How Companies Collapse Gradually, Then Suddenly

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 The risk of sudden death for a company can cause panic among stakeholders. Act fast.



Companies on the brink of financial collapse reach that inflexion point in two ways: “Gradually, then suddenly,” as the great American author Ernest Hemingway once described. 

In business, things tend to deteriorate slowly over three to five years – then abruptly in the final three to five months of a company’s life when revenue streams begin to dry up.

For wartime CEOs, this risk of sudden death for a company opens up the perfect opportunity to strike a deal and map out a turnaround strategy.

Real Life Story

The board at RuleBurst, known then as SoftLaw, was reluctant to give access to their data. This prevented me from conducting due diligence on the company – an essential step for a turnaround.

The impasse was not only frustrating for me but also perilous for SoftLaw: the company was losing money. 

The weeks went on when, out of the blue, the board relented. They realised SoftLaw was quickly heading towards disaster. It was time to act fast – and the first step to do so was to be open to a turnaround plan.

Key Lessons

  • Move patiently and cautiously. Business turnarounds are the ultimate test of endurance for wartime CEOs. It takes fortitude and patience to sway the majority of stakeholders who might not agree with you in the beginning. Never give up.

  • Be prepared with your battle plan. Understand the situation from key figures, even the sceptics among stakeholders, then develop your turnaround strategy.

  • Watch out for danger signs. A company headed for collapse reaches that inflexion point over the course of a few years. Examine the hard data and identify danger signs pointing to near death.

  • Act fast. In a turnaround, the risk of a company going into sudden death can cause panic among stakeholders and compel them to assess all their options. Act fast in this precarious situation.

Find Out More

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Until next week, may the force be with you.


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