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Expand and be liquidated

The VBRA has warned repairers to watch out for the “rising turnover – reducing profit” trap as they enter the busiest time of the year. Taking on extra work could over-extend the business and even put it at risk of going into liquidation.

Ron Nicholson, VBRA director general explains: “Without careful planning in consultation with bankers and financial advisers, agreeing to take on additional work and over-extending the company's physical and financial capabilities, businesses could put themselves at real risk of going into liquidation.”

He warns that even the addition of extra courtesy car costs due to increased volumes and long lead times will impact on retained margins.

“With an overall increase in operating costs and with the risk of running up against poor cash flow, businesses should consider carefully the impact of agreeing to take on additional and uncontrolled work, so as to safeguard the security and long-term survival of the business. It is not necessary to grow bigger – it is vital, however, to get better.”

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