Dropping back in: SBR gives youth social enterprise a fresh start

When rapid growth, COVID-19 and devastating floods left a social enterprise working with young people under financial pressure, a Small Business Restructuring provided a pathway to reset its finances, preserve jobs and keep its community programs running.

Case study

Industry: Social enterprise / youth and community services
Location: NSW-based, operating nationally
Solution: Small Business Restructuring (SBR)

Background

Using skateboarding to build stronger communities

For The Totem Collective, skateboarding is about much more than learning tricks.

Established in 2010 and based in NSW, the social enterprise uses skateboarding and art to help build stronger communities. Working with local and state governments, youth services and community organisations, it delivers free skateboarding programs, events and cultural initiatives across Australia. From metropolitan centres to regional and remote communities, its programs are designed to break down barriers, build confidence and self-esteem, encourage inclusion and create opportunities for young people to connect.

That impact has been reflected in programs around the country, with Totem helping young people build skills, confidence and connection – including in regional communities and among girls and young women.

Over the years, Totem expanded its reach nationally, combining professional advice and planning with the delivery of skateboarding and skate-art focused workshops and events. By the time Jirsch Sutherland became involved, the business had annual revenue of approximately $400,000 and employed four people. However, a combination of rapid expansion and successive external shocks had placed the business under mounting financial pressure.

The Challenge

When rapid growth collided with COVID and floods

The Totem Collective had grown quickly and, with that growth, its overheads had increased.

Then came COVID-19. Travel restrictions and limits on gatherings had a direct impact on the business’s ability to deliver its workshops and events, particularly in regional and remote communities. Major floods in the NSW Northern Rivers region, where Totem is based, subsequently created further disruption.

“The result was a business with an established national operation and an important social purpose, but a financial position that had become unsustainable,” explains Jirsch Sutherland Partner Trent Devine.

The company’s challenges included:

• Rapid expansion: Growth had driven overheads higher and placed pressure on the company’s cost base.
• COVID disruption: Travel restrictions and limits on events affected the delivery of programs, particularly in regional and remote areas.
• Natural disasters: Flooding compounded the disruption and financial impact of the pandemic.
• Mounting financial pressure: The cumulative effect left the company needing to address its debts and establish a more sustainable financial footing.

“It was a viable business that had been hit by a series of events largely outside of its control,” says Devine. “The cumulative impact put enormous pressure on the business and left it carrying a level of debt it could no longer manage. However, there was still a good underlying business worth saving. Totem had an established operation, employees and a strong social purpose. The challenge was finding a way to deal with the legacy debt while giving the business the opportunity to recover and move forward.”

The Solution

Restructuring the debt while keeping the business operating

Devine was appointed Small Business Restructuring Practitioner and worked closely with The Totem Collective’s director and advisers to assess the company’s position and develop a restructuring plan.

Small Business Restructuring allows eligible financially distressed small businesses to restructure their debts while the directors remain in control of the company and continue trading. For The Totem Collective, that ability to keep operating was particularly important. The business could continue delivering its programs, retain its employees and maintain relationships with councils, community organisations and the young people it supports while the restructuring was undertaken.

“SBR was particularly well suited to this situation because the underlying business remained viable,” says Devine. “The objective wasn’t to dismantle the operation; it was to address the debt that had built up and give the company a sustainable platform from which to move forward.

“We worked closely with the director and his advisers throughout the process to develop a proposal that balanced what the business could realistically afford with delivering a meaningful return to creditors – and allow the company to continue trading.”

The Outcome

Four jobs saved – and the wheels keep turning

The restructuring plan was accepted by creditors, allowing The Totem Collective to draw a line under its legacy debt and focus on rebuilding and stabilising the business.

The process successfully achieved:

• Business preserved: The Totem Collective was successfully restructured and continues to operate today.
• Creditor return: Creditors received 20 cents in the dollar under the restructuring plan.
• Jobs retained: All four employee positions were preserved.
• Greater stability: The restructuring gave the business the opportunity to reset its financial position following several difficult years.
• Community impact preserved: The business could continue delivering skateboarding and skate-art programs to young people and communities around Australia.

For Totem’s director, Nigel Cameron, the outcome meant being able to look ahead again.

“What a wild ride! You guys really did support me to save my business. [It] is recovering and stabilising, and it wouldn’t be here without your help. I’m excited to see where it takes us!” Cameron wrote in a thank you email. “I appreciate the work you contributed to this. Just want to thank you all immensely.”

Devine says the nature of The Totem Collective’s work made the successful restructuring particularly rewarding. “A successful restructuring is always a good outcome, but this one had an added dimension,” he says. “Jobs were preserved, creditors received a return and, importantly, a business that creates positive opportunities for young people and communities around Australia was able to keep operating.”

Beyond the board A skateboard might get a young person through the gate, but for The Totem Collective, what happens next is what counts. Since 2010, Totem has taken its Skate, Create, Empower philosophy across Australia, using skateboarding, mentoring, art, and creative workshops to build confidence and connect young people. The demand spans metro areas and country towns alike. From Sydney’s inner west and Port Kembla in the Illawarra, out to Mudgee and Gilgandra in central western NSW, Leeton in the Riverina and Glen Innes on the Northern Tablelands, Totem’s reach extends across communities large and small. In border towns such as Howlong and Corowa, events have drawn young skaters from as far as Wodonga in Victoria, while Totem has also taken its programs further south to Bendigo in central Victoria. These experiences go far beyond learning tricks. Totem’s Skate Create Capture program in Mudgee combined skateboarding and mentoring with photography, filmmaking, and storytelling. On the NSW Mid North Coast, Totem partnered with young skaters and Port Macquarie-Hastings Council to co-design Keep It Clean – a campaign using skate culture to foster community pride and encourage young people to look after local skateparks. At its Youth Week launch in Lake Cathie, nearly 60 young people gathered for skating, mentoring, and the campaign rollout. The impact extends behind the scenes, too. The business engages around 25 subcontractors, from female and male Australian Olympic skateboarders and emerging amateur and professional skaters to photographers, videographers and graphic designers. For some of the younger people coming through the industry, that support extends beyond providing paid work: Totem helps them obtain Working with Children Checks, provides training and guides them through the practicalities of setting up an ABN, invoicing and working for themselves. In doing so, it’s helping turn a passion for skateboarding and creativity into real employment and career opportunities. “Beyond the direct programs, Totem is also creating jobs and supporting careers – for both up-and-coming and established people in the industry – helping them do what they do best,” explains Totem director Nigel Cameron, who brings more than 25 years of youth work and skatepark design experience to the organisation. “Our programs are designed to shine a light on young people and families in both regional and metro areas, no matter where they live,” he says. “We give them a space to skate, create, build new skills, make friends, and put themselves out there in a safe and supportive environment. Every young person deserves a moment to feel empowered, and we give them that opportunity.”