If you want your business to succeed, you’ve got to be deliberate about your strategy. You must know that businesses do not just succeed, that they are made to succeed! You must know that though money is important towards the success of a business, it is not the main or the only reason why businesses succeed or fail; many other factors are.
As experienced Business Consultants who have Set Up new businesses and/or helped Turn-Around several Struggling and Ailing Businesses, factors responsible for retail business failure are many, some are very critical and some, less critical; both are however important and must be deliberately and consciously addressed to avoid falling into the failure trap that bedevils many retail business. It is those factors that this article seeks to address
According to the Australian Bureau of Statistics Research report of 2013, a staggering percentage of small businesses fail in their first 4 years of existence. Also, a finding by Patricia Johnson and Richard Outcalt of the Retail Owners Institute, states that “one retailer failed every eleven-and-a-half minutes, 24/7, 365 days, on average, last year alone in the U.S”, across industries and sectors. Ordinarily, it would seem like retail businesses shouldn’t easily go out of business, I mean they are always selling, they sell every-day-household use- items and cash keeps flowing in! This may be true to some extent but from our experience, no retail business, no matter its size, customer base or available resources, is insulated from failure. Failure factors,that could easily endanger your business capital and well-being, must be addressed early on and continuously too!
Killer No.1: Incomprehensive Pre-investment Research Plan
One reason many retail businesses fail is because the owners do not take pains to conduct adequate and comprehensive research into the viability or otherwise of the business they intend to invest in. Many business owners invest in some business because their friends or colleagues are investing in that business. Others invest because they “feel” the business is very okay and profitable. This is very misleading and risky! Investing in a business on the basis of “gut feel”, instinct or heresay, is the most disastrous decision any entrepreneur can make. Business is empirical and your figures must be derived from good research and reality!
Design and implement a pre-investment research plan. A pre-investment research plan or business plan is your business roadmap and compass, a most important guide to help an investor make informed decisions about his /her investment! The pre-investment research plan spells out in detail, every aspect of the retail business you want to invest in right from capital-cash and assets- to peopling and resourcing, site/location modeling including parking lots, traffic control, physical and logical security arrangements, layout of your retail shop, risks and mitigating factors, Sales, Cash Flow projections, Purchasing and Procurement Processes, Creditor Profiling and Management among others.(Sign Up Here) to receive our high value Retail Business Emails right inside your mail box every morning! You can’t fail if you follow our guide.
A Business Plan is best written by an experienced business consultant. A consultant will give you a professionally written document that will actually aid your investment decision making thereby protecting your capital. Even if you know all the rudiments of a business, it is safe to engage a business consultant, because experience matters. Ensure however that the consultant is experienced in the area of business you want to him to write an investment plan for you. Ask for references on verifiable projects successfully completed in the past. This will help limit costly experimentation that comes with lack of relevant experience on the part of your would-be consultant.
Killer No. 2: A Weak and Inefficient Leadership or Management
The success of any organization is as good as the quality of its leadership. The fact is that successful organizational leadership requires 90% perspiration and 10% inspiration”(Thomas Edison,1847-1931). This is the only way to provide a “presence” and a vision! A dysfunctional leadership can actually only lead your organization aground. If you do not want your retail business to fail, provide good quality leadership or get someone or a team to do so for you because success is never accidental and is also never cheap!(Sign Up Here) to receive our high value Retail Business Emails right inside your mail box every morning! You can’t fail if you follow our guide.
Hire and retain the right people to ensure you do not fail! The right people are people who have the right skills, experience, ownership spirit and empathy for your business! Right people are people with the right attitude towards your organization, its customers and shareholders. The right people are a rarity these days especially in retail business circles; ensure you retain them as your strongest assets.
As the owner, you also need to honestly assess your people and resource management skills. You need to ask yourself: do I have what it takes to run this business successfully? If you do not have the skills (you will always know if you do),then get someone or a team to help you with the day-to-day management of your retail business, step backwards to the background and run things from there. That you are the owner of the business or have had some years of work experience does not mean you are the best person to run your retail business.
From our experience, we have discovered that A Weak, Inefficient and directionless Leadership will cause a business organization to fail faster than any other factor. If your business is small and you are managing it full-time, you are probably the Chairman, Managing Director, Accountant and Sales Manager, or maybe you have some people working for you, whatever your case, you need to provide a presence, a strong leadership that will ensure that things go well and people do what they should do ,when they should do them! You and your team must be able to envision the future, cultivate the ability to innovate and swim with strong competition and unfavorable external policies and pressures.
Killer No 3: Poor and Inadequate Location
Location is where you site your physical retail business while positioning is how you site your business in your customers’ minds. Both are important in enabling you to hit increased sales, which is key to your success. If you do not sell, you won’t cover your costs let alone make any profits! This is why choosing a good physical location for your business and positioning the business well in the minds of your current and potential customers must be a paramount strategy for you.
To sell more, choose products that are regularly needed by your environment and customers, whether your own a physical store or an online shop!
Citing your physical shop in a central or high traffic location where there is high customer footfall is central to your by retail business success or failure! A good location may mean a busy neighborhood or street, a major road or a large shopping environment with ample shopping and parking spaces. The ambience, serenity and security of your store or mall is very important in getting you high customer foot-fall and sales!(Sign Up Here) to receive our high value Retail Business Emails right inside your mail box every morning! You can’t fail if you follow our guide.
Killer No 4: Poor Positioning
Positioning is having a larger share of your customers’ minds than your competitors! Having a greater part of your customers’ mind than their pocket share should be the core of your customer service strategy. This is because most retail FMCG businesses, within the same industry and class with you, sell the same daily-use goods. It is either you are selling or will be selling the same types or category of goods that your competition is/or will be selling.
Ask yourself why a customer should buy from you consistently rather than your competition, then device customer service practices that will encourage loyalty and repeat business. Good customer service practices will help position your business uppermost in the minds of your customers. It is the ability to retain long-term customer loyalty that guarantees sustained profitability.
Ensuring that your products are of trusted quality and fair prices will help you gain greater loyalty because even when your prices may be slightly or significantly higher than that of your competitors, your customers, or a large part of them, will keep patronizing you. How you position your retail business in the minds of your customers is one factor that you must address to avoid failure! !(Sign Up Here) to receive our high value Retail Business Emails right inside your mail box every morning! You can’t fail if you follow our guide.
Killer No 5: Inefficient Internal Control Structure and Sound Processes
Building your strong retail brand may seem difficult (not that difficult though if you hire the right people to help you in your journey) but destroying your brand is very easy! One way to fail fast in your business is to maintain a loose and weak internal control system. A poor and porous internal control structure renders your cash and inventory open to stealing, damages and all kinds of ex-filtration which is a major failure factor that easily kills retail businesses. It also endangers your business capital, removes all safeguards for your assets and inventory and deeply hurts the culture of accountability that is the hallmark of every business that is built to last.(visit our blog www.steepleglobal.com.ng/blog or click here and Sign Up Here to receive our highly informational and valuable business success posts)
Solution and Strategy
The scope of your internal control structure should be wide and not just focused on cash and inventory only. It must address your procurement and supply chain management practices, confirmation of goods and warehousing, accountability for discounts on purchasing and sales deals as well as population of inventory data into your systems and databases. To prevent unauthorized modification or alteration to stock quantities and prices as well as unapproved discounts or rebates, physical and logical access to your computers, systems, networks, storage warehouses and unauthorized access to inventory databases, must also be covered.
Ensure your internal control system also covers your revenue assurance practices. These include:
• handling of cash sales proceeds and evacuation of same from your Sales Staff, accountability
• handling of proceeds from non-cash sources like POS, Bank Transfers or other electronic payment sources
• restriction on employee movement in and around the shop and other prohibited areas.
• unrestricted movement of employees in and out of your storage warehouse or shop floor
• handling of employee entry and exit into the company premises or facility, where they change clothes and keep their belongings is strategic to ensuring your business does not fail.
…to be continued