3 lessons we can learn from Carillion's collapse....

February 1, 2018

I have to say that I was really shocked to hear when Carillion went under.  To go straight to liquidation means that there was NO HOPE for that company.  Shocking... and horrifying given the length of the supply chains relying on Carillion delivering on thousands of contracts around the country.


Being a practical person, I accept that "what's done is done" and have no interest in going into forensic detail as to who was to blame.  But what I do find interesting are the lessons that we can all learn from the fall from grace of this formerly revered industry leading company.  Let us remember this and learn from it.  Here are three clear lessons I can see:


1. Know who you're doing business with.

How the government could have missed the warning signs of "multiple profit warnings" I will never know.  Would you enter into a new contract with a company about to go bust?    One of my clients was asked if they'd like to renew their 10 year lease terms... good thing we checked... the company was "In liquidiation"


Always take a peek at what info you can glean at Companies House.


2. Price your bids properly

It was illuminating working for a US company a few years back.  When they get a bid in... they do a proper solid financial analysis to really properly check what the profit margins might be taking a realistic view of what might happen on the contract.  Only then do they consider if they should bid for the contract.  They might not bid as much..... But they can deliver what they win ... and make a sensible margin on it too.  Definitely a smarter way of working.


3. Ensure you have positive cashflow and profits

It might seem obvious but without positive cashflow and profit your business is going nowhere.  This is BASIC.  You can't pay people or buy materials with money you haven't got.... oh h


old on!  Yes you can!  You can take on more and more debt... that will drown your business.  


Be sensible - keep your overheads low and do what you need to (legally of course) to get the contracts in so you can make a decent margin.  If that financial equation isn't working - go back to basics, look at your business model and how you're running your contracts. 


If you need help with the "legal stuff that no one really understands" around your bids and tenders (particularly where termination, insolvency, collateral warranties, step in rights are concerned...those clauses real important now right!) contact me at nicolina@andalllegal.com  




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