Are you being optimistic or unrealistic about your business? In this insightful episode, Darren Vardy explores the daily conversation he has with business owners about hope versus reality. Learn why the 'she'll be right' mentality keeps businesses trading at losses, how fear of failure leads to kicking the can down the road, and why early engagement with advisors transforms outcomes. Discover how to set realistic goals, identify systemic versus temporary issues, and understand why businesses that go through restructuring often emerge stronger. Darren shares the importance of viewing your business as an investment and knowing when to cut your losses.

KEY TOPICS COVERED:

• The daily conversation about optimism versus reality in business • Why hope and fear of failure lead to poor decision-making • The 'she'll be right' mentality and its dangers • Setting realistic goals and knowing when to pivot • Identifying systemic issues versus temporary cash flow problems • Why early engagers have far more options than late engagers • How creditor relationships impact restructure success • The importance of viewing your business as an investment • Why businesses that survive restructuring often thrive afterwards • The difference between optimism and unrealistic expectations

KEY TAKEAWAYS:

✓ It's okay to be optimistic if you set realistic, measurable goals ✓ Fear of failure causes business owners to delay hard decisions ✓ The longer you leave problems, the harder turnarounds become ✓ Early engagement with advisors provides more options and less creditor resistance ✓ Businesses should be viewed as investments - assess returns like any other investment ✓ Systemic issues require different solutions than temporary cash flow problems ✓ Directors who go through restructuring rarely want to repeat the experience ✓ Successful restructures require thorough due diligence and realistic forecasting ✓ Businesses that survive restructuring often become better operated and more profitable ✓ It's okay to fail if you learn from mistakes and don't repeat them

Who Should Listen: Business owners, company directors, lawyers, accountants, and anyone wanting to understand financial distress warning signs.

About the Host:

Darren Vardy - Managing Director of Insolvency Options and Registered Liquidator with over 30 years of experience in business recovery and debt solutions. Darren has helped thousands of businesses and individuals navigate financial distress and find practical solutions to complex problems.

Connect With Us:

• Website: insolvencyoptions.com.au  • Phone: 1800 463 328 • LinkedIn: https://www.linkedin.com/in/darrenvardy/

Subscribe & Follow:

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Co-host: Anthony Perl

Produced by: Podcasts Done For You

Optimism versus realism, making hard decisions in business.

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Welcome to IO Insolvency Options

with Darren Vadi, the Managing

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Director of Insolvency Options

and a registered liquidator.

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With over 30 years of experience

helping businesses and individuals

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navigate financial challenges.

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In today's episode, Darren

explores the daily conversation

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he has with business owners.

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About the difference between

optimism and reality.

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He reveals why hope and fear of

failure can lead to poor decisions.

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How the she'll be right mentality

keeps businesses trading at losses.

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And why early engagement with advisors

dramatically improves outcomes.

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You'll learn how to set realistic

goals, when to pivot, and why businesses

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that go through restructuring often

emerge stronger and more successful.

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I'm your co-host, Anthony Pearl.

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Let's dive into unlocking

more about insolvency options.

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Darren, I imagine over the

years of you doing this.

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That this whole concept of being

optimistic about a business versus

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realistic, I imagine that is day

one looking at a business that

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you see that every single time,

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Darren Vardy: daily conversation.

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Absolutely.

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Absolutely.

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And you know, we get

back to our discussion.

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We started with about what is the true

position of the company and what is the

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true realizable value of the assets?

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Is the company showing to be better

than it's actually performing?

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Because no one wants to admit

that their business is failing.

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No one really wants to.

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People fear failure.

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So human nature is, should be

right, particularly in this country.

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Should be right.

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I'll just wait.

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Next month is looking better.

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Next quarter is looking better,

and it's okay to be optimistic.

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So long as you've got some

goals, realistic goals set for

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the performance of the business.

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And then if the business doesn't meet

those performance goals, the stakeholders

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need to then make the hard decision.

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Well, we've attempted to do it.

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We've set some goals, which

should have been realistic.

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We haven't achieved them, so therefore

we need to look at that alternative.

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Anthony Perl: And I imagine every business

has a bad month or two, but there's a

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point where that needs to change and

you need to have a good look at that.

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That's the common element.

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I imagine, that it's not just one

or two bad months, it's seeing

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a pattern of it when you go in

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Darren Vardy: correct,

it becomes systemic.

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And when it becomes systemic,

that's when it's an issue.

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And you know, cash flow

is key to all business.

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And we've just come through

the December, January period.

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Where for the majority of businesses,

there is an impact on cashflow where,

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and it's an adverse impact on cashflow

because you have to pay extra wages.

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You've got the holiday

close downs and the like.

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So leading retail aside, which tends to

thrive through the December and January

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period, the majority of businesses

slow down and stop over this time.

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So that is generally

accounted for in the budgets.

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When the budgets happen, so you move

on to the regular months, February,

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March, April, for instance, if those

loss scenario, the trading loss

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scenario continues, directors need

to be then realistic and say, right,

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why are we still continuing to incur

losses when in reality we should have

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came back out of the holiday shut down

period and be back to normal training.

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And that is certainly a key.

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Now, I mentioned that cashflow is tight.

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Quite often during that period,

director shareholders might look

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for some short-term funding,

which comes at a far greater cost.

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But again, you need to look

at the reason as to why you

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need that short-term funding.

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Is it just getting

through the slower months?

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Or if it lingers on through months

where the business ought to have

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recovered and be back to normal trading?

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Then the other question is, well

then why haven't we got back there?

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It's not throwing money at it just

to solve that short term issue.

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It's, Hey, do we have a more systemic

issue where we haven't recovered?

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Why haven't we recovered?

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What does that then look like for

the next couple of months thereafter?

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And do we need to pivot and look at

going in a different direction for

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some products or for our business

as a whole so we can ensure that

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this loss making doesn't continue.

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Anthony Perl: When you go in and get

asked to look at a business and you

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see this straight away, the reality

versus the optimism that's in there,

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are those conversations difficult?

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How are they generally received?

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Darren Vardy: The always

difficult conversations to have,

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particularly where directors and

shareholders have been involved

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with their business all their life.

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But quite often we sit there and

say, well, look, you know, you can

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continue to operate at a loss, but

to do that, you are continuing to put

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your money into a loss making business.

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Now you need to be really careful

that every time you put money into

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your business, whether it being out

of your mortgage or borrowing money.

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You are minimizing your wealth, your

personal wealth, and a business like

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a house, like an investment property.

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It's just another investment, and

that's where business owners need

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to look at it from that perspective

and say, is this a good investment?

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If I'm to put more money in,

am I going to get my returns?

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And if business owners aren't gonna get

their returns and their returns might be

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repayment of the monies they've put in

at a commercial interest rate, payment of

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wages to them along the way, and payment

of dividends as a shareholder, whatever

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the level of their returns are that

they expect there to be, the question's

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going to be is, is it a good investment?

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And if it isn't, then why do it?

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Anthony Perl: Yeah, I mean,

optimism that hope gets in the

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way of good decisions, doesn't it?

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Darren Vardy: Hope does get in the way.

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I also get back to the fear of failure as

well, and I think that's the driving force

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is that people don't want to naturally,

they don't wanna admit to failure.

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They fear failure, but putting it

off and kicking the can down the

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road just makes the situation worse.

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Anthony Perl: And how often.

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If at all, do you find that these

businesses have some sort of advisor, be

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it a coach, be it a, an actual genuine

advisor that is actually in place

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in telling them these things versus

them not having anyone, so they're

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kind of just left for themselves?

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Darren Vardy: Every business I see

have got an external accountant.

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Your external accountant

is your trusted advisor.

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Quite often businesses won't seek

advice from their external accountant

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because they actually see it as

a cost, particularly where the

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majority of external accountants

are doing compliance work or their

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focus is on the compliance work.

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So for most businesses,

you know, that's a chore.

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It's a cost.

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They don't see the value in that.

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So they'll engage on a minimum basis.

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With their accountants and advisors, so

they minimize the cost, but what they

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don't realize is that spending that

little bit more time with the advisors

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can really be of assistance to identify

a problem and then look at solutions

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to address that problem before it gets

to the stage where the advisor needs to

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refer the client to someone like myself.

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Anthony Perl: So what's the

outcomes of when you're going into

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businesses, and I imagine, as you

said, you see this all the time.

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You go in, you give

them this reality check.

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How do they respond generally

speaking, and, you know, give us

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some examples perhaps of where

it's gone one way or the other.

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Darren Vardy: The shock is not uncommon,

particularly where business owners

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have invested significant monies of

their own back into the business,

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and every business is different.

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The longer people tend to leave the

business, the harder it is to do a

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turnaround, so the options are very

limited, whereas the early engagers.

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Tend to have far more options and less

resistance from their creditors to

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support the business going forward.

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Quite often we find that if people

have been trying to survive for months

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on end, the creditors chasing them.

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They're avoiding phone calls from

their suppliers in respect to payment.

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Quite often you'll find that

those businesses won't get the

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support from their creditors.

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Where they look at a turnaround situation.

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Whereas, you know those business

owners who identify a problem, act

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early, seek urgent advice, communicate

with their suppliers as to what's

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going on, because the suppliers

just wanna know what's going on.

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If payment can't be made, they want to

know what can be done to reduce the levels

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of the debt if they can't be paid in full.

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So really it's a matter of that

early engagement and being upfront

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with the people you work with.

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Which will put you in the best lie.

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The best step forward to enable you

to do a turnaround if necessary.

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Anthony Perl: How often do you see that

people that do go in and they're start and

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you work with them and they're starting

to see that there is a turnaround,

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is it still being overly optimistic?

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Do you walk away sometimes going, okay,

well you've got them to the point where

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they're trading in their back to a, you

know, being able to run the business,

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but you probably shake your head thinking

they could well end up in the same place

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in the future because they're still

being optimistic rather than realistic.

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Darren Vardy: Yeah.

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I think as a result of going through

a process and as a result of coming

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to see someone like myself with the

financial position that they face.

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And what we need to do to go

through a turnaround process.

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That optimism very quickly moves to

reality in a realist position because

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ultimately, to put a restructure plan

together, there needs to be some thorough

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due diligence on the operations of the

business, which you know, your creditors.

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And importantly, as a major creditor,

the A TO have a significant.

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Input into, they'll want to see a certain

level of due diligence done by the

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practitioner to ensure that the business

in the future is not going to fail.

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So quite in going through that

process, the forecast, the budgets,

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the review of the business operations.

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Is looked at in a significant level

where everything's challenged.

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And by virtue of challenging everything

and making sure that the numbers are real

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effectively, there is no room for optimism

to enable a successful turnaround.

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So therefore, it does bring the.

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Directors back to reality, so

to speak, as to if they've got a

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business, what that business looks

like, and if they're gonna have it be

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able to successfully turn it around.

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Anthony Perl: I mean, in some of

these cases, do you look back and

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see they're better businesses for

having been through this process?

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They're better business

operators at least.

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Darren Vardy: Absolutely, because one

thing that drives the business owner

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is that they don't ever want to be in a

position that they've previously been in.

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That resulted in them coming to

see me and to do a turnaround.

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So quite often we see that if the business

owners are faced with a situation, they

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genuinely have to become invested in the

success in the future, and quite often.

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From my experience is that once someone

has been through a process, they tend

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to go on and survive and even thrive.

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On the other side of that process

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Anthony Perl: because it's interesting,

you often see people who are sprouting

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themselves as coaches, consultants,

and things who do actually talk very

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openly about the fact that I've been

through a process and this has happened,

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and we're now in this environment.

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And it's lessons learned, isn't it?

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And they can be important things because

that optimism that people have going

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into a business, nobody goes into a

business thinking that it's going to fail.

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Darren Vardy: No, that's exactly right.

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I hate to say, but sometimes people

just need an attitude adjustment.

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Sometimes they're more than

optimistic, they're unrealistic,

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and not being aware of the risks.

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It's okay to be optimistic,

but when you're unrealistic.

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You are not conscious or

identifying the risks as you go.

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That is where failure can occur as well.

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So it's being alive to those risks.

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It's okay to be optimistic, but not

unrealistic, but at the same time, you

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need to be managing the business to ensure

that you are meeting targets, meeting

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budgets, and more importantly, meeting

that break even level to ensure that

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all the debts are being paid as you go.

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Anthony Perl: And tell me, do you

look back, kind of almost like a proud

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parent when you see some of these

businesses that you've dealt with in

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periods gone past and see that they

are seemingly going really well?

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Darren Vardy: Yeah, look, you

know, that's one of the reasons

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why I'm in this business.

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You know, I'm in this business to try

and help people and educate people

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on the better ways of doing business.

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And it's okay to fail so long as

the reasons for failure have been

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identified and addressed and learn.

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As you said earlier, you

learn by your mistakes.

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It's okay to make a mistake so long as you

learn by it and don't let it happen again.

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And as business owners, we're

all gonna make mistakes.

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It's just a matter as to what is the

severity of that mistake and how do I

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fix it to minimize any impact on the

business, on all the stakeholders per

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shareholders, creditors, and the like.

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Anthony Perl: And that's all we

have time for in this episode.

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But next time on IO insolvency options,

we'll dive into the critical difference

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between compliance and advisory services.

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Darren will reveal why accountants must

be more than just compliance officers

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and share a shocking case study where

a director nearly lost everything

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because important documents were

simply readdressed without urgency.

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It's essential listening for business

owners and accountants alike for details

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on how to get in touch with Darren

and his team on insolvency challenges.

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Please consult the show notes.

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This podcast is produced by my

team at podcast done for you.com

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Until next time, remember, there's always

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