It’s better to quit now and start again than ruin your reputation fighting a losing battle

The collapse of HMV, Jessops, Blockbusters, et al has led to many musings about the terrible luck these brands have experienced.

Luck, schmuck.  This is my thirteenth column as Madame Guillotine. I
have actually found the number 13 to be more lucky than not. Typical, I
hear you say.  It’s true, I seem to be more than a little contrarian in
my thinking and my anarchic, bloody-minded tendencies are increasing,
not softening, with age.  So there.

My already limited ability to hold my tongue seems to have all but deserted me recently. And here’s why.

I know a business. They are not yet clients so don’t try to second
guess who they might be as you won’t. This business has run into a cash
problem. They are robbing Peter to pay
Paul, hoping that they will get enough new cash in to pay HMRC and PAYE
– not to mention payroll and their other creditors, before they get a
visit. They are trading insolvent.

I told them six months ago that they were in an untenable position.  No amount of money juggling could close
the gap. They ignored me so I refused to work with them. The directors
are now, frankly, on a knife edge, morally, legally and psychologically.

And here’s the thing. If they had gone into administration when I
told them to (they were terrified of doing it) they would have built up
relatively small debts and could have protected their most essential
suppliers from further losses.  Most importantly, post administration
they would have been in a position to restructure the Phoenix business
and keep it going – better managed (one hopes), leaner and with more
focussed products and services.

Yes, some people would have lost out, including the government. But
the business would have been able to rebuild, keep most of the staff and
grow again as a viable entity, thus eventually paying more VAT and
PAYE.

You see, quitting is not always the disaster people think it is. Quitting too soon can be. Quitting too late always is.

As it is, a team of us may be able to pull this thing out of
administration and rebuild it – but a lot of damage has been done. Not
least to the management team, who simply imploded and will never again
be looked upon as competent senior management by any potential new
owners.

It takes guts to build a business. It takes real balls to take on board harsh realities, retreat and regroup.

And so, to all you brave entrepreneurs out there who are juggling cash flow
and fighting off creditors, tight margins and stale markets, remember
that most of you have a huge advantage over the HMVs and Jessops of the
world. You’re smaller, you can act faster, you can remake yourselves
quickly.

So never mind superstition.  Make your own luck.