Insolvent Pubs Restaurants and Licensed Premises
Turning Insolvent Pubs Restaurants and Licensed Premises business around from a negative trading position requires and demands a specific skill set.
As insolvency and turnaround specialists we come across business owners who set off with the best intentions but who quickly run into difficulties when it comes to the balancing of the finances and the control and management of the staff or team.
There is always a reason as to why and how people end up in the position that have ended up in. For insolvent pubs restaurants and licensed premises these reasons are as broad as:
Buying a Pub, guest house, restaurant or hotel simply because they want to or it has been an idea that they have been toying with for some time. However 5we have to remember that the seller wants to sell and the buyer is balancing between an emotional purchase and a rational one.
It is often the case that just because you are paying a solicitor to look over the lease or contract details, a bank for potential financing is never much of an issue providing there is sufficient security for the loan amount.
Then of course you have the seller who wants to sell and may well have only submitted abbreviated accounts and who also may not be as honest as the buyer may hope for.
So if the latter applies to you then its likely that you are burning resources and you have a situation where the staff have turned against you and you aren’t having the control you need despite doing everything in your power to attempt to manage and maintain control.
If you are in this position then you will need nothing more than a miracle or exceptional good luck to change this position or your business will fail.
In my opinion business owners in this position are unable to simply tell their team what they need to happen and how they need them to change their attitudes towards the business as its too late.
Things like commercial leases hold no value whatsoever even if you have paid a 5 or 6 figure sum for a goodwill purchase not long ago. So for most people to be able to devise a strategy that will enable them to break free from the negative shadow thats following the business is seemingly impossible.
Remember that if your seller has been dishonest with the accounts then your rental payments are usually based on the turnover of the business and if the anticipated turnover isn’t what it should be then the rent and rates that you are paying could be as much as 30+% of your turnover instead of the 10-12% as it should be.
If this is happening then you are having your head pushed under the water and it will just be a matter of time before you throw in the towel or receive a winding up order or the statutory demands start coming in. In which case you will have to move up into position or face certain closure and potential bankruptcy or at least a voluntary arrangement.
Most of the time there are actually options that you wouldn’t ever consider. Most people going through or who have been through the Insolvency Process will ay that the view from the back window is different to the view from the front. So if you can tap into the right person who is an insolvency and recovery turnaround specialist then you will have more of a chance of turning the negative into a positive.
Say you are a pub for example: can you negotiate a variation to the lease with the brewery?
Can you negotiate a managed price for your purchase orders
open up an excel spreadsheet and start to list a critical list of creditors
Look at all the forthcoming payments and when they are due.
Cut costs where you can, replace negative staff with positive ones.
If you cant bring yourself to say what you need to say then get help in to do it for you. What ever happens you must take a survivalist mentality no matter what. Especially if you think that your business could survive if only you could change the management or certain negative members of staff.
A Company Voluntary arrangement can work providing future cashflows allow for a plan to work.
Alternatively if you are insolvent now or are heading for an insolvency position then you could look at a liquidation depending on the impact of that decision.
For any matters or questions relating to a business insolvency or turnaround or sale situation then call our team on 01425 600 129.