Why do businesses die12 Sep 2014 22:32
Simple question, it is not about accounts that is a retrospective snapshot......It can give you an insight but never the true reasons....often misread and interpreted from the perspective of the individual.....eg an accountant, a salesman, an investor, a gambler etc....
Because accounts are a snapshot and often compiled to best present a position at a year end, IMO never read accounts without looking at trends and motivation and context.....
Context is market, legislation, global trends, management, competition etc
Businesses die usually because they do not adapt or evolve through having a CIP and a strong strategic management.
In this case the market and product are out of step with current trends, which have been evolving over the last 2-3 years.....clearly evident in the increase in online shopping and advertising and the effect on reduced footfall and i am guessing the mix of shoppers.....possible legislation in Germany and the low profitability of the UK business...
But the management have not evolved a credible strategy early enough is quite clear.
The management have also one very concerning shortcoming IMO....Control, coordination ...this was clearly evident in the prior figures where the announced an adjustment to the accounts of £1m +......over a very short timescale....that was the clear signal that something fundamental was wrong.....together with the directors sells during the year.
They clearly do not have day to day control or knowledge of how their business is performing, without that how can they drive a clear strategy, control costs, expand sales, without knowing your margins.....IMO this exhibits signs of a weak rudderless management and worse a business with very fragile internal processes....and a direct threat to there survival in the future unless they change.....
Business die if they do not evolve continuously, innovate..... And that means management.....and the management remains largely the same.....
Usually management buys are a good sign, but only if it is not the 'Blind Faith' sort that i fear this maybe....
Well, having said that i hope i am proved completely wrong and this is a turnaround situation.....but i will not be holding my breath unless the management changes and they innovate and present a coherent internal and external strategy and open up new markets and opportunities....otherwise they will run out of cash and time.....
GLA...