Member Article

What to do if you're a Zombie company

The UK is home to an increasing army of SME zombie companies, said to be dragging down our economy. These struggling SMEs can just about afford the interest payments on their loans, but unfortunately, not much more.

A zombie company is said to be a firm which is generating just about enough cash to service its debt, so that the bank won’t pull the plug on the loan, yet at the same time is completely stagnant. As nearly half of public turnover is derived from our SMEs, it is little wonder that the government wants to do everything it can to kick-start these SME zombie companies and avoid risking tens of thousands of job losses.

There are, however, a number of things that small business owners can do to get some momentum back into their business. Here are our 5 top tips:

1. Cut operating costs

For many businesses, rent and staff are the biggest expenditures.Make sure you are being as efficient with both as you can. Make sure you only hire staff that you need, at the levels you need.

2. Don’t stop training your staff

Your employees are a your biggest source of revenue, so make sure they’re in tip top condition and ready to make money for the firm at all times. Investing in your staff benefits morale and will also make them feel more valued, loyal and ultimately work harder for you.

3. Try to retain good customers

It’s well documented that retaining customers is cheaper than finding news ones. So treat them well and they will reward you with their business. This will be essential when business development is slow.

4. Innovate!

If you’re doing something a particular way because that’s how you’ve always done it (and your business isn’t growing) – you’re probably doing it wrong! The world is changing, your customers are changing, and you should be too. If you haven’t got the time or resources at work to brainstorm new ideas, why not rope in a couple of friends and family at home and get some fresh ideas that way.

5. Take control of your cashflow

Maintaining a healthy cashflow is the lifeblood of any successful SME business. It is important to build a relationship with your customers’ finance department and note who the good payers are and what excuses are made for late payments. Outsourcing to an invoice financing company could help, as they can advance money against your invoices, thereby helping cashflow. They can also chase up and collect the invoices for you, should you not have the resources or expertise to do so.

Clearly, it will not be an easy task to kick-start UK SME zombie companies, especially in the economic climate we find ourselves in today. However, there are some things that can be done to turn around a struggling company. Ultimately it just takes time, energy, and some good old-fashioned elbow grease!

By Tracy Ewen, managing director, IGF Invoice Finance

This was posted in Bdaily's Members' News section by Tracy Ewen .