The recent collapse of Dick Smith made headlines in newspapers and prime time TV for good reason, it is a household name in Australia, but why crash and why now? It’s only a few days after New Years Eve and we’ve just started 2016? Here’s my take:
What Is Voluntary Administration?
Firstly, in case you don’t know, voluntary administration is basically when you put your hand up and say we are in a world of hurt and need to appoint external administrators to run the business, with a goal to keep trading and make a recovery otherwise look to get the business into the best shape to make an exit, pay creditors and hopefully distribute a little something to shareholders.
Voluntary Administration is different from a Liquidation in that a Liquidation means to sell off all possible assets and determine who to pay with the funds that have been realised. A Voluntary Administration aims to trade through and come out the other side with a viable business.
So, What Happened To Dick Smith?
Well I think this one website sums it up quite well: kogan.com
What I mean by that is that kogan.com is one of the most well known and successful online electronics marketplaces in Australia selling the same range of products as Dick Smith. Consumers for quite some time now want to buy online, read reviews online, have it delivered to their front door and return it if need be. BestBuy.com provides a similar service in North America.
Dick Smith has (read: had) 390 stores across Australia and New Zealand. That’s a lot of rent to pay.
Back in the day, let’s say 20 years ago, Dick Smith was the local electronics store in Australia you would visit, but times have changed, consumer buying habits have changed, and Dick Smith failed to ride the innovation curve of this sector and is now paying the price.
The Administrators have not reported exactly the reasons behind this collapse but did announce that Dick Smith performed poorly over the Christmas retail period despite offering special deals and discounts to entice buyers.
How Do I Avoid My Business Collapsing?
Well you want to have a remarkable product or service and there needs to be a sizeable and long term marketplace for your product. You need to be checking in with consumers and asking for feedback, providing exceptional customer service plus staying on the bleeding edge of your industry and the markets and where they are headed.
A great example is bookkeeping, not that long ago a large chunk of bookkeepers billable hours was for keying in and coding banks statements. So they would have to sit there and go line by line through a bank statement and enter each bank transaction in the accounting software. With the advent of bank feeds, accounting software like Xero can link to your bank account and import each bank transaction, which has killed this component of bookkeeping.
A smart bookkeeper would have been aware of this technology hitting the marketplace, accepted the fact that it will impact their revenue and cashflow quite significantly, and made the decision to become an expert in these products and helping businesses transition over, providing support services plus pivoting there service offering to helping businesses manage their cashflow and chase debtors.
The performance and longevity of your business is the corner stone of our Virtual CFO style offering and helps to ensure your business keeps kicking goals and achieving the type of success you wish for.
To learn more about growing a business
If you want to jump in the fast lane contact Brad here and he’ll run you through the gauntlet of whether you are the type of business owner I can truly help.