As Covid-19 sweeps the globe, non-essential businesses have been forced to shutter their doors due to lockdown and social distancing laws. According to research, 40-60% of small businesses don’t survive a disaster. When dealing with a distressed company, time and capital are the two of the most critical aspects to consider for a quick recovery. Fintech has also been immensely hit by the global pandemic, with investments decreasing the longer the crisis situation continues.

At Penser, we are experts in commercial due diligence and would like to offer some insight on how to manage your distressed fintech business. Our expertise in fintech consulting, in particular, can assist your distressed fintech business in reducing the loss of personnel and profits while working on a quick recovery. In this article, we outline five tips to help save your distressed business.

Act Immediately

If your business is distressed, both time and money are in short supply. To stop the business from going under, it is imperative to act quickly and funnel emergency working capital so that the business can continue operating. Pretending otherwise or trying to delay the inevitable will only result in higher losses in the long run. One of the first things you need to do is to build a strategy to tackle this without incurring more losses. Evaluating cash flow, reserves and credit availability can help you calculate if you can implement long-term changes to save the business or if your business needs short-term palliatives to stay afloat.

Consulting key stakeholders, investors, and management is a step in the right direction to keeping the business afloat. An experienced fintech consultant can guide your distressed fintech in the right direction when it comes to seeking help and building a recovery strategy.

Develop a day-to-day financial plan

The first aspect that is hit in a distressed business is working capital. Working capital is simply the operating liquidity (money) that is available for your business expenses. It is important to restructure the business cash flow into successful aspects of the business. For fintechs in distress, this can mean pausing unsuccessful but innovative ventures, minor acquisitions, and new product development. This will allow the business’s ventures still generating money to have more working capital to onboard more clients and customers. A day-to-day financial plan will help the business adapt to different amounts of working capital as sales wax and wane throughout the distress period.

It is useful to have an experienced fintech consultant on board to help you distinguish between the different aspects of your business that need working capital. A third-party perspective will allow an unbiased view and help more deserving products and services that are still making profits to gain more working capital.

Re-evaluate your business model

While it can seem that a distressed business is doomed to fail, re-evaluating the business model to tweak the products and services to offer more value is a critical step to reviving the business. Since a majority of fintechs depend on offering internet services as part of their product suite, crises like the Covid-19 pandemic that has led to a surge of internet activity display a silver lining for distressed fintechs. Fintech thrives on dynamic change; flexibility is an important skill for distressed businesses to display in such times.

Re-evaluating your distressed fintech’s business model can help you identify a new avenue for success in a previously undervalued aspect,  such as contactless payments. If your distressed fintech business can pivot towards solving a new customer problem, this is a good time to evaluate that business model. For instance, several fintechs have begun offering insurance covers in the last month, focused on the Covid-19 pandemic. As experts in distressed fintech consulting, we can advise you on how to rework your existing services into a new product that can prove to be more profitable for your business.

Focus on short-term wins

It can be really disheartening to see your business in distress, but it is important not to lose hope. Short-term wins can pave the future for long-term success by increasing the credibility of your business. Increasing customers and clients can depict an upward trend for the future. If your distress is brought about by external circumstances beyond your control like the Covid-19 pandemic, the issue doesn’t lie with your product or service.

When it comes to managing a distressed fintech, it is important for businesses to stop chasing long-term goals and instead develop a strategy for immediate changes that can be cost or policy-focused. This brings in immediate capital to the company, saves time that is lost on longer and bigger changes, boosts morale among employees and generates support that can create a powerful impact on the business as a whole.

Create a turnaround strategy for the future

Before the fog of distress lifts, it is important to evaluate the reasons that led to the company landing in this position. Creating a turnaround strategy for the future can stave off similar issues and equip both employees and management with plans on how to deal should this situation arise again. A turnaround strategy should include a business continuity plan to offer quick recovery and minimise losses taking into account the influence of market drivers, regulatory changes, and any previous issues that might crop up.

All of the above steps are short-term palliatives that can only help your business stay afloat for so long. For a distressed fintech business, it is important to evaluate the reason for failure and distress and incorporate a strategy to avoid any other potential errors of judgement that might lead to a similar situation. A business continuity plan takes care of an unexpected negative change to the business not brought about by product, service, or personnel problems.

The most important thing to remember when dealing with a business in distress is that there is still hope for revival until the business shutters. Assessing your business’s financial situation and taking immediate steps to minimise the impact and increase cash flow can offer your business a second lifeline. The help of a fintech consultant well-versed in the industry can help nurse your business back to help and shorten your recovery period as well.

As a fintech consulting firm, we are well equipped to guide your business through strategic planning services. We also offer commercial and technical due diligence services if your business is seeking an investor focused on distressed business. We have experience working with special situation investors and companies. Contact us to know more about how we can help your business.