Cazoo (an online car dealer retailer) and Ted Baker (a retail fashion house) entered into insolvency in recent months, thanks to the mothball and ripple effect causing a heel and toe in this area.
An opinion by Ron Mookerjee.
But why did this happen:
Market Conditions/Competition
For Cazoo, the pandemic meant that more people were at home, which meant buying habits/decisions changed as more people could look online to find the right car for them to buy. Yet, fast-forward to today, consumers are eyeing other alternatives that have taken the market by storm.
On the flipside, for Ted Baker, the pandemic caused difficulties in maintaining payments on their store portfolio and overall supply chain issues, which caused the business to face difficulty. Similarly, Amazon and other online-led fashion brands have taken over, causing Ted Baker to seek assistance in navigating the future and leading to the appointment of administrators.
Balance Sheet Issues
Over-spending on marketing campaigns and growing too quickly on the back of an over-the-top valuation was what Cazoo was riding on; purchasing a car dealer group and other subscription-based models ultimately led to its downfall. On the other hand, Ted Baker made a significant accounting error, leading to a £58m hole from a diluted stock take and not keeping a pulse on its numbers.
Change in Focus/Leadership
Change in direction and the lack of the right processes inevitably led to the downfall of these two well-known British brands. Had the vision become aligned properly and securely, then both of these businesses would still last today.
What can you do?
Here are three things you can do ahead of the above:
i) Stake out your SWOT/PESTLE analysis to see that you are on top of your processes.
ii) Keep your financial management in check so your business’s runway isn’t running away from it. Budgets and key financial factors contribute to keeping on top of your company’s financial cycle.
iii) Align your team with your vision – if the team changes – then ensure you re-visit your mission statement.
If you have struggled or placed your business into some form of insolvency and need help getting out of the rut you are in due to signing your personal guarantees, please do not hesitate to contact me so that I can guide you forward.