Ragtrader Live speaker Simon James from financial advisory business HLB Mann Judd, reveals how to avoid the pitfalls of administration, following the firm's management of the Lisa Ho collapse.
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HLB Mann Judd consists of... eight member firms and three representative firms, has approximately 90 partners and around 700 staff members. It represents a group of specialists providing business advice and services to a wide range of business organisations and private clients, including a number of fashion retailers.
The firm was recently... appointed to handle the affairs of the iconic Lisa Ho group, following the company's collapse into administration in May 2013.
The inside word is... The Lisa Ho collapse occurred due to a number of factors, but heavily as a result of financial mismanagement, according to HLB Mann Judd partner Simon James. "With most of these business turning over $20 million or the like, there are a lot of costs associated with making sure everything works as it should. Which makes it pretty hard, because they either have to step away from the design component or get someone in to run the back office. And that's what she [Lisa Ho] did - and they stuffed it up."
The recent wave of iconic fashion business collapses is.. Due to declining revenue and tightening of margins. “It's a tough industry out there and a lot of them don't have a massive capital basis – and the amounts of cash involved in buying product are fairly substantial,” James said. “So you've got a big cash outlay and [in a fashion business] you've got to hopefully sell through on all these things to make your money back. It's a risk. Effectively every time you buy a season, you're risking the whole company really. Because it's all the cash the company has and you're taking on additional debt to do it.”
The most common mistakes fashion retailers make is... Not knowing their customers well enough, not ensuring their OTBs (Open To Buy) are correct, discounting too much, being short of product and, oppositely, ending up too overstocked.
Learn more about how you can avoid these pitfalls and health-check your business at Ragtrader Live.