business closing
Companies facing closure must plan ahead
Sunday, May 25, 2008
It's a truism of business that some fail — especially when the economy turns down — but companies can soften the blow to clients, employees and investors with planning and communication, experts say.
The issue moved to the forefront this week when O'Neys Salon & Spa closed after 35 years in business, leaving some clients with unredeemed gift certificates and unanswered questions about what to do with them.
A sign on a window at O'Neys Salon & Spa on Rahn Road reads 'Closed permanently. Thank you for 35 years of business.' When it becomes clear that a company is facing its own demise, owners and senior executives have a moral obligation to alert customers, lenders, community leaders and others that the business will close, said Joseph Petrick, director of the Institute for Business Integrity at Wright State University's Raj Soin College of Business.
Giving customers advance notice allows them to take advantage of gift certificates, Petrick said. And a heads up to employees gives them ample time to track down other work, especially in a tight labor market, and to make other preparations, he said. Companies that need to retain workers until the end can use bonuses and other incentives to keep them on board, he said.
Under certain circumstances, an abrupt closure makes sense, said Jay Janney, an associate professor of management and marketing at the University of Dayton.
A shutdown can be appropriate when prompted by such things as an owner falling seriously ill, a firm not having the money to pay bills or a fire or natural disaster striking a business, Janney said.
In some cases, a competitor can become an ailing business' ally.
Janney said the owner of a foundering business can strike deals with competitors to have them honor coupons or gift certificates, and then clue customers into the arrangement. Giving customers somewhere to go when you close the doors keeps bitter feelings to a minimum, he said. And sometimes companies step up without prompting and agree to accept the gift certificates.
In the case of pharmacies and professional firms such as veterinarians, dentists and accountants, the owner often sells her customer list to a competitor who then can offer their services to the client.
Petrick said that business owners have an ethical responsibility to settle their bills before they close. One option, he said, is for a company to contact suppliers and see whether they can take back inventory rather than demanding payment for it. If that doesn't work, Petrick said, a business also can try selling inventory to a competitor to generate cash to pay debts.
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ttresslar@DaytonDailyNews.com.
