Early Warning Signs of Business Distress (And What to Do Next)

A guest blog taken from an article by Megan Singleton, Director at Leonard Curtis 

 Over our years of experience advising businesses, there is nothing we have not seen in terms of business distress.  A key piece of advice to business owners is to watch for the warning signs - acting early can make all the difference. 

Here are seven things every business owner should keep in mind if they feel things may be heading in the wrong direction. 

1. Don’t bury your head and hope it will go away 

Business owners are, by nature, optimistic. That optimism is often what got the business off the ground in the first place. But when challenges arise, it can also lead to a habit of hoping the problem will resolve itself. Unfortunately, ignoring difficulties rarely leads to improvement and more often leads to fewer options later on. 

Taking stock early is crucial. That means looking honestly at what’s happening both inside the business and externally, market conditions, costs, customer behaviour and then bringing trusted advisers or your management team together to decide what needs to change.  

Even if a formal insolvency process eventually becomes necessary, it doesn’t always mean the end of the road. Our focus is always on what comes next and how to move forward with purpose. 

2. Forecast and then challenge your forecast 

Regular forecasting, particularly cashflow forecasting, is essential. Not just for survival, but for making informed decisions and identifying opportunities for growth 

A good forecast should consider: 

• Best-case scenarios 

• Worst-case scenarios 

• Realistic assumptions 

Once the numbers are down, challenge them. Ask what happens if income dips, costs rise, or payments are delayed. These forecasts become practical tools for identifying gaps early and working out how they might be bridged before pressure builds. 

3. Act quickly when you see trouble ahead 

The earlier signs of business distress are identified, the more time there is to react. Delays tend to make issues accelerate. By the time creditors are chasing payments and cashflow is tight, options often become limited. Forecasting and regular reviews give businesses valuable breathing space but only if action follows insight.  

It’s also important to reflect on what the business actually means to you. We often speak to owners who realise, after honest reflection, that constantly fighting fires isn’t how they want to spend their days. Understanding what “good” really looks like helps shape the right solution. Asking for help isn’t weakness, it’s usually the most sensible step available.

4. Ask for help early 

There is a wide range of professional support available, and engaging early significantly improves outcomes. Nearly six years on from Covid, many businesses are still under pressure. Rising costs, tighter margins, and economic uncertainty have created challenging conditions. A greater number of businesses can be saved when issues are addressed promptly with specialist advice. Leonard Curtis operate an open-door approach. Early conversations are confidential, and focused on exploring options not forcing decisions.

5. Keep talking to your stakeholders 

Clear communication is a powerful tool during periods of distress. Customers, suppliers, and employees are the backbone of any business: 

• Without customers, there’s no revenue 

• Without suppliers, operations stall 

• Without employees, delivery suffers 

Once a plan is formed, communicating appropriately and at the right time helps maintain trust and stability. Honesty with employees, when appropriate, is also vital, particularly where their support is needed as part of a recovery plan. 

6. Keep lenders and creditors on side 

Good communication applies equally to lenders and creditors. Engaging early, especially when difficult conversations are required, helps maintain credibility. If payment arrangements are agreed, sticking to them is essential. Broken promises quickly undermine confidence and reduce flexibility when it’s needed most. Consistency, transparency, and realism are key.

7. Don’t be afraid of insolvency processes. Rescue is always the priority 

Fear and misunderstanding around insolvency often prevents business owners from seeking help in time. Speaking to a licensed Insolvency Practitioner does not automatically mean closure. In fact, the priority for most restructuring firms is to save the business wherever possible. When consulted early enough, practical strategies can often be developed to stabilise cashflow and return the company to a sustainable footing. 

CVAs 

Company Voluntary Arrangements aren’t just for large retailers. They can be a flexible and effective option for many viable businesses facing cashflow pressure, allowing debts to be managed while trading continues. 

Pre-pack administrations 

In some cases, pre-pack administrations are appropriate, but they require careful handling and proper advice, particularly where connected parties are involved. Done incorrectly, they can attract scrutiny from creditors, HMRC, and the Insolvency Service. 

A final word 

Family businesses often face additional emotional pressure. Fear of disappointing loved ones, or having personal identity closely tied to the business, can cloud judgement at critical moments. 

Seeking impartial, confidential advice early helps remove emotion from decision-making and protects both the business and personal relationships. 

As restructuring and insolvency advisers, Leonard Curtis supports businesses of all shapes and sizes from negotiating with creditors to arranging funding and exploring all available recovery options. Initial conversations are confidential, with no cost or obligation.  

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