A Guide To Getting Out Of Bankruptcy For SME's That Have Declared Concordatum - 9 Guaranteed Tips
First, let’s take a look at how a company’s bankruptcy happens mathematically.
Bankruptcy risk is the probability that your company will be unable to meet its payment obligations within a certain period, usually within 1 year. When you reach the point where you can no longer pay the debts you owe, your company goes bankrupt.
God forbid, there are many examples of bankruptcy in both Turkey and globally, especially among SMEs.
SMEs have a higher bankruptcy risk compared to large businesses. This is because SMEs do not have as large a cash pool as big companies, and the likelihood of cash shortages and being unable to pay debts is higher. Also, large businesses are often protected by the “too big to fail” concept, unless a very adverse situation occurs. Large businesses serve many sectors of society and their failure would affect a wide range of consumers, employees, and their families. Therefore, large businesses are protected by various mechanisms within the ecosystem, and governments create rescue plans to prevent their collapse.
However, SMEs are quite alone and defenseless in this regard. Since you are not large enough, it is very difficult to find support from the ecosystem when you face cash shortages. At most, you can get support from acquaintances and family, but this can only last for a while; no one can support you and your business for years.
Therefore, when you, as an SME, find yourself in a position where you cannot pay your debts, it is up to you to take action.
As the BCC team, we have had experiences in rescuing technically bankrupt companies in Turkey, Europe, the Middle East, and Africa. Based on these experiences, if you are an SME owner struggling to turn around your debts, heading toward bankruptcy, or having declared concordatum, make sure to read our guaranteed tips below for getting out of bankruptcy:
1. First, immediately cut all unprofitable products, inefficient employees, and wasteful expenditures that drain your cash flow.
2. Set up and quickly implement your Free Cash Flow Scaling model. The model we use at BCC is SINE: Strategy-Execution-Cash-Team. Reevaluate your position in the market; if you are overly caught in competition, quickly pivot to a position with less competition. If your product portfolio is insufficient, design new products that your target audience wants and start marketing them strategically. Create a core Concordatum Team that will enable you to execute all of this smoothly. Ensure that every penny you spend supports this new strategy and will generate cash for you within a year. Cut all expenses that will not bring profitable sales within a year.
3. The data of your business will tell you the safest direction to turn your investments, not suggestions from friends or family. Set up a reporting and data system where you can see your key performance indicators in real-time.
4. Manage your company with a focus on profit, not revenue. Set aside at least 50% of the profit from each lira as free cash and invest this money in high-return, low-risk investment vehicles, keeping it liquid for a while. Growing this cash through the right investment tools is critical during times of crisis.
5. To ensure your long-term customers continue using your services, negotiate strategic and long-term sales contracts with them. Also, ask them for qualified referrals.
6. Ask your long-time suppliers, who have now become your business partners, to extend your payment plans in a way that doesn’t hurt them but supports your cash flow. Ask them to improve the terms of your supply contracts to support your cash flow.
7. Join 1 or 2 business networks that will bring qualified referrals to your business and strengthen your ties with the business world.
8. Provide key training to your team to ensure the flawless implementation of this new strategy and prepare them for the concordatum battle.
9. You may not be able to see the mistakes that led to your concordatum due to business blindness and emotional weight from years of experience, and you may not have the information you need to create a new roadmap. In this period, seek support from the BCC team, whose sole aim is to maximize the free cash flow of SMEs with limited liquidity and contribute to the prosperity of our country.
Not every concordatum results in bankruptcy.
However, SMEs that do not follow the steps above are bound to face bankruptcy.
To your success in business,
Business Coach for CASH
Your Business Coaching Team