home building companys go bust

[davidc4430]

i have just been reading my loacal news paper, and in particular a story about a local home builder thats gone belly up.

coast to coast homes.

leaving a lot of workers and local businesses out of pocket.

one cabinet maker is owed $16,000

then there are plumbers and electricians and painters ect ect.

this company is the 7th to go under THIS YEAR!

i dont get it, you build houses. the customer pays for the house i presume.

how do you go bust?

i'd love to know did the bosses lose their homes?

are they still driving flash cars?

[lyndal1838]

Why do you assume that the company bosses have done something wrong just because they go under?

There are a lot of factors involved in running a business that impact on the viability of that business but the owners have no control over.

How do you know the bosses are driving flash cars.....have you seen them?  Builders that I know drive vehicles suitable for use in their businesses unless they are huge multinational companies.....and they are not the sort of companies that go under.

Unless the company bosses have used their homes as collateral in their businesses they will not automatically lose them although creditors can take action in the courts to try and recoup their losses by the sale of the family home.

[springyzone]

I agree, just because a business goes under, it doesn't mean there was any corruption. 

A company can go bust if they are not getting enough business or have made mistakes in their costing, all sorts of reasons.

There is one aspect I do worry about though with some private businesses and I've come across this a few times (happening to family & friends, not to me personally).

I have a son in law who is in a trade. He is self employed but does most of his work for an extremely well known building company.

Now, it is his responsibility when he is given a job to buy the materials for that job and these can run into thousands of dollars. This is an upfront cost of his before he is paid a cent. 

Then he may work for weeks on that house, plus pay an apprentice or another worker.

Once it is finished and passed, then he is supposed to be paid.

But this particular company can be very tardy with payment. It was at the stage about 3 years back where he was owed money going back at least 6 months or more. In other words, the building company wasn't paying till about 4 or 5 or more months AFTER he completed the job.

You take a young person with a mortgage and no money coming in and with a second child expected etc & you have stress.

In my opinion, perhaps building companies should have to be like consumers and pay a certain percentage of costs to tradesmen before they are even expected to start.

[travlyn2012]

Similar thing happened to one of my friends father.

He had a small building company and employed around 8 people.

The framing company that made the house frames required payment up front and it went broke.

Friends father was unable to absorb his losses and his business collapsed.

[chameleon54]

I worked in the building industry for a number of years including sub contracting to one of S.A,s largest companies. It was owned by one of the high profile, well known S.A. Italian building families. They built retirement villages, government homes, major shopping centres and commercial premesis. They didnt pay anything until the job was completed meaning I was up for all of the materials cost and paying the employees that worked on the job with me. Luckily the building company DID pay its bill within 14 days, once the job was done, but it was a worry waiting for the cheque. 

That company went belly up around five years ago and yes the owners did take a very substantial hair cut of their private wealth. They have started up again but have not been able to get established to anything like the size they where. Pity as they where one of the responsible ones. So in answer to the original question, in this case anyway, the owners took a major hit and havnt fully recovered since.

[davidc4430]

i see companys going bust all the time

then often i read about the 'trickle down effect'

little businesses who feed of the bigger business are left 'out of pocket' huge sums of money

while those who were in control of the bust busieness ride off into the sunset scott free.

i think its about time this was sorted out

[joztamps]

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@davidc4430 wrote:

i see companys going bust all the time

then often i read about the 'trickle down effect'

little businesses who feed of the bigger business are left 'out of pocket' huge sums of money

while those who were in control of the bust busieness ride off into the sunset scott free.

i think its about time this was sorted out

---

I once remember (maybe from John Clarke - Fred Dagg) a definition of "failed entrepreneur" as "the bloke who lives in the mansion on top of the hill".

[lyndal1838]

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@davidc4430 wrote:

i see companys going bust all the time

then often i read about the 'trickle down effect'

little businesses who feed of the bigger business are left 'out of pocket' huge sums of money

while those who were in control of the bust busieness ride off into the sunset scott free.

i think its about time this was sorted out

---

To say that little businesses feed off larger businesses is an unfortunate expression.  It gives the impression that they are taking something they are not entitled to.

In actual fact many of these large businesses could not exist without the small businesses who are usually sub contractors and often one man operations.

What do you mean by sorting this out?

When a business goes under the liquidators are called in and their job is to sort it all out.  There is a set formula for distributing available funds and there is no room for any variation.

The business you mention only went into liquidation last month.....they have not even had a creditors meeting yet.  In view of the amount of money owing it could take several years before it is all done and dusted.

Many years ago I worked for a business that went into liquidation.....an ordinary suburban retail shop with only about $50,000 owing to creditors and no outstanding employees entitlements or amounts owing to the ATO.

The owner took a $30,000 hit to pay the bank overdraft.

Even a small liquidation like that took over 13 months to finalise.

[davidc4430]

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@lyndal1838 wrote:

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@davidc4430 wrote:

i see companys going bust all the time

then often i read about the 'trickle down effect'

little businesses who feed of the bigger business are left 'out of pocket' huge sums of money

while those who were in control of the bust busieness ride off into the sunset scott free.

i think its about time this was sorted out

---

To say that little businesses feed off larger businesses is an unfortunate expression.  It gives the impression that they are taking something they are not entitled to.

In actual fact many of these large businesses could not exist without the small businesses who are usually sub contractors and often one man operations.

What do you mean by sorting this out?

When a business goes under the liquidators are called in and their job is to sort it all out.  There is a set formula for distributing available funds and there is no room for any variation.

The business you mention only went into liquidation last month.....they have not even had a creditors meeting yet.  In view of the amount of money owing it could take several years before it is all done and dusted.

Many years ago I worked for a business that went into liquidation.....an ordinary suburban retail shop with only about $50,000 owing to creditors and no outstanding employees entitlements or amounts owing to the ATO.

The owner took a $30,000 hit to pay the bank overdraft.

Even a small liquidation like that took over 13 months to finalise.

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you do undertand where i'm coming from, these small businesses do 'deals' with the bigger businesses, lower prices than they charge normal consumers to get a steady influx of work.

and when things go bad the little guy can be left out of pocket big time.

i think some kind of insurance scheme should be set up so in the event of a company going belly up there is a way for the little guys to get their owed cash.

[lyndal1838]

There is an insurance scheme David, but from what I read that building company was a bit unreliable about taking out insurance on some of their jobs.

As far as paying their subcontractors.....to put it simply, it is the same as a company that goes under without having paid their employees.....tough luck....stand in line to get it from the liquidator.

It is even more difficult for the sub contractors who have paid for materials on behalf of the main business...not only have they not been paid for their labour but they have to still pay their suppliers.....that is the ripple effect that does so much damage.

No tradesmen that I know will charge more for private jobs than they will charge a big business.....the labour component is usually a fixed amount per hour.   The difference is usually in the discounts on materials and the little guy does not get a very big discount.