With many independents citing the first year of business as the hardest, it is vital that every retailer gets the best start. Accountant Phil Mullis identifies seven obstacles that can prevent a new business from achieving its potential …
Differentiation
Other than price, what is it that sets you apart from the competition? As an independent retailer, you should be trading against your reputation – so sell yourself on that.
Lack of capital
Cash flow is the lifeblood of business, but having access to working capital can mean the difference between a well-stocked store and empty shelves. However, start-ups are high risk for creditors, so it can be hard for independents to access the capital they need to get going.
If you can’t go down the route of bank finance, then crowdfunding could be your next port of call. This can either be loan finance or equity – but you do need a decent proposition to achieve investment.
Lack of strategy
A business that fails to plan is one planning to fail – it doesn’t take long to create one and it could make a real difference. Before you open the doors to your store, ask yourself the following questions: Who is your business for? Who are you marketing to? Are you competitively priced?
All of these questions will ultimately decide your best plan of attack, so plan wisely.
Lack of succession planning
Day-to-day operations rule the retailer, and if you are the only person running your business, chances are you will know every cog in every wheel so that the shop can keep trading. But, when there comes a time to hand over your business, would you know who to turn to? If you do, how would you bring that person into the business if something kept you away from it? A plan in place could help both you and any colleagues prepare to continue business seamlessly and successfully.
“If you are the only person running your business, chances are you will know every cog in every wheel – but when there comes a time to hand over your business, would you know who to turn to?”
Lack of technological know-how
It might come as a surprise to know that whilst the Government invests efforts into keeping high street stores competitive with the online world, half of all small high street retailers and charities don’t even have a website. Lack of technological know-how is really going to be costly for many independents, who just cannot ignore the fact that 60% of adults are now using mobile phones to access the internet on the move. In terms of the bottom line, retailers could face losing out on around £12b in sales every year, so they need to be much more clued up on how to get on board the technology bandwagon.
Lack of time to be a retailer
Yes, it sounds ridiculous, but when you run a business, not only are you the shopkeeper, you’re also the accountant, the HR division, buyer, marketer and stock checker, among other things. Small business owners can benefit from increased productivity by hiring someone to help, and that could make all the difference if you need to make more time to look after other areas of your business.
It might be useful to know that the Government has introduced measures to help small businesses employ people, and you are likely to be entitled to things like relief on your National Insurance and top-up schemes to help you employ an apprentice that will cost you less.
Lack of financial management
Not setting budgets is one of the main reasons why retailers fail to keep their businesses going. You should know what your daily sales are, which items of stock shift quicker than others, and which take longer to move. Some items will have a shorter shelf life than others – fashion items, for example, can see a very quick change in trends as the seasons pass.
Therefore, if you don’t manage your stock properly you could end up with a lot of items you can’t sell. Food retailers also need to have a faster stock rotation to ensure that use-by dates are adhered to.
Having your sales information to hand, as well as maintaining regular monthly accounts, will help you to identify cash gaps much quicker. You will also know what’s doing well, what your headcount is, your payroll outgoings and how much of your capital is tied up in stock at a glance.
The key to all of these points is to make sure you work closely with your accountant, who will be able to advise you on a few areas that you may be able to scale back on. A good accountant will do more than just help manage your figures – they work at the roots of your company and can often identify problems or potential issues before you have uncovered them yourself. Time is money, so if you can get that part right you’ll be on the road to success in no time
Phil Mullis is an accountant specialising in retail, working with Wilkins Kennedy LLP, which provides a full range of accounting and business advisory services. This article was fetaured in the May issue of Furniture News magazine.
