Imagine this scenario – your business has a major, long-time customer. The customer has been paying on its invoices, but payments have been coming more and more slowly, and there is now a substantial balance due on the account. On top of all that, you just sent them a large shipment of custom widgets on a special order.more »
As a bankruptcy practitioner, I have seen a fair share of business failures. Unless a company’s management is particularly nearsighted (or the failure is sudden and due to external forces), towards the end management teams do usually recognize that there are problems and try to correct them.more »
We have seen a lot of companies go into bankruptcy over the years, and there are some common issues with most of them. These are issues that may not necessarily show up on the balance sheet, but in my experience they are sure signs that trouble is ahead. If some of the signs on this list apply to your company, then some major course corrections may be in order. If all of the signs apply, then your company is probably doomed.
1. The owner’s son or daughter is going to take over, no matter what, and he or she is unqualified. In a lot of family-owned businesses the company falls apart in a few generations because owners conflate a management succession plan with an estate plan. Giving Junior ownership of the family company after the founder is gone is fine, but management should only consider giving Junior the job of running the business if he or she would reasonably have been hired by an objective HR manager from among a pool of qualified candidates. Unlike good looks, managerial competence is not an inherited trait.more »