Why do some companies fail while others prosper?

Blame the market, the government, intense competition, or even bad luck. Whatever the reason, the fact is Leather Merchants & Wholesalers companies do fail! A new report by financial analysts Plimsoll Publishing gives a unique insight into some of the real reasons why one in five UK Leather Merchants & Wholesalers companies are failing, while one in two prosper. The analysis has looked at the industry's top 174 UK companies and placed each of them into one of five financial ratings. The ratings are based on an assessment of the overall financial strength of the company plotted over a 4-year period. For the 74 companies listed in the 'Strong' section, the analysis is quite an accolade. These companies are simply well managed, averaging glamorous 8% margins and delivering these largely debt free. Indeed 42 of these companies are now in the 'Strong' section for the 2nd year. They prove that once you have a solid business where management is in control, you can maintain this success irrespective of market conditions. Rating Companies Pre-tax Margin: Strong 74 6%; Good 17 3%; Mediocre 25 1%; Caution 20 1%; Danger 38 -9%. As for the 38 companies listed in the 'Danger' section of the analysis, of which 17 are new entrants, their immediate reaction might be somewhat different. Many of these companies are hampered by a combination of high debts and low margins. On average these companies make only -9 margins and carry 4 times the debts of the average 'Strong' company. They are certainly most vulnerable to financial collapse. David Pattison Senior Analyst at Plimsoll maintains: 'Very often it's a question of the management initially accepting that the business has a problem. They must then take action today, rather than next week or the week after.' There is no doubt that the likelihood of a company failing increases as its financial rating deteriorates. 84% of UK companies currently in receivership were rated 'Caution' or 'Danger' up to 2 years prior to their demise. Pattison continues: 'If the pundits are right and the UK market tightens towards the end of the year, then there is no doubt in my mind that the 38 companies already in the Danger section of the analysis will take the brunt of this downturn.' The analysis is aimed at busy managers that need to apply this kind of detailed analysis to their daily thinking, understanding where the market is going and how the financial standing of their competitors, customers or suppliers will affect their own business in 2005 and beyond. Copies of the 174 company, 319 paged analysis are available in paper and CD versions (priced at £305 and £499+vat respectively). Call Plimsoll Publishing on 01642 626400, or visit [http://www.plimsoll.co.uk] for more details. Readers of Leather International can receive a 5% discount.