April 1, 2012

Even the best ones can go bankrupt; if business in wrong country

Construction business is in many ways a volatile business because it is entirely based on investments: somebody is investing to build something. If it is residential, somebody has to invest in houses.  If it is hospital, government is investing in public health. If it is new factory, somebody is investing in new production. It is investment related business. And in many parts of southern Europe we see that nobody is investing – not people, not government, not companies.  
Peikko has had in one European country a very good customer for almost a decade. This precaster has been technologically advanced, open for new solutions and looking for new ideas to develop the industry. It has been run by a family which has acted modestly, putting money into business and not on fancy cars. The factories have been running efficiently. The sales and marketing has been effective and well-managed. And yet, this company is about to be closing down now.
Why? If e.g. the cement consumption of this given country is this year of 2012 in the level of 1967, something is fundamentally wrong - there is just no commercial activity in this sector. And one single company just cannot do anything for it. Period.
What could be the message to the owners of this company? You have done a good job, but fighting against windmills is impossible.  Remember to have an American view, bankruptcy is merely an opportunity to learn for the future. Let´s not act in a “normal” European way where failure in business is making a bad mark for the persons involved rest of their lifes.
To see companies to bust without any reason of their own makes me angry. But this is the life of construction in certain countries in Europe at the moment.  

5 comments:

  1. “…failure in business is making a bad mark for the persons involved rest of their lives.” – Yes, please don’t act this way. Things happen for a reason, and bankruptcy does occur to let businesses learn their mistakes. However, the circumstances in a company’s external environment (and not its operations) can also be a reason. Perhaps one can either consider those circumstances first or forecast future threats to avoid bankruptcy.

    ReplyDelete
  2. Bankruptcy can be avoided simply by correctly managing the finances of a business. Know how much money is coming in and going out. The magic word is always “ENOUGH.” Never too much, nor too little. It’s just a matter of sensible spending and saving.

    ReplyDelete
  3. I totally agree with Alana. Keeping a close eye on all expenses is a sure way to prevent the need to file bankruptcy. Spending only within your limits will help keep you out of debt, and may even mean you have some money to save. It’s okay to cheat a little bit by buying some things that you want, but don’t overspend.

    ReplyDelete
  4. One important thing that you need to remember is that your competitors are always willing to go out of their comfort zone in order for them to succeed in the business. So, you shouldn’t be confident of the thought that you’re always on top. Keep on breaking barriers!

    ReplyDelete
  5. Any business should anticipate or be prepared for bankruptcy. You shouldn’t wait until it has already trapped your business and about to eat up all the properties and assets that you have worked on for so many years. Even before you face bankruptcy, you should already have a plan on how to steer your company away from it.

    ReplyDelete