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There is a pattern with the types of manufacturing business that we help out. They are rarely new businesses and have usually been established for many years. They also tend to have a long serving workforce and the company can not afford the redundancy costs to slim the business down.
Quite often the company will be in an overpriced factory using very old equipment that can not easily be moved. They sometimes do own the trademark or rights to some good products which has encouraged them to keep going waiting for the next big order.
Manufacturing is a tough and competitive business. The businesses that tend to make money own the rights to the product they are making – so no one else can make it and undercut them or they are making a high value specialist product.
Manufacturers can have long lead times in cash flow – tying up money in wages and materials that customers want quickly but sometimes take a long time to pay for.
Older established businesses can have problems with long serving staff that they cannot afford to make redundant as new processes and machines come along that could improve the production process.
Some of the first questions we ask this type of business owner is;
There are various options to businesses that answer yes to 1 and 2 above. Earlier this year we liquidated a large manufacturing business based in the UK who were the largest producer of an artisan product sold through specialist shops. Although the business was liquidated, we sold the assets back to the directors so that they could carry on in a restructured and lower cost format. Assets are typically valued in this case by an auctioneer and often the best buyer is the current management which saves the costs of removing assets and selling them at auction.
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Licensed Insolvency Practitioner