Saving a business in trouble: The 4 stages of awareness

While it’s nice to think all small and medium-sized enterprises survive, we all know that they don’t. But it doesn’t happen overnight, and during the company’s decline its directors often go through various stages of awareness.

Stage 1: Denial.

This is the stage where the directors and management think everything is fine, to the point where they start becoming complacent. Which is often a bad thing, as any warning signs that the company is in trouble aren’t so much ignored as missed completely.

Stage 2: Ignorance.

Hooray! The directors and management are finally starting to see the warning signs that the company is actually in trouble. But they believe that if they just leave everything alone and wait, the problem will sort itself out.

Stage 3: Realisation.

The company has started collapsing, and the directors and management are finally taking some action. Unfortunately, the stress of the situation has put them in “fight or flight” mode. They ignore the long-term consequences of various business models and decisions. All they’re interested in is the company’s immediate survival.

And so, despite the trouble their company is in, they take on a big project in the hope it will miraculously save the company.

For some companies this can actually work, providing it has sound fundamentals and a business model that’s working. But companies usually get into trouble because their business model is not working, and taking on a big project won’t fix it.

If fact, the project will probably make things even worse for the company because of:

  • Poor and incorrect project estimates
  • Working capital requirements
  • Poor project management already exists
  • Rework and poor workmanship
  • External factors.

They blew their chance to save the company, and whatever they do now will be either too little or too late.

Stage 4: Desperation.

Despite everyone’s effort (or rather the lack of it), the company collapses. Everyone is now desperate to do something—anything—to stop it from happening. But the chance to save the company has well and truly passed, and there is nothing more anybody can do to save it.

Obviously, the earlier you start intervening, the better the chances of achieving a corporate turnaround. And as much as we’d like to help, once your company has reached that desperation stage, it can be too late for even us to save it.

If you think your company might be insolvent (and we have a video that talks about the 10 warning signs), don’t hesitate to get in touch with us.