How to stop your organisation going the way of Dick Smith

Mar 27, 2016 | Company Liquidation, Corporate Insolvency

The end of an era has come for one of Australia’s most iconic businesses, with electronics retailer Dick Smith set to close the doors of every single one of its 363 stores on both sides of the Tasman in the coming weeks. Following the appointment of administrators in January, the chain has entered an insolvency process in an attempt to recoup as much money as possible after it failed to find an interested buyer.

While the competitive retail industry has become increasingly difficult for brick and mortar outlets in the face of rampant online shopping growth, many chains similar to Dick Smith have managed to remain profitable. So what can small business owners learn from the demise of the failed retailer?


Poor strategy breeds poor performance


The chief issue with Dick Smith’s business model since falling under new ownership in 2012 seems to be a strategy of continued growth in spite of falling profits. Speaking to the ABC about the collapse of the brand that bears his name, businessman Dick Smith chastised owners Anchorage Capital for embarking on an aggressive, unsustainable campaign of store openings.

“When it was changed to a consumer electronics business it probably could remain viable with 100 shops,” he said. “But when you have the utter greed of modern capitalism, when they opened 300 shops, basically the writing was on the wall – it’s going to go broke.”

This failure to correctly read the state of the market and effectively plot out a financial strategy, in Smith’s eyes, is what doomed the business.


Taking a more considered approach to financial strife


Should your small business find itself in a situation similar to where Dick Smith was prior to the appointment of administrators, being proactive and tackling your issues head on is the best plan of attack. Unlike Dick Smith, however, this shouldn’t mean making aggressive expansion plans, but looking carefully at ways in which your business can be improved and sustained.

One such move is, rather than waiting for a creditor to appoint an insolvency practitioner, bringing in a voluntary administrator yourself when your business is in danger of becoming insolvent. At Corporate Lifeline, we have the experience and expertise to guide you through the administration process, and will work with your company to achieve the most favourable outcome possible for everyone involved.

Don’t find yourself the next casualty of poor financial planning and guidance – speak to Corporate Lifeline today about your business options.


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