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A zombie company is simply a company that is neither dead or alive. In other words, it is so overwhelmed by debt that any cash generated is being used to pay off the interest on the debt owed to creditors. In many cases the debt is not being reduced. With this, the majority of ‘Zombie’ Companies are unable to invest in any future growth of the business and therefore are unable to employ more staff.
The first sign that a company is turning into a zombie will often seem like symptoms of unusual health. However, this isn’t always the case, in some instances, the company will appear to be thriving, at least in some important respect, and its executives will be justifiably proud of this success. But Zombie companies, like zombies in movies, slowly move forward, but only just.
Since they’re only just managing to get by week by week, they can’t hire anyone new and they can’t afford to pay out redundancy, as there’s no cash for a payout. The business stagnates slowly but surely, with sudden growth being as much a problem as a downturn in business.
If you’ve seen any films about these members of the undead, you’ll know that zombies don’t tend to last long. This could be the fate of any zombie company that doesn’t properly address its issues; if you’re paying off interest on a loan and the interest is suddenly raised, your company can die. If someone business-critical leaves their role for a better job at a company that is enjoying healthy growth and you can’t afford to get someone of the same calibre, your business will slowly die.
Ignoring a zombie company won’t do any good. Unfortunately, they’re often created because businesses ignored signs that all wasn’t healthy in the company finance book. That’s why it’s so crucial businesses get help early on, raising their company back to the land of the living. Whether it’s worth refinancing the debt, selling off a non-crucial asset in order to reduce the debt and giving the business a little more cash, or speaking with a business consultancy to achieve a company turnaround, there are ways of helping your business to get back on its feet again.
A business consultancy move will help advise you on the best course of action, bringing a fresh pair of eyes to your company and seeing what you work with daily, before coming up with a plan to rescue your business. We offer a business turnaround service which can help your business make a full recovery.