San Diego residents may remember a recent post here discussed the pending bankruptcy filing of Golfsmith, America's largest golf retailer. The bankruptcy filing apparently became necessary due to a variety of reasons, from the downturn of interest in golf impacting sales to the fact that Golfsmith had nearly $200 million in debt. However, even as Golfsmith prepared to file for bankruptcy, it was obvious that there was a party interested in acquiring the company: Dick's Sporting Goods, America's largest sporting goods retailer.
In Part I of this two-part series, we began to take a look at some of the reasons why businesses end up filing for bankruptcy. Part I examined two of the most crucial reasons: the failure to adapt and the mistake of expanding too quickly. Here, in Part II of the series, we will look at two more concepts that are commonly tied to a business bankruptcy filing: faulty business practices and problems with ownership.
Many of our Escondido readers are probably used to seeing news reports about business that file of bankruptcy. Indeed, many previous posts here have detailed some examples of companies that file for Chapter 11 bankruptcy - businesses like clothing retailers and sporting goods stores. Some people may think, "Oh well, another company that wasn't selling something that people wanted to buy." But, is there more to it than that? How do businesses end up filing for Chapter 11 bankruptcy? There is no short answer, but there are some concrete possibilities in almost every case. In Part I of a two-part series, we will examine some of the possible reasons.
There is no shortage of golfers in the Escondido area, which is why many of our readers may be surprised to hear that the largest golf retailer in the world is reportedly on the precipice of filing for Chapter 11 bankruptcy. The report comes on the heels of a reported failure of the retailer to complete a sale of the company.
A previous post here from a few months back touched on clothing retailer Aeropostale's Chapter 11 bankruptcy filing. At that time, the business had hoped to keep some of the company's stores open throughout the bankruptcy process, and exit in a stronger position to maintain profitability. However, recent reports indicate that this may no longer be an attainable goal.
When a company begins the process of filing for Chapter 11 bankruptcy, there is no doubt that there could very well be quite a few entities that have an interest in how the case is handled. The Chapter 11 bankruptcy process allows a business to craft a plan for how to address debt and how to reorganize to return to profitability. Creditors, in particular, will have a keen interest in seeing that the bankruptcy process is successfully completed.
For many businesses in Escondido, there will come a time when a major change needs to be made in order to sustain the viability of the company. In some cases, the change will be in marketing - reaching different customers by using different ideas. For others, the change may be in what the business sells, perhaps to adapt to evolving customer preferences. But, in the most serious circumstances, the changes may address creditor issues by pursuing debt relief with a Chapter 11 bankruptcy filing.
For some residents in California, dealing with minor financial challenges is common; however, these are often easily overcome with proper budgeting or adding another job to his or her life. When a small business owner deals with financial problems, this is frequently owed to business debts, personal debts or both. Depending on the severity of the situation, some circumstances require a business owner take more serious steps, such as filing for bankruptcy.
A recent post here discussed the Chapter 11 bankruptcy filing being pursued by California-based clothing retailer Pacific Sunwear. Now, reports indicate that yet another clothing retailer geared toward the tastes of teens and young adults is making a similar move in a bankruptcy filing.
Several previous posts here have mentioned how important it is for businesses to be able to adapt to the times and adjust to the changing tastes and habits of their consumers. Those companies that do not make the correct adjustments may face declining profits, rising debt and stagnant sales. And, as a result, companies in that position may contemplate a bankruptcy filing in an attempt to right the ship.