The long running dispute between the football club and the owners of the Ricoh Arena (ACL) over an alleged £1.3 Million in rent arrears has come to a head this week with ACL petitioning the High Court to put the Club into Administration. Whilst this doesn’t look at first sight like good news, it is probably preferable to the alternative of Insolvent Liquidation which would almost certainly result in the Club being demoted down a number of leagues by the FA, if it survives at all (per Rangers FC earlier this year).
Whilst we don’t comment on the specific facts relating to this case, it does highlight a couple of basic business principles that are all too often overlooked.
Firstly, the old adage of “failing to plan is planning to fail” was never truer. All businesses whether a Football Club or a Widget Manufacturer should have a robust, up to date business plan including financial forecast to work towards. This is especially true where economic factors remain challenging, as by regular reference to the plan the business can spot problems before they become major issues, and act accordingly.
Secondly, it is crucial that where a business has a “business critical” relationship with a supplier (the owners of the stadium in the Coventry City case), then there must be open an honest dialogue with them as soon as there is a hint of a potential issue. Often businesses want to shy away from having awkward conversations, pushing the issue under the carpet & hoping it will go away, sadly it rarely does. In practice talking with suppliers can often result in short-term assistance from them provided they can see that you are working towards a sensible solution, with a stronger relationship emerging in the long run.
Finally, in some circumstances a form of managed winding-up may be the best option for everyone. There are currently a large number of “Zombie” companies that are unable to make sufficient profits to pay off historical debts but equally there’s a reluctance to restructure, as a result they continue bumping along and living a hand-to-mouth existence. A corporate restructuring can often result in the profitable areas of the business being relieved from the old debt so they can grow and employ more people.
At Burgis & Bullock, we don’t deal with insolvencies, but we have vast experience in business planning, cash flow forecasting and management assistance so that clients run their businesses on sound financial footing and have the tools and resources available to spot when things aren’t going to plan and to act accordingly.
For more information on how we can help your business to survive and grow contact your local office, call us on 0845 177 5500 or contact us online