Dealing with Financial Distress
A Guide for Start-ups
Startups are built for growth, but growth without control leads to risk.
Whether you're pre-revenue, post-funding, or scaling fast, financial distress can hit hard and fast. Burn rates climb, investor pressure builds, and runway disappears. Early action is critical to protect the business, the founder, and the capital already invested.
Signs of Financial Distress in Start-ups
Cash Burn Outpacing Revenue
Your monthly expenses are significantly higher than revenue. Burn rate is increasing, and your runway is shrinking with no clear path to breakeven or new funding.
Shareholder Disputes
Tensions are rising between founders, shareholders, or investors. Disagreements over strategy, funding, or business direction are stalling progress and creating uncertainty, putting both the company and your position at risk.
Unable to Pay on Time
You are negotiating payment extensions with the ATO, suppliers or contractors. Staff wages or superannuation are at risk of delay, which can damage your reputation and team morale.
Funding Uncertainty
A planned funding round has stalled or fallen through, leaving a capital gap. Investors may be stepping back or taking advantage by asking for large equity positions.
Founder Financial Stress
You are not taking a salary, using personal funds to cover business costs, or facing burnout. The stress is affecting your ability to lead, make decisions, and manage relationships
Lack of Strategic Financial Oversight
There is no clear financial strategy, forecasting, or governance in place. Key decisions are being made without proper risk management or cash flow visibility.
The Importance of Early Intervention
Startups often delay seeking help, hoping that the next round of funding or big contract will solve the problem. In reality, waiting too long narrows your options and puts everything at risk, including your IP, reputation, and existing capital.
Extend runway through cost control or restructuring
By cutting non-essential costs, streamlining operations, or restructuring debt, you can buy more time to stabilise the business and focus on revenue.
Open up refinancing or investor negotiation options
Early engagement with lenders or investors gives you the chance to secure additional funding, renegotiate terms, or restructure shareholder arrangements before the situation deteriorates.
Reduce risk to founders and directors
Addressing issues early can help protect you from personal liability, legal claims, or reputational damage, particularly where director duties or shareholder disputes are involved.
Set up the business for recovery or an orderly exit
A proactive approach allows you to explore recovery strategies or, if needed, plan a controlled exit that protects value, staff, and stakeholders, while reducing financial fallout.
Financial Recovery in Action
Learn how delayed action and cash flow challenges led a tech start-up to lose control through costly funding rounds. Discover the importance of early financial planning and tough decisions to avoid insolvency and protect business ownership.
There are Options!
When businesses face financial distress, they have several options to consider in order to manage and overcome their challenges.
Cash turnarounds are part of a broader business recovery process. It involves looking at the core reasons for the financial distress and implementing simple initiatives to improve the situation.
If addressing the financial distress early enough, implementing a cash turnaround strategy may put the business back on a positive path, and avoid more formal appointments such as an SBR.
Restructuring can take many forms, from structured mechanisms such as Small Business Restructures, to informal debt negotiations.
Some restructuring types can be very complex and costly to undertake, so there needs to be a clear understanding of how and why the restructure is happening.
In some cases it can be too late to restructure or implement a cash turnaround strategy. This may be because creditors have issued formal notices to begin winding down proceedings, or it could simply be because the the business owner's appetite to keep the business going has diminished.
In these cases, it's really important to control an exit from the business that protects the directors as much as possible in the circumstances.
Unsure of what to do but not quite ready to take direct action?
We can sit by your side and keep an eye on things - ready to act when needed.
Issues for Start-up Founders to Consider when Selecting a Way Forward
Is there a realistic path to profitability or investor funding?
Review your financial forecasts honestly. If revenue growth or funding is uncertain, it may be time to rethink your strategy before running out of cash.
How will financial distress affect your team, brand, and investors?
Low morale, delayed payments, and lost trust can impact performance and reputation. Transparency and timely action help preserve these relationships.
Are there critical contracts or IP that need protection?
Key customer agreements, licences, or intellectual property may be at risk if the business falters. Safeguarding these assets should be a top priority.
Are founder or director liabilities increasing?
Unpaid tax debts, personal guarantees, or shareholder disputes can create personal risk. Understanding your exposure is essential to protect yourself.
Free Interactive Guide
Your Options when in Financial Distress
Want a more detailed explanation of what options available for start-ups? This guide will take you through the options available.
At Thryvv.io, we're Business Turnaround Specialists that work for you.
How We Help – Director’s Advocacy in Action
As Director’s Advocates, we work for you, the business owner, not the banks, creditors, or government. Our job is to help you navigate financial distress with clarity and confidence.
We understand the weight financial distress carries and how hard it is to ask for help. But the sooner you reach out, the more options you have - and the better the outcome for you, your business, and your family.
01 Control the Process
Establish a recovery board to identify the problems, control the process and oversee progress.
03 Understand the Numbers
Introducing financial discipline, including rolling cash flow forecasts, margin reviews and cost controls
05 Proactively Engage
Rebuilding confidence with stakeholders, including staff, customers, creditors, and investors.
02 Bring in the Right People
Use our extensive professional networks to bringing in specialist support when and where needed.
04 Manage Director Risks
Ensuring director risks and governance obligations are actively managed, using tools like DirectorShield.
06 Advocate for the Director
We act as the intermediary between the Director and the practitioner, advocating for their interests throughout.
Book a Strategy Call with us
Book a free strategy call with us today and take the first step toward getting back in control. We’ll help you understand your position, weigh your options, and build a clear path forward — without judgement, pressure, or jargon.