Company insolvency: even supermarket giants can get it wrong

The companies behind Tesco’s second hand car business – Auto Online Limited and Carsite Limited – went into administration earlier this month, after Tesco took the decision to close its Tesco Cars business. It appears that the supermarket giant decided that selling cars isn’t one of its long term goals and is the latest blow to the retailer following poor Christmas trading and a profit warning to shareholders. This isn’t the first time that Tesco has taken the decision to close ventures that don’t live up to expectations: an attempt to set up a property sales business was challenged by estate agents and was eventually shut down.

So if Tesco gets it wrong, what chance do ‘ordinary’ businesses have to get it right? How can business owners avoid company insolvency?

One can argue that Tesco is under pressure from shareholders to continue growing and the only way to achieve that growth is to diversify into new areas. This is a potentially risky strategy, as a well-known groceries brand may not be sufficiently ‘elastic’ to be successful in completely new areas where the brand is unfamiliar with consumers and where existing players put up a spirited resistance to the newcomer.

But it clearly illustrates how even massive organisations, with huge resources and experienced management, can get things wrong.

No-one starts a business with the expectation of failure, but even careful planning and diligent management may not be enough to save a business from hitting the buffers. Many factors can affect a company as it grows and unexpected events can cause problems for any business, big or small.

But the most important thing is knowing when to stop, or at least when to pause and take stock of the situation. In Tesco’s case, they took the decision to cease trading and appoint administrators to deal with the failing car business. No doubt they took advice on what the options were and the administrators may find a way of rescuing some, or all, of the company.

We are often approached by business owners who think that they have come to the ‘end of the road’ and the nice part of my job is where we can rescue a business rather than merely close it down. Sometimes there is no option but to close the doors, but frequently there are ways to breathe new life into a struggling company.

So if your business is struggling to survive and facing insolvency, think of us as the business breakdown service – we identify the problem and provide options to fix the problem – helping you get back on the road. To find out what the options are for your business, call us today on 01709 331300.

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