structure is clearly laid out from the outset and any performance incentives are outlined. While turnaround consultants do not come cheap, a good one can more than make up for their fees by saving the business, increasing efficiencies, restoring value and establishing better business practices. Many will also tie their remuneration to outcome.
TMA UK is part of TMA, a global organisation that represents the interests of turnaround professionals as its members who have the skills needed to assist in these unprecedented times. If you need assistance, please contact our helpline on 0844 804 0116
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