The business was a Surrey-based pet store, which was originally incorporated in 2003 under a different time, It had then lain dormant for two years before the new owner took charge.
What Happened?
The director’s wife took an active role in the company as she had been seeking an opportunity where she could combine her love of animals with a business opportunity. She was confident the business could be grown by improving local support. The store was in Dorking and came with a three year lease, with an annual rent of £12,500. The business was acquired for £25,000 to include the goodwill and stock, with this sum being loaned from the director’s father.
In 2008, the director made a decision to integrate the pet store business with his other company, which provided kitchen installations, as a way of improving operations. However, the business still operated two accounts with separate banks.
Meanwhile, by early 2009, the economy was failing and had impacted on the kitchen installation company, leading to its closure. The director had taken on a consultancy role so as to remain in employment.
New Rival Lowers Prices
The pet shop though continued to trade and was doing reasonably well, however, growing sales year on year, For the year ending 31 March 2012, turnover of £220,000 was achieved with a profit of just over £35,000. But, the business then ran into difficulties, when in 2012, a ‘pet superstore’ opened and this well known retailer was able to sell many products at lower prices.
This led to a considerable drop off in sales, which also caused cashflow problems. The couple were in financial difficulties and the director’s contract for consultancy work had ended.
Customer numbers fell yet further when a nearby supermarket, that was responsible for much of the retail football, closed for a two year refurbishment. Sales were down 40% and this had a knock-on effect in terms of paying creditors. Debts built up quickly and once it was heard that an equine business in the town was planning to open a pet outlet, the director felt days for his firm were numbered.
The Solution
Advice was sought and the business was closed, owing nearly £20,000 to creditors and just over £50,000 to HMRC. Stock was valued independently and the director bought this for £2,500. Company Debt convened a meeting of creditors and the business was placed into liquidation.
