Carry On . . . In Business

Carry On . . . In Business - Part 1

Comparatively few businesses are forced to close for a single reason alone. Risks of ‘failure’ become critical when individual problems combine into a serious threat to the business.

13 04 2004 United Kingdom

Predicting which businesses are likely to be forced to close - and why

Can you actually predict business insolvency?

The ‘Z-Score’ is a well-established method of predicting financial insolvency and it is claimed to give predictions up to two years ahead - with over 70 per cent accuracy.

This method uses financial information from past trading statements to calculate five key ratios and combines them into a final Z-Score.: If this score is 3.0 or more, the business is likely to be in good shape; If the Z-Score is below 1.8, it is heading towards probable insolvency.

Z-Score is widely used by accountants but it has its drawbacks. The accuracy varies between manufacturing, retail and service industries and it is not so reliable for small businesses.

If you are a member of topenterprise or a registered guest you can read more about the Z-Score method in the Business Survival zone.

What is the business survival rating?

Comparatively few businesses are forced to close for a single reason alone. Risks of ‘failure’ become critical when individual problems combine into a serious threat to the business.

Z-Score and other ways of predicting business failure take into account a wide number of factors, but these are mainly symptoms of financial problems. Methods based on past years’ financial accounts tell you about the risks . . . when it’s probably too late to fix them.

topenterprise offers a unique tool that

enables you to find which problems carry a high risk of business failure,
pinpoints the critical combinations for your individual business and
leads you to solutions for getting back on a stable path for recovery.

This business survival tool is based on a 20-question form available exclusively to topenterprise members. Your answers are analysed against ten major factors that force businesses to close
– Actual root causes, rather than balance sheet symptoms of the real business problems.

Instead of using past years’ financial accounts, this online survival questionnaire is based on where your business is now and where it is going. It takes the key survival factors identified from your answers and identifies any ‘killer combinations’ that pose particular threats to business survival.

And it goes further by offering a series of solutions you can use to overcome the risk factors you have found.