Is my business viable? The decision path, step by step.
Three questions decide what happens next, and they need answering in order. The middle one — whether the underlying business is viable — is the one almost nobody can answer about their own company without working through it properly, so it has its own explainer below.
This is a guide to the questions, not a decision engine. No diagram can determine whether a company is insolvent, or what it should do next.
Question one
Can the company meet its debts as they fall due?
Not eventually, and not if one particular customer pays. As they fall due — including what is coming in the next few weeks, and the tax you have not paid yet.
No, or not sure
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Question two
Is the underlying business viable?
This is the question that decides everything below it — and almost nobody can answer it about their own company without working through it properly.
What “viable” actually means
It does not mean the business is currently making money, and it does not mean the company can pay what it already owes. Viability is a narrower question: stripped of its historic debt, would this business make a sustainable profit and generate cash? A company can be deeply insolvent and have a perfectly viable business underneath. It can also be paying everything on time and have no viable business at all.
The four tests we work through
- 1. Does the work itself make money? Not turnover — margin, after every genuine cost including your own proper wage, and after the contracts you would rather not look at. If the current order book were priced honestly today, would it be profitable?
- 2. Is there a market that will still be there? Customers who will keep buying, at prices that work, from a business that has been in difficulty. Concentration matters: one customer at 60% of turnover is a different proposition from thirty at 3%.
- 3. Can it be funded through the change? A viable business still needs working capital to get from here to there. Committed funding, not hoped-for funding — and enough of it that a bad month does not end the plan.
- 4. Are the causes fixable, and being fixed? If you cannot say clearly what went wrong, it is probably still going wrong. A cause that has been identified and corrected is a different situation from one that is still running.
Points towards viable
- The trouble came from one identifiable event — a bad debt, a lost contract, a one-off
- Recent work is profitable when priced properly
- Customers are loyal and would follow the business
- Debt is historic rather than still accumulating
- The order book stands up without the loss-making contracts
Points away from viable
- Losses every year, for reasons nobody can name precisely
- Margins that only work if nothing goes wrong
- The market itself is shrinking, not the company’s share of it
- Debt still growing month on month
- The plan depends on winning work not yet won, or funding not yet committed
If your honest answer is “I don’t know” — that is the normal answer, and it is a reason to have the conversation rather than to wait until it becomes obvious. Working this out is most of what a first meeting is for, and a 13-week cash-flow forecast usually settles it faster than anything else.
If the business is viable
The task is to separate the viable business from the debt it is carrying. Depending on funding, creditor pressure and how much time there is:
- Turnaround — fix the causes, no formal procedure
- Refinancing or new investment — if it can be serviced
- HMRC Time to Pay — if tax is the main problem
- A CVA — pay creditors over time, keep trading, keep control
- Administration — protection while a rescue or sale is achieved
- A sale of the business — the business continues, under new ownership
If it is not
The task changes: bring things to an orderly end, on terms you have some say over rather than terms a creditor chooses.
- An orderly wind-down — complete what is profitable, stop what is not
- A sale of the assets — realising more than a forced sale would
- Creditors’ Voluntary Liquidation — a director-led close, on your timetable
This is not the failure branch. Deciding early that a business cannot be saved usually protects more value, and more of your own position, than discovering it six months later.
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Either way — question three
Is urgent creditor action already underway?
A statutory demand, a winding-up petition, an enforcement notice, a secured lender’s demand, a frozen account. This question overrides the two above it, because it changes what is still available — some routes close as court action progresses.
If any of that has happened, take advice this week rather than next.
Indicative guidance only. Which route is appropriate depends on viability, funding, creditor action and the wider facts. General information about the law and practice of England and Wales, not a formal solvency opinion or personalised legal advice.
Next step
Most of a first meeting is spent answering question two.
If you do not know whether the business underneath is viable, that is the normal position — and it is the thing we can help you establish quickly. Your initial consultation is free and confidential.
Related
The Turnaround and rescue page
This guide sits alongside our main page on the subject, which covers the same ground more briefly and links to the rest of the site.
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