To what extent
are the weaknesses due to issues under your control?
How easy or
difficult it is likely to be to turn around your business?
What do you
need to focus on to do so?
If there is no
reasonable prospect of saving your business, you are running
an insolvency risk and advice from an insolvency practitioner
should be sought.
Weakness
Strength
Management Structure
Autocratic management
Unassertive management
Narrow range of management skills, particularly financial
Poor communication
Team management
Assertive management
Broad range of management skills, including finance
Good communication
Strategic Challenges
Significant rate of change or decline in industry
Inability to innovate or change
Many causes of decline
Single plant, product, supplier or customer
Commodity product or service
Customer can walk away
Competitors price cutting
Industry overcapacity
Collapsing markets
Order book weak (volume and/or margin)
Weakening market position
Large capital expenditure needed
Lack of bank or shareholder support
Suppliers uncooperative
Lack of customer support
Stable or growing industry
Able to innovate or change
Few causes of decline
Diversified plant, product suppliers and customers
Strongly differentiated product or service and market position
Customers locked in
Identifiable niche markets
Fragmented industry
Growing market
Strong profitable order book
Strong market position
No major investment required
Bank and shareholder support
Cooperative suppliers
Customer support
Financial control
Severe cash crisis
High borrowings
Poor financial information and forecasting
Lack of bank support
Poor costing information
Overtrading
Mild cash crisis
Low borrowings
Good financial information and forecasting
Strong bank support
Good costing information
Trading within resources
Operational control
High fixed costs
Long-term loss contracts
Fundamental quality problems
Old or obsolete plant and equipment
Low fixed costs
Profitable contracts
Good quality products
Current adequate production facilities
One off projects
A large project being undertaken (move, acquisition, computer system change or product development)
No large distraction from core business
Will the bank continue to support?
In times of financial difficulty, a bank's support can make the difference between success and failure.
Consider:
Does the bank trust your integrity? How do you know and has it been tested?
Do you talk to them regularly? Do you normally discuss issues before or after they occur? Are you likely to continue to talk to them?
Do you seem to be in control of all key facets of your business?
Do you have a plan: short term and long term? Have you discussed/agreed your plan with anyone? Do you believe it to be realistic and achievable?
Does the plan set out the support you need: how much, how long, how it is to be paid back etc?
Are you prepared to accept help where and when you need it, or do resist external involvement?
Will the bank be confident that your plan will work? Can you make the bank believe you can make it happen?
Does your plan materially increase the bank's risk and, if so, how is this addressed?
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