Companies often try to secure major contracts in order to generate high turnover and profits. There are, however, dangers associated with large contracts, especially for small firms.

Millennium Valeting Limited was incorporated by its director, Ken Welding, who had spotted a demand for the provision of car valeting services to the main franchised car dealers.

The firm was based in Warrington and the business got off to a good start. Customers were attracted to their offering and the company's turnover was increasing steadily as it successfully won contracts - two of which were of a significant size.

After about 18 months, however, the company's situation changed dramatically as it lost one of these major contracts to a competitor who was able to undercut their prices. The work was terminated at short notice which meant Millennium Valeting was suddenly overstaffed.

Cashflow difficulties quickly followed, and the director reacted quickly by approaching his Accountant who directed him towards Clarke Bell.

At this stage, it seemed that a Debt Arrangement could be agreed with Millennium Valeting's two main creditors - the Inland Revenue (in respect of PAYE) and HM Customs & Excise (in respect of VAT).

The plan was to spread the debts repayments over a period of time. Just as an agreement was to be reached, Millennium Valeting lost a second major contract - which had been generating about 25% of the company's revenue.

The impact of this loss was a gaping hole in the firm's turnover. John Bell of Clarke Bell and Ken Welding then met to discuss the implications of the Millennium Valeting's current cashflow situation.

It was assessed that the company was insolvent and should be wound up.

For Ken this meant the end of a very stressful period in his life:

"I thought we'd be able to get through that difficult time, but when we lost that second contract I had no idea what to do. Clarke Bell advised me what to do every step along the way and the staff were extremely helpful in answering all my queries."

John Bell said:

"The difference between success and failure for a company can often be attributed to one single contract - especially for smaller firms. Such fine margins can make life very stressful for business owners.

I am delighted we were able to help Ken through this difficult time."