What Effect Did The Mainzeal Collapse Have? - BWA

The Mainzeal Impact

The Mainzeal Impact

It’s nearly two months since the announcement of the Mainzeal collapse. The full impact of the $93.5 million deficiency will be starting to bite for the many contractors and suppliers that have to absorb their portion of that loss.

It’s nearly two months since the announcement of the Mainzeal collapse. The full impact of the $93.5 million deficiency will be starting to bite for the many contractors and suppliers that have to absorb their portion of that loss. These are not anonymous people.  They are the cornerstone of our society including local plumbers, electricians and roofers. They have worked hard to build up their businesses only to find that the insolvent circumstances of one major player has left them with an unstable future.

How do Mainzeal’s sub-contractors come back from such circumstances?

Times are tough today and many businesses are struggling to survive. They do so by pursuing projects with narrow margins to remain afloat - like those offered by Mainzeal. There is of course the expectation that an organisation the size of Mainzeal would not fail and leave them liable to pay for materials and labour provided.

Paying employees and suppliers may now be getting difficult for the Mainzeal sub-contractors. Some will be questioning their ability to meet their financial obligations. Safe guarding their business is now the need of the day. This requires diligence, focus on costs, versatility around issues, and engaging the help of professionals when needed.

Here are five strategies that can be practically applied to aid business survival:

1. Scale back

Scale back activities and operate intensively around the core business that is profitable. Once these are stable, broaden into other activities that are within the scope of the business’ core competencies. Carefully and methodically rebuild by searching out new value chains that yield a positive result. Aim to be expense averse and cost efficient.

2. All hands on deck

Have all levels throughout the business focus and contribute to the planned outcome. Great things have been accomplished in the face of adversity, and if short term goals are set and everyone pulls in the same direction, the business can recreate itself. Care is required to ensure everyone knows their part and that work loads are realistic and achievable. Be weary of what is developed as a management strategy may not be easy to realise tactically or on the ground, so test and review.

3. Integrating operations

Managing a business is not only about detailing the tasks and projects that need to be done, but also about ensuring that they come together and are completed. It is important that individual activities are contributing towards the bigger picture. Ask and expect compliance reports. Review regularly to monitor progress and identify any weaknesses that need addressing.

4. Meticulous financial information

Business is about the creation of wealth. That outcome is achieved when the company can pay its bills when they fall due, and assets exceed liabilities. It’s a company’s profit and loss statement and the balance sheet that provides the necessary monitoring of this.

The business manager doesn’t need to be an accountant to do well in this area, but he or she certainly needs to understand what the numbers are telling them. Assessing, challenging, checking and considering the financial information is critical to ensuring things are on track. Measure in dollars and cents the costs being met and the revenue being earned.

5. External advice

Asking for external help could be what you need to increase your chances of survival. Bankers, accountants and advisors will want to know your immediate liquidity situation, a list of your assets and liabilities, your commercial prospects and the availability of the resources necessary to rehabilitate the business. Accurately prepare information about the situation in a brief form and use this document to communicate the current position.

Voluntary administration (VA) could be the right step to take. An alternative to liquidation or receivership, VA can offer businesses breathing space from creditor demands while they address issues that are consuming them. Using an appointed administrator with skills in VA law can increase your chances of survival.

For more information, see my earlier blog on Voluntary Administration – the undersold solution.

For further discussion, feel free to contact me directly.

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