The upcoming tax year is set to introduce some of the announcements made in the Autumn Budget and some business owners are already feeling an emerging sense of dread.
There is a belief that while many businesses will struggle, a certain subset of companies will face closure over the next 12-months.
As these so-called zombie companies collapse, it is worth understanding how your business can avoid that fate and what to do in the aftermath.
A business that only makes enough money to cover its running costs and cannot grow beyond that is often referred to as a zombie company.
These businesses are viewed by competitors as soaking up valuable resources that would be better served by more agile companies capable of using their share of the market to push for growth.
While not a flattering term, it does highlight an ongoing problem that many businesses face with the current economic climate.
Covering operational costs is challenging enough and any business that wants to grow needs to approach its finances carefully to avoid limiting this potential.
One short-term solution that seems to be partially responsible for the presence of the zombie company is working capital loans.
Low interest rates have made borrowing more attractive and this has resulted in businesses taking out loans to make up for shortfalls in cash flow.
These working capital loans are not always a sign that a business is at risk, but if they are the only thing propping up a business, then this is often what earns it the zombie company label.
Rising operational costs are likely to cause many zombie companies to collapse.
While this is expected to be positive in the medium and long-term for the economy, there will be a negative impact in the short term.
This will be felt most by those currently employed by zombie companies, who will need to seek new employment in a job market that is becoming increasingly competitive.
However, the decline of zombie companies is not completely negative.
Businesses that are able to endure may find the reduction in competition advantageous as the displaced clients and customers seek new companies to work with.
This may also extend to recruitment opportunities if some of the former employees have the skills and talent that your business needs.
Zombie companies likely would not have facilitated their career growth, so providing them with an opportunity to flourish will be welcome.
To ensure that your business is on the right side of the dividing line, it is vital that you seek professional financial support.
Our team of experts can help review your current cash flow to make you aware of any shortcomings and suggest solutions that are better than temporary fixes.
This can help manoeuvre your business out of the risk of becoming a zombie company and make the most of the opportunities left by the reduction in competition.
Give your business finances a second lease on life by speaking to our team today.
