Groupon Pushes One Business Close To Bankruptcy

Groupon has become a household name. Internet shoppers can use Groupon to take advantage of deep discounts from various vendors in their local area or on the web. The savings to the customer are often 50% or more. The benefit of the advertising program to the business is increased exposure of their business and hopefully return customers and increased sales.

By offering a Groupon you increase brand recognition by everyone who checks the Groupon deal that day while also encouraging people to try your product at a discount when they otherwise may not have tried at all. 

Chicago bankruptcy lawyers will tell you that it is important for a business owner to keep in mind how much business they can actually afford to garner from the Groupon deal.

According to an article in AOL Jobs a UK based bakery offered 75% off discount on her mail order cupcakes. The discount was so deep that the bakery owner estimated that each Groupon sold would cost her $3.90 out of pocket. According to AOL Jobs the bakery owner was prepared for this loss and had originally wanted to offer her Groupon more aggressively but Groupon encouraged her to focus on 15 smaller markets to start. Turns out, 8,500 Gropon users decided this offer was too good to pass up.

The bakery owner had to spend all of her profits for the entire year to fulfill these orders and hire extra staff to get it done on time. The loss totaled over $50,000 turning this advertising effort into a major loss.

The article in AOL Jobs cited that the Groupon did not have to end this way. According to Groupon they give businesses the option to put a cap on the sales or to stop the sale at any time during the day if it is selling too quickly. Groupon also claims that they contact the businesses mid-day to communicate about how the sale is going so that there are no surprises.

When the economy takes a turn the exposure brought on by Groupon can be a great thing. However Chicago bankruptcy lawyers have seen far too many business owners have to file for chapter 11 bankruptcy because they grew too quickly and could not keep up with the business. Taking too many orders can also affect the quality of the product which can hinder repeat purchases.

When taking on an advertising campaign consider your business plan. Filing chapter 11 bankruptcy is similar to filing for chapter 7 or chapter 13 bankruptcy in Chicago. The business will either be dissolved with assets used to pay off creditors or restructured so that debts can be paid off over time.

Chang and Carlin
The content found on the Chang & Carlin site is not legal advice and is purely for informational purposes. The information contained herein is not a substitute for the advice of an attorney and does not create an attorney-client relationship. If you are interested in obtaining information about chapter 7 bankruptcy, chapter 13 bankruptcy, foreclosure services, real estate legal services, you are encouraged to call our law firm at 866-790-8601 a Free Legal Evaluation. Chang and Carlin serves clients in Chicago, Schaumburg, Joliet, Warrenville, Waukegan, Illinois.