November 2010 newsletter

Here are some of the more interesting news in the world of insolvency during the last month.

‘The Walking Dead’

The financial and popular press has found a ‘new’ phrase for the thousands of companies and individuals that are in a perpetual state of financial crisis, with no chance of getting out of it – ‘zombie businesses’ and ‘zombie households’.  The industry analysts Plimsoll (and they should know) say that there are large numbers of zombies across virtually all the business sectors.  Jon Moulton wrote an  interesting article in the magazine ‘Insolvency’ recently on this very topic. In it he suggested that British management have an ‘extend and pretend’ philiosophy which simply delays the inevitable.  His view is that (1) zombie businesses need to be dealt with swiftly and clinically if we are to exit the downturn quickly and stronger; and (2) the banks and government should do more to support strong companies.  He criticised the government who he says is following a policy of short term job retention which he believes will hold back the upturn.  All very interesting stuff.

I support Jon’s views but I do not see these issues as new.  His article prompted me to look back through my files. In there I found an article I had published in 2005.  In it I argued that factors such as the abundance of credit and poor managerial skills would do an awful lot of damage to the economy in the long run, because management were getting into the habit of not making major decisions.  The problem is we cannot now afford the social and economic cost of what is needed to turn around the UK economy quickly, and continuing to ignore systemic problems only breeds more problems for the future.  We may hear soundbites of growth nationally, but those improvements will be felt more in the South while here in the Black Country only those businesses operating in the right niche at the right time will see any quick gains.  Go to my insolvency blog for more on this subject.

Alternatively, as this is a pretty depressing subject, here are some links to zombies in versions of Michael Jackson’s Thriller being performed on the tube and in a Phillipines prison.  Brilliant aren’t they?  Which of your clients do they remind you of?

Perhaps HMRC will be given the lead role in the remake of ‘return of the zombie killers’?
What will the New Year bring?

The downturn continues to pose many challenges to all us professionals – sustainable fee levels, bad debts, creeping inefficiences, client retention, cash collection, ‘Tesco Law’ being just a few.   I am noticing business owners focussing more, sometimes exclusively, on cost, such that I suspect that a good many of your clients are avoiding you simply because they don’t want a bill.   Clients are increasingly looking to non-traditional sources of advice, such as the internet, and are using self-managed solutions in an attempt to avoid professional fees.   The problem is many clients are incapable of differentiating between all encompassing, sound, advice and incomplete, bad, advice.  Steve Clarke of Maypole Financial Services recently provided a salutary reminder of just how costly this can be – follow this link to my insolvency blog for more on this.

You have probably lost several clients already this year.  It’s tough finding new clients of the same quality.  The difference between a client surviving and thriving, their being able to take on that much needed project, or their going out of business could be their taking of action prompted by your timely support.  I do not subscribe to the theory that January will see a major deterioration in the economy as a whole.  Some sectors, and we in the Black Country generally, will suffer more than others, but things will not be as bad as the pessimists would have us believe.  What I do expect to see is more of the same, such that we professionals will remain under pressure to do more for less.  And best protecting your client, sometimes from themselves, will also protect your own business.  More of the same has its dangers, it’s the old story of what happens when you put a goldfish in boiling water or slowly heat it – and like the goldfish, many of your clients can be expected not to notice the creeping paralysis enveloping their business until it is too late.  This is where your timely intervention can make a huge difference.  You may be busy over the next few months, say on tax returns, but can you really afford not to spend some time prompting your less successful clients into pre-emptive action in the meantime? A month might flash by in the wink of an eye, but as in politics an awful lot can happen in one month in business!

On the subjects of zombie businesses and the focus on costs ………………

Businesses are a three legged stool – the legs being sales, production and finance.  And stools are only as strong as the weakest leg.  My Business Resuscitation Programme introduces the resources needed to repair any, or all three, of the legs.  The longer the fire of underperformance smoulders, the more likely it is to grow into a full scale conflagration requiring specialist (Insolvency Practitioner) action.  If you have a client who is at the top of the decline curve, just starting to underperform, cost savings could head off a later, full blown, financial crisis.  However any further down the decline curve and your client will need to do more – in my experience it is simply not possible to turn around a business in the later stages by just cutting costs or working harder at the same thing – successful turnarounds require both significant change and more money introducing into the business.  And this is where my Business Resuscitation Programme comes in – call or e-mail me for details.


  • The long slumbering OFT appears to have woken up!You may have seen the company at the bottom of the escalator near TK Maxx in Merryhill offering to write off your unsecured debt. Sounds too good to be true, doesn’t it?  Well it is.  The OFT have recently issued a warning explaining why these things simply do not work.  To prevent a client being scammed, click on the following announcement on the OFT website.

    Also, have you wondered just how companies offering ‘payday’ loans get away with charging interest rates of over 2,000%?  Me too, but it appears the OFT are now tackling the issue.  A few days ago the OFT issued an improvement notice on the aptly named ‘Tooth Fairy Finance’ which could lead to them being fined up to £50,000 for every breach of the new conditions imposed on them.  Here’s a link to the OFT announcement.  Let’s hope that this heralds an era of increased OFT focus over that entire murky part of the sector.

  • I didn’t get  enough of you completing my survey.  It would be much appreciated if you would – there’s a bottle of champagne for one of the ‘completers’.  Please complete my survey using this link.

Finally, Steve Davies of Prosperity Corporate Consultancy of Stourbridge won last month’s prize – congratulations Steve and well done for donating it to charity.


Paul Brindley
‘Doing more for Black Country businesses”



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