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Will Your Employer Fold?

Posted: Monday, 16 October 2017 @ 09:35

The recent news that Monarch Airlline has folded is not a total surprise to me.

Over the years, my firm has negotiated a few exit packages for senior staff from the organisation and there were a few signs communicated to us of difficulty at the organisation.

e.g Complaints over staff relations, unnecessary penny pinching in negotiating, the organisation having a number of staff going to Employment Tribunal which are all signs of employment relations not being in the best place.

This is a perspective from a lawyer's point of view but leads me to wonder is it possible to be more definitive in determining if your employer is going to fold.

You cannot be certain but here are four signs that your employer may be about to fold.

Some other variables worth looking at. 

Negative business changes  

With respect to Monarch the company failed to change along with the industry with threats from budget carriers.

In 1995 newly founded low-cost airline easyJet set up its own base alongside Monarch in Luton and the budget airline industry grew rapidly, taking couples on weekend citybreaks, stag and hen parties to ever more exotic destinations, to ski resorts in winter, the beach in summer. The focus moved away from customer service towards those who offered the cheapest fare which impacted Monarch.

Ryan Air also undermined Monarch. 

A separate example is US video rental chain Blockbuster went out of business in part because companies such as Netflix offered streaming online films for a fraction of what it cost to rent movies.Markets change and sometimes companies struggle to deal with it. 

External Unlucky Events 

With respect to Monarch, terrorist attacks in Egypt, Turkey and Tunisia, the migrant crisis in southern Europe and more recently the weakness of the pound following the EU referendum vote have all kept UK holiday-makers away from some of Monarch's most popular destinations.

Thus the company has suffered. 

Sometimes your employer can be unlucky and to some extent Monarch was a victim to events beyond its control.

Perhaps your employer could be out of luck too.

Lack of cash flow 

It is obvious but if there is  not enough money to keep the business going then it will certainly fold unless it has a sugar daddy.

It is not just poorly run companies that run into cash flow problems.

Clearly Monarch had cash flow problems but growing companies can have cash flow problems too. A business can run out of cash when it’s growing and when it’s shrinking. 

A lack of funds was a big reason why eToys folded. In the year it went bust, the company was actually bringing millions of dollars in revenue but because the company was expanding quickly  it was also strapped for cash

Nasty rumours

When a company is on its way to going bust, people outside the firm tend to talk and rumours start flowing. In the lead up to Monrach folding investors were approached and rivals such as easyJet were sounded out about the possibility of a sale.

A new company, Shelfco, was set up, to hive off the prospective long-haul Monarch and its costly Boeing orders.

Meetings took place with the government, in the vain hope that a bridging loan could see it through the winter.

There were warning signs being communicated about what was going to happen.

Thus Monarch folding was not a total shock.

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