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Dos and don'ts for a struggling business

Republic is the latest casualty of the high street. However there are many other fashion companies which are  struggling in the current climate.  Perhaps of most concern is that some companies do not realise they are struggling, despite the warning signs.

Bobby Lane,  a partner at accountancy firm Shelley Stock Hutter, gives his do’s and don’ts for businesses that may be heading into a dangerous period.

Don’ts

  • Don’t Bury Your Head In The Sand

We have seen many business owners who, despite knowing  that things are not going well,  bury their head in the sand and hope that things will get better. You must face the problems and deal with them -   acting  now could be the deciding factor in the future of the business.

  • Be prepared to scale down

Maintaining a showroom, big offices or large staff, which has historically been required , may not necessarily be the appropriate set up moving forward.

  • Don’t Ignore The Signs

Lack of cash, declining sales and staff that are not busy are all signs that things are not going well.  Pretending it is not happening or not dealing with the effects can be catastrophic.

Do’s

  • Do Forecast

As a minimum, you must  prepare a 12 month forecast of the Profit & Loss, Balance Sheet and, crucially,  the cashflow requirements for the business. This should clearly identify the scale of any issues that the business may face.

  • Do Look at Your Costs

This means everything from the direct costs of your inputs-  your fabric supplier, manufacturers to transport and logistics.  Also do look at all your overheads – including the cost of stationery to renegotiating your lease terms wherever possible.

The key to survival is turning as many of your fixed costs to variable ones.  This  could be by converting staff contracts  ( if possible from large basic salary payments to more of a commission basis ) or outsourcing administrative functions such as HR and Finance.

  • Do Look at New Opportunities

There are always opportunities in a downturn so keeping your options open is very important. Developing new revenue streams through new products or opening new sites should also be considered.  Many businesses have identified new opportunities such as short term pop up stores, as an additional route to grow their top line, whilst keeping their costs variable.

Bobby Lane is a partner at Accountants and Business Advisors firm Shelley Stock Hutter LLP.  He advises many fashion and creative businesses on all aspects of their business

blane@sshllp.com

Readers' comments (2)

  • Thierry BAYLE

    Good points.
    When we work / talk with independent retailers on their stock and people, there is often optimism from the owner's part (which is good) however there is not always action despite real cash flow issues.
    I agree you must consider having a cash flow projection for the next 6/ 12 months.

    More generally, in the current climate you must take action.
    What are you doing differently today?
    What objectives, goals have you set up to turn around the situation? Have measurements to ensure you constantly review the work done.

    Thierry

    Unsuitable or offensive?

  • Thierry BAYLE

    Extra point.
    Stock is about blance and flow.
    What numbers are you tracking to know whether your stock is fresh and turning fast enough?
    We track every month some key retail numbers ( IMU / MMU/ GMROI...). What are yours?

    Remember you do not have 1 profit center. You have most probably 8 to 15 micro businesses ( each one represented by a product class ). Each class must have its own strategy!

    Thierry Bayle

    Unsuitable or offensive?

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