The beginning of a new year can be a wake-up call for businesses. Many companies face a harsh reality as financial pressures mount, particularly if the festive season fails to deliver the expected revenue boost.
The volume of struggling businesses is also on the rise; the Australian Securities and Investments Commission (ASIC) reported a 47% increase in insolvency appointments from July to December 2024 compared to the same period the year prior, underscoring the strain felt across the country.
If your business or a client’s business is facing debt, declining sales, or operational challenges, recovery is possible with the right strategy and a positive mindset.
Read on for five actionable steps to help you turn your struggling business around.
1. Accept the Reality: Recognise the Warning Signs
Financial challenges can make you want to stick your head in the sand and keep pushing on, business as usual. However, you cannot fix a problem if you don’t acknowledge it exists.
The following traits are common indicators of financial distress and may mean your business model needs a significant rethink:
Poor cash flow
Regularly falling short when it comes to covering operational expenses.
Increasing debt
Struggling to keep up with loan repayments or tax obligations.
Declining sales
Revenue is consistently lower than expectations and failing to align with industry benchmarks.
High employee turnover
A demotivated workforce often signals deeper cultural issues.
While any of these signs alone could stem from a temporary challenge or market shift, two or more — especially if persistent — are reasons for concern.
Remember: acceptance is not admitting defeat; it’s the first step toward resolution. Acknowledging red flags from a distance allows you breathing room to take proactive measures to mitigate any damage.
2. Conduct a Comprehensive Financial Health Check
For a business facing challenges, gaining clear insight into its financial health is crucial. Understanding where you stand financially is the first step towards turning things around.
Reviewing financial health involves a deep dive into:
- Profit and loss statements: Identify areas where expenses exceed revenue.
- Cash flow analysis: Understand how money moves in and out of the business.
- Balance sheets: Assess asset value against liabilities.
The goal is to uncover inefficiencies, overexposure to debt, or other vulnerabilities that may be dragging your business down.
With a clearer picture of your financial health, you can prioritise key areas for improvement. For example, weak net profit might indicate that your pricing model needs reassessing.
The earlier you identify weaknesses in your business, the less likely they will cause long-term damage to your success.
3. Proactively Manage Debts
Debt can be overwhelming, but there are several strategies you can use to ease the burden.
Open communication with creditors
Many creditors are willing to negotiate payment terms if approached in advance. Transparency can also build trust, prevent legal actions, and encourage suppliers to continue working with you in the future.
Streamline costs
Cut unnecessary expenses and improve operational efficiency to free up resources for debt repayment.
Explore refinancing or debt restructuring
Restructuring plans can help your business avoid insolvency while addressing financial issues.
Alleviating short-term pressures can create a pathway toward long-term stability and, ultimately, success.
4. Seek Professional Advice
One of the most impactful actions you can take is engaging experienced insolvency professionals.
With industry knowledge and proven experience, experts might be able to identify options you may not have considered — and may not be aware of.
A professional will provide tailored strategies to address the challenges unique to your industry and business while helping you navigate complex legal and financial processes.
It’s important to recognise that early intervention is key. The sooner you seek advice, the more options you’ll have to save your business.
5. Leverage Formal Restructuring Tools When Necessary
Once other measures have been exhausted, your insolvency expert may recommend using tools like Small Business Restructuring (SBR) or Voluntary Administration (VA) to provide a lifeline.
While daunting, these processes offer the chance to formally resolve debts while protecting your business from legal action from creditors.
Unlike liquidation, these tools are designed to aid recovery and long-term stability. As such, they shouldn’t be considered a business’s death sentence.
Turning Adversity Into Opportunity
Recovering from financial distress requires acceptance, detailed planning, and a proactive approach. By recognising the signs early, conducting a financial health check, managing debts, seeking expert advice, and considering formal restructuring tools, you can set your business up for recovery and long-term success.
At SALEA Advisory, we specialise in guiding struggling businesses toward stability. With our expertise in Small Business Restructuring and Voluntary Administration, we’re here to help you navigate financial challenges confidently.
Contact us today for personalised advice and take the first step toward securing your business’s future.
