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This happens when a company is so overwhelmed by debt that any cash the business generates is used to pay off the interest on the debt owed to creditors. Often, this means that the debt does not get any smaller. As a result, the majority of ‘zombie’ companies are unable to invest in the future of the business.
The first sign that a company is turning into a zombie will often seem like symptoms of poor health.
The signs are not always obvious; the business may be successful, but ‘zombies’ are not failing. However, they do not make large profits or grow.
If your business is just managing to get by week-by-week, you can’t hire anyone new or expand your facilities; you may have a ‘zombie’ on your hands. The business will stagnate slowly but surely, with sudden growth being as much a problem as a downturn in business.
If you’ve seen any films about these members of the undead, you’ll know that zombies don’t tend to last long. This will be the fate of any zombie company that doesn’t properly address its issues. If you’re paying off the interest on a loan and your lender suddenly raises the interest, your company can die. If someone business-critical leaves their role and you can’t afford to get someone of the same calibre, your business will suffer.
Many assume that letting the company fail is their only option; however, this is not the case. There are several routes you can go down to improve your business and protect yourself as a director.
Firstly, ignoring a zombie company won’t do any good. Unfortunately, they’re often created because businesses ignored signs that everything wasn’t healthy in the company finance book. That’s why it’s so crucial for businesses to get help early on, raising their company back to the land of the living.
There are ways of helping your business get back on its feet again. Whether it’s worth refinancing the debt, selling off a non-crucial asset to reduce the debt and give the business a little more cash, or speaking with a business consultancy to achieve a company turnaround,
Bell & Company can provide a fresh pair of eyes to your company, over a decade’s experience, and a plan to rescue your business.
Call 0333 305 4331 for further information if you are worried about your business’ health.
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