investing-in-distressed-business

Don’t let a cash crunch destroy the business that you’ve built

If your business is in distress and you find yourself at the point where you need cash to help the business survive, it is time for some fundamental decisions to be made.

Here are your options:

A. Find an investor
B. Sell the business
C. Liquidate the business
D. Place it in business rescue

If the fundamentals of the business are good, you would usually just need an investor to provide a cash injection (and a bit of restructuring) to get through the slump. As simple as this sounds, it is sometimes difficult for a business to find a suitable investor.

Three reasons why it is hard to find good investors for distressed businesses

  1. NUMBER OF POTENTIAL INVESTORS
    There aren’t that many investors that are looking to invest in distressed businesses. Due to the high risk profile of a business in distress, only people with a high tolerance for risk would be interested in looking at these types of investments.
  2. CONTROL
    Investors usually want to control the business, especially a business in distress. If you do manage to find an investor, they would usually want to take over control of the business, and leave you on the sidelines, battling with the company’s creditors, and seeing all your hard work disappear in front of your eyes.
  3. SPECIALIZATION
    Every industry requires its own special knowledge, insights, and expertise. On top of this, every business in a particular industry has its own particular competitive advantage. If you do manage to find an investor that takes control, and they do not know anything about your industry, chances are pretty good that the investment would not lead to the successful turnaround that you expected.

An New Alternative

What of you could find an investor that could do the following for you:

  1. Challenge, and help you improve the thinking that got you into the situation where you find yourself.
  2. Help you analyze the current setup to identify the areas that need to be rationalized.
  3. Help you formulate a workable plan that will turn the business around and ensure its survival.
  4. Help you deal with creditors and restructure current debt in a way that makes sense for the continued survival of the business.
  5. Help you rationalize the overheads of the company to prepare it for the future.

What if you could find an investor that does not want to take over control of the business, but act more as an advisor to help you recalibrate the business for the future?

After all, there is no-one more suitable or invested in ensuring the survival of the business than the people who built it. If this sounds like something that you would like to explore, please fill in the form below, and we will be in contact with you to discuss your particular situation.

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