childrens timberland boots Four signs your employer is going down the drain
When Jonathan Cutler joined eToys in the summer of 1999, he thought he might be at the company forever.
The Los Angeles based online toy seller appeared to be one of the dot com bubble era more promising technology companies. As director of communications, Cutler fielded an ever increasing number of media requests.
was incredible, he said. was a great euphoria in the space and I had a chance to be in an industry and a company that was growing up in front of me. than two years later, the company shut down and Cutler was searching for work. Like many web based businesses back then, eToys wasn turning a profit, which scared off investors. Remember the dot com bust?
Cutler knew that things were bad for months before the firm was shuttered the mood at the office soured and there were layoffs yet he stayed until he got his pink slip and felt terrible when he walked out the door for the last time.
all felt hugely defeated, said Cutler, who now runs JCUTLER Media Group, a communications firm he started in 2006. gave our blood, sweat and tears and we truly believed in it. are plenty of managers and executives with whom Cutler can commiserate. Many once mighty companies Blockbuster, Compaq, Enron to name a few have either closed their doors or been gobbled up by competitors, leaving surprised employees jobless and confused.
Most recently, US cupcake chain Crumbs Bake Shop surprised employees and customers when it said 7 July it would close. The following day, doors of the company 42nd Street store in New York were locked and the store was dark.
Sometimes it obvious that a company is going under. Yet employees often have little or no idea that their company is truly in trouble until the end.
She was responsible for launching a frozen food division. By 2007, frozen foods made up about 50% of total revenue for the multinational company.
At first, Boghossian was living the high life. She travelled across the country in a private jet, she had big expense accounts and her division was growing exponentially.
Then came the Great Recession. Nearly half the staff at Contessa was laid off between 2009 and 2011 and the company began cutting back on benefits such as matching employee 401(k) retirement contributions, spousal benefits and free coffee in the office.
Contessa ran into problems for multiple reasons. One of them, according to Boghossian: The company failed to change along with the industry.
During the recession, more restaurants started selling their own frozen meals. If people wanted to save money by not eating out, they went to the grocery store for a lower cost treat a version of their favourites from places, such as PF Chang said Boghossian.
In just four years, Contessa share of the frozen food industry fell from 80% to 25%. Its combined woes led Contessa to be sold to a private equity firm in 2011.
were number one, but all of these top restaurants made us irrelevant, she said. didn change, we didn get better, we didn innovate. upheaval disruption is hardly unique to food companies. US video rental chain Blockbuster went out of business in part because companies such as Netflix offered streaming online films for a fraction of what it cost to rent movies said Melissa Sonberg, a Montreal based executive in residence at McGill University Desautels Faculty of Management.
was technological disruption that people could see coming at them way back, she said about Blockbuster. pretty easy to see the impact of disruptions like this once it becomes obvious. signs
By 2009, Boghossian saw other signs of trouble.
Production fell it started making products three days a week instead of five and went from two shifts on those days to one and never recovered.
I saw that production was down and continued to get worse not better, that is when I knew the company was in serious trouble, she said.
There another way to tell that the company issues go beyond a sector downturn or recession: it the only one of its peers having problems, said Sonberg. If its competitors are thriving and the economy is growing, then whatever ailing the business is likely company specific.
Cash flow falls
As one of KPMG London based restructuring partners, Roger Bayly has made a career out of identifying troubled companies. His one sure fire way to tell if a company is in trouble: it is haemorrhaging cash.
is king, he said. If there not enough money to keep the business going then it will certainly fold, he said.
It not just poorly run companies that run into cash flow problems, Bayly said. Many promising fast growing operations have also folded because they didn have enough cash to keep expanding.
business can run out of cash when it growing and when it shrinking, he said. not so much about revenue, it about what really happening to their cash. easier to see cash flow at public companies since they report revenues, profits and cash flow numbers. Start by looking at the company quarterly cash flow statement. This document details what cash is coming and what going out. You want to see more dollars entering the business than leaving it, said Bayly.
View image of This cupcake chain shuttered its stores virtually overnight/ (Andrew Burton/Getty) (Credit: Andrew Burton/Getty)
A lack of funds was a big reason why eToys folded, said Cutler. In the year it went bust, the company was actually bringing millions of dollars in revenue, but because the company was expanding quickly, it was also strapped for cash, he explained.
irony is that we were running out of money and couldn raise additional funds, he said. with that revenue, the company was not going to make it. rumours When a company is on its way to going bust, people outside the firm tend to talk and rumours fly, said Sonberg.