Addressing the Bankruptcy Risks of Mid-sized Companies to Support Local Economies

In recent years, mid-sized enterprises have been facing increasing financial challenges that not only threaten their longevity but also pose significant risks to local economies. The Tokyo-based consulting firm, 株式会社融資代表プロ, led by president 岡島光太郎, has begun offering a monthly financial consulting service aimed at reconstructing the financial structures of these essential businesses for sustainable operation.

The firm's new service, which starts at 70,000 yen per month, addresses a critical need as many mid-sized companies struggle with financial transparency and strategy. Often, their financial data resides solely in the minds of company leaders, creating a 'black box' situation that hinders effective decision-making. This consulting initiative aims to eliminate this opacity and build a data-driven management framework.

The Economic Landscape: The Crisis of SMEs

According to the 2024 edition of the Small and Medium Enterprise Agency's white paper, 99.7% of Japanese businesses are classified as SMEs, accounting for about 70% of employment. They serve as the backbone of the economy. However, the 2024 bankruptcy report from Teikoku Databank indicates that the number of bankruptcies has risen for three consecutive years, with a recent increase of 11.4% year-over-year, totaling nearly 9,901 cases—the highest in 11 years. Factors such as rising interest rates, increasing costs, and labor shortages are intensifying challenges for regional mid-sized players.

The implications of a single mid-sized company's bankruptcy extend beyond the company itself. Estimates suggest that one bankruptcy can lead to the following consequences:

- Loss of 300 to 1,000 direct jobs
- Impact on 100 to 300 supplier companies
- A ripple effect affecting 1,000 to 1,250 local employment situations

The damage incurred can decimate local economies, especially since many mid-sized enterprises are headed by respected community leaders, creating immense pressure to avoid failure.

Succession Challenges and Financial Management

A survey by Tokyo Shoko Research indicates that 62.15% of companies lack successorship. Furthermore, the Small and Medium Enterprise Agency highlights that 51.3% of companies that ceased operations were profitable prior to closing, underscoring a looming risk: inadequate financial management and succession preparedness can lead to business failures. From interviews conducted by 株式会社融資代表プロ, concerns echoed repeatedly include incomplete financial organization, personalized fund management issues, and recognition of succession challenges without actionable solutions.

Innovative Solutions: Affordable Financial Leadership

Recognizing this gap, 株式会社融資代表プロ has introduced a service that allows mid-sized companies to hire financial experts for a fraction of the cost of a full-time Chief Financial Officer (CFO), which typically ranges from 8 to 20 million yen in Japan. Their monthly fee, starting at just 70,000 yen, provides an accessible way for these companies to address their financial issues.

The Essence of the Service

This offering involves experienced consultants from various financial institutions—including banks and credit unions—acting as financial leaders in a collaborative capacity with company executives. They will help in decision-making, ensuring that the businesses can shift from intuition-based to data-driven management.

Support Menu Includes:

- Financial analysis and problem identification
- Management structure development
- Business and financial strategy formulation
- M&A, business succession, and organizational restructuring support
- Fund procurement assistance
- Real estate strategy

By establishing these financial infrastructures, 株式会社融資代表プロ aims to fundamentally address the structural issues faced by mid-sized companies. Their motto reflects their philosophy: “If financial management is sound, 80% of management concerns are resolved.”

Case Studies of Implementation

Case Study 1: Y Company (Parts Manufacturing)
Struggling with rising material costs and international competition, Y Company felt significant pressure even while being profitable. Through the service, they achieved:

- Increased transparency in departmental profitability
- Improved profit margins via cost reduction
- Enhanced precision in business planning
- Secured loan conditions based on desired specifications
- Established a succession plan

Their goal of having a well-structured financial system before passing it on was accomplished, alleviating succession-related anxieties.

Case Study 2: C Industry (Construction/Specialized Engineering)
C Industry transitioned away from unreliable budgeting practices. After implementing the service, they realized:

- Clear visibility on project-specific profits
- Strengthened financial awareness among employees through management accounting
- Well-founded investment decisions for diversification

The president expressed, “I regained confidence in my role as a manager.”

Case Study 3: S Company (Wholesale/Retail)
Facing pressure from major e-commerce players and fearing that their business might not last beyond their tenure, S Company was rejuvenated by establishing a coherent e-commerce strategy. After adopting the service, they were able to:

- Make strategic changes to inventory management
- Transform unprofitable sectors into experiential showrooms
- Formulate a community-centered e-commerce strategy

They have navigated a successful turnaround, clarifying their path toward sustaining their legacy for generations to come.

Closing Thoughts from President 岡島光太郎

“Leaders of community-centered mid-sized firms bear the heavy dual responsibility of pride in their companies and obligations to their communities. Nonetheless, many grapple with financial organization and succession issues, feeling the weight of the pressure that comes with the mantra ‘failure isn’t an option.’

We don’t aim to negate their experiences or intuitions; instead, we provide a compass in the form of objective data to help ensure firm decision-making. With an entry-level cost from 70,000 yen onward, we strive to support as many regional enterprises as possible, facilitating their business continuity.”