Weekend Edition: Back from the brink. How to save a business in distress.
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Why are Australian hospitality businesses facing a surge in closures?
These are difficult times for many businesses. Things have been a lot worse, of course, but there has been an increase in recent years of businesses going under. But that can happen anytime and often for very simple reasons that could have been avoided. So how do you make sure that your business or the businesses that you invest in, how do you make sure they stay in shape? That's this week. The morning call from NAB with Phil Dobby. The weekend edition. Well you'll know that a lot of Australian businesses are struggling right now, particularly those that are reliant on discretionary spending. The ASIC stats show that in the year twenty three to twenty four, that was the worst year for insolvencies for quite some time, up thirty nine percent on the year before.
And figures for April this year from Creditor Watch showed the number of insolvencies in Australia that month leveled off at one thousand two hundred and fifty five. Now they Absolute numbers. That's actually worse than it was during the global financial crisis, although there are many more registered companies now. So the failure rate is actually a bit lower than it was back then. But still that absolute number is a big concern. And according to the same statistics, in the year to April, almost ten percent of food and beverage service companies closed up shop. That's something to think about. Michael Fingland is the CEO of Vantage Performance, a business turnaround specialist in Brisbane for over nineteen years now.
Welcome, Michael. So in those nineteen years, is this the worst you've seen it? I feel great to be
with
you.
Uh not the worst, certainly. I think the the GFC was probably the worst uh and you know followed Uh closely behind by the the the mining downturn uh twenty twelve-thirteen. But uh it's getting there, unfortunately. It's it's all the signs are heading towards a a pretty tough couple of years ahead with those insolvency numbers, as you say. Uh you know, we're run rating at fifteen thousand a year at the moment, which um sounds a lot worse than what it currently really is. I mean, during the GFC, yeah, it got to about ten thousand a year. We were run rating at about eight thousand a year uh prior to COVID. So that was the baseline. We dropped down to sort of three and a half thousand for a couple of years during COVID.
So there's been quite a bit of catch up. A lot of those businesses that would otherwise normally fail during that period have started failing. And a lot of those stats, whilst we've been running it at thirteen to fifteen thousand for a couple of years now per annum, a lot of those companies were actually closed during COVID. So they Yeah. It it it sounds worse than it is because they were really dead dead companies. Uh well
no one had wound them up. Yeah, exactly. So the word fail is an interesting one, isn't it? Because there will be people who wind up companies just because you know, they're a small company, it's a stage of life. So there's going to be a natural attrition from people who just don't want to do it anymore. Yeah. And that and
that's that's why you haven't seen unemployment tick up. And unemployment's always the last uh KPI to tip uh before a recession. And that's the one that's been holding you know pleasingly quite stubbornly low. But it's just starting to tip up. And the reason is um uh you mentioned the Creditor Watch stats before.
How does Michael Fingland compare today’s downturn to the GFC and the mining slump?
The one that we really watch is the number of insolvencies as a ratio to registered companies. And that's the one that is Is the reason why unemployment numbers haven't actually gone up in uh
Yeah, because that was my point earlier, wasn't it?
But it's getting close. So four and a half
is that danger zone uh of of insolvencies to registered company fa uh to registered companies. And it it's the it's the it's gone up rapidly from high twos into four. Uh it's looks like it it it's stabilizing. If if it kicks again, then it'll it'll breach that same period which we saw during the GFC and uh and COVID, which is in the four and a half to five. So that's that's the real watch out.
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Chapters
8 chapters
1
Why are Australian hospitality businesses facing a surge in closures?
0:01–3:01
2
How does Michael Fingland compare today’s downturn to the GFC and the mining slump?
3:01–6:40
3
What early warning signs indicate a company is heading toward insolvency?
6:40–10:12
4
Which two strategic changes can unlock cash in a struggling business?
10:12–13:50
5
How can a turnaround specialist quickly free up working capital?
13:50–18:26
6
What is the Safe Harbour legislation and how does it protect directors?
18:26–21:48
7
Can businesses thrive after a Safe Harbour plan, or do they just survive?
21:48–26:13
8
What are the three critical drivers for a small café to survive a recession?
26:13–29:14