The 4 Critical Mistakes that Lead Businesses to Bankruptcy

September 29, 2016 Posted by kingcade

We have all seen the headlines of some of the largest retailers filing for bankruptcy.  From Sports Authority to popular brands like Aeropostale and Pacific Sunwear, these are just a few of the apparel players that have filed for bankruptcy this past year.

According to experts, a variety of factors have played a part in these business bankruptcies.  Here are four missteps that lead businesses to financial collapse.

  1. Failure to adapt. While e-commerce has created an exciting new environment for brands and retailers to promote and sell their apparel, difficulties with adaptation have hurt businesses that lack the support and expertise to manage change in today’s digital and mobile arena. Teens and millennials are driving a massive migration online and are also less brand-focused than previous generations.
  2. Expanding too soon and high real estate costs. There is a good reason why closing stores is often the first line of defense in a retail bankruptcy and restructuring plan. These excessive brick-and-mortar expansions can destroy profit margins across the board, and retail analysts say U.S. retail is at the peak of over-expansion. Expensive rents played a key role in the collapse of Sports Authority and Pacific Sunwear.  PacSun successfully emerged from bankruptcy this month after reducing its debt, closing some of its stores and negotiating lower rent.
  3. Outdated business concepts. Not keeping up with the times can cost a business (and a brand) dearly. A number of businesses file for Chapter 11 bankruptcy because their concept is no longer of interest or their consumers’ tastes have changed. On the other hand, there is the issue of “oversaturation,” where a marketplace becomes too competitive and there is an overabundance of similar businesses and products.
  4. Poor mergers and ownership challenges. The past year and a half has brought a strong wave of mergers-and-acquisitions, particularly in the footwear and apparel industry. Who owns the business plays a big role. Is it a family-owned business that has a vested interest in keeping the company going or is the business owned by a private equity firm, who owns a variety of other businesses? In the case of Sports Authority it was said that new ownership played a pivotal role in the company’s downfall.

If you are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Related Resources:

http://footwearnews.com/2016/business/retail/bankruptcy-chapter-11-brands-retailers-mistakes-reasons-business-analysis-258911/

 

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