Corporate Insolvency – Trading in Administration
We have recently had a successful trading period as Administrators of a retail business. Trading a company in Administration is largely uncommon. However, it is useful and beneficial to facilitate a sale as Going Concern or an exit via CVA.
The business Recovery team at CG&Co recently traded a company in Administration for just over 6 weeks. The company was in the retail sector and had latterly become 100% based online. This made for a different style of Trading Administration to that which we had processed historically. E-commerce retail companies operate in an entirely different manner to one which has a physical store.
The key takeaways from this particular case have been listed below:
- Retaining and managing the management team was essential in utilising their knowledge and experience of the business, its customers and suppliers.
- Pricing has to be constantly reviewed based upon the number of sales, the amount of outstanding stock and of course, the profitability of that stock.
- With the above point in mind, it was also essential to ensure that the website was up to date with the stock levels of each remaining item.
- ROAS/ AOV and marketing specific metrics were new to us on the most part, meaning that we had to learn, adapt and monitor specific areas of the business to inform marketing spend, strategy and therefore, pricing too.
- A daily review of the previous day’s sales was carried out to establish whether continued trading was justified despite some loss making days.
- Customer service and communications are pivotal to an online retail business. So, questions regarding returns, damaged goods, refunds and non-deliveries were also heavily monitored. We also had to seek legal advice regarding the returns policy. This was to establish what would be appropriate given the circumstances.
- We provided an undertaking with our 3rd party logistics provider and scruitinised their invoices to ensure that their changes were correct.
- Shopify, Klarna and PayPal were the three most used platforms by the company. There were clear communications and battles to get payment from them for post administration sales.
This was all completed successfully whilst we continued to market the company, negotiating and completing the sale of the business and assets too.
Trading periods in Administration is just one of many considerations and options available to distressed businesses.
If your business is experiencing difficulties and you’d like to initiate a free, non-committal conversation with an Insolvency Practitioner, please contact nick.brierley@cg-recovery.com
