Businesses urged to not waste a crisis and act early as recovery timelines stretch beyond a year

Todd Gammel

Business owners facing financial difficulties are warned to use the current crisis of uncertainty as cover for restructuring and not to wait out the storm from fuel and costs increases as recovery often takes far longer and delays can reduce the options available, Todd Gammel, partner at HLB Mann Judd Sydney, says.

Gammel says a turnaround typically takes between 12 and 18 months, even when action is taken as soon as problems start but now is as good a time as any as there is more understanding in the market and patience from external aspects like transport costs/supply issues that can be utilised to buy time and explore options.

“Financial problems are usually the result of pressure or issues building over time. Cash flow tightens, trading conditions change, lenders become more cautious and suddenly management is spending all their time just keeping the lights on.”

Once a business reaches that point, day-to-day demands such as payroll and suppliers take over, leaving little room to step back and reassess the broader strategy.

“The risk is that businesses become reactive as we can see with fuel prices/transport cost changes. Businesses are forced to focus on survival and the longer that goes on, the harder it becomes to turn things around.”

Gammel says simply waiting for conditions to improve around the current crisis could be a waste of the crisis that can provide a straightforward cover for operating changes.

“Early action gives you choices even in a crisis. If you act while there is still flexibility in the business, you can restructure properly, access funding or bring in new partners. If you leave it too late, those pathways start to close. Acting now may enable recovery activities to be in place and the business moving positively before anyone becomes aware due to the distraction of the larger issues in play”

Gammel says this is often seen in legacy business structures, which are frequently set up years earlier for tax or family reasons.

“We see businesses that are effectively boxed in by their own structure limiting external funding or investment,” Gammel says.

“For family-owned businesses, the challenge can be made worse through the generations. In some situations, funding from family assets is being used just to keep the business going, without a defined end point or strategy. Over time, that can eat away at family wealth rather than preserve it. Family jewels can be sacrificed to feed the family business.

“Changing this approach can unlock new funding or investment opportunities, but it needs to be done carefully. If the tax side isn’t managed properly, you can create new problems while trying to solve the old ones.”

Gammel says an independent perspective can be critical in those moments, particularly when decisions become complex or emotionally charged.

“You need someone who can step back, assess the situation objectively and ask questions of what the desired outcome is. That means looking at all the options, including ones that may not have been considered internally, and focusing on outcomes that are sustainable over the long term,” Gammel says.

“That can include restructuring ownership, or, in some cases, stepping away from parts of the business altogether.

“Bigger isn’t always better. A simpler, more focused business can ultimately deliver more value for the owner and a potential investor than a large, complex one that’s constantly under strain.

“We’ve seen businesses reduce their scale significantly, sometimes by more than half, by exiting contracts or divisions that were not delivering real value. What’s left is often a more profitable, more manageable business with stronger margins and a clearer strategy towards sale or investment.”

Funding also plays a central role in stabilising distressed businesses, particularly where assets exist but cash flow is constrained.

“There are situations where businesses are asset rich but cash poor,” Gammel says.

“In those cases, structured funding can bridge the gap and give the business time to execute a recovery plan but that may become more difficult as a crisis develops as confidence in the business and /or the overall market declines, so acting early can avoid these issues.”

Gammel says the businesses that recover most successfully are those that approach these situations with clarity and urgency, supported by the right advice from the outset.

“A business in going through difficulty can be a turning point to greatness. If you address issues early using a larger crisis as coverage for change and take a structured strategic approach, you can reset the business and put it on a more sustainable footing for the future before anyone notices.”