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Business planning

Great concept? Check! Next in our 12-part guide to setting up shop is the crucial phase of ensuring your business is built on strong financial foundations.

Whether it’s for a first store, an addition to an established portfolio or a new concept, the business plan is a map for the future direction of any independent retailer and a first chance to analyse whether your concept is worth investment.

“The business plan is your opportunity to tell a comprehensive story about your company, as well as the details about how you will target your market,” says Amanda Murphy, head of business banking at HSBC.

By setting clear, realistic targets, the business plan will help communicate your vision and expectations to staff members, says John Allan, national chairman of the Federation of Small Businesses (FSB). Alongside a thorough understanding of the business and extensive market research, the plan must assess consumer demand, projected cash flow and operating costs.


‘Crowdfunding has become a new way of financing and one we would consider if we were launching now’
Sam Middleton, founder, The Chapar

It is crucial to determine if the business will be a limited company or a sole trader, advises Alan Hawkins, chief executive of the British Independent Retailers Association (Bira). As a limited company, the business owner is often required to sign personal guarantees.

Associations such as Bira and the FSB provide guidance on all aspects of setting up a retail business. Bira operates its own bank, offering loans up to £30,000. Bira members can also save money when accepting debit and credit card payments by using a Bira recommended bank, which guarantees to charge a smaller percentage on the payment than normal lenders. Over the past 12 months, Bira members took payments of £1bn.

Establishing supplier relationships is key. If you buy stock seasonally, suppliers offering ‘buy now, pay later’ terms are the way forward, says Hawkins. “Many suppliers need the commitment to an order rather than immediate cash. At the end of the day, cash is king, so if you do not have any track record then paying up front for goods puts you in the driving seat to get the best price,” he says.

Rinku Loomba, chief executive of mainstream womenswear brand Viz-a-Viz, advises leaving a contingency for problems with a supplier. Loomba’s Viz-a-Viz PartnerShop scheme offers a different approach. Retailers are supplied with 10 capsule collections and only pay for stock when they sell items and have positive cash flow.

In 1996 when Lauren Ferguson opened her first store - Sisters Boutique of Falkirk, winner of the Drapers Independents Awards 2014 Young Fashion Independent of the Year - she approached the bank with projections of the cash needed to stock and fit the shop, as well as anticipated weekly turnover.

“I have a very savvy mum who made me buy my first flat at 20,” she recalls. “By the time I was 23, I had £50,000 equity in a house, so the bank was interested.” Ferguson funded 40% of the deposit for the property for her shop, with the bank providing a mortgage for the remainder. Half of the renovation costs were paid from Ferguson’s own funds, with the rest supported by a bank loan.

Sisters Boutique launched with three labels (Morgan, Giant and Elle) bought with cash. Ferguson only received the option of standard 30 days credit after opening an account with French Connection. “The only suppliers who gave, and still give me, extended credit are the wholesale agents who wanted to support me when I expanded,” she recalls.

“They sent me stock and let me pay for it over three months as it sold through. None of the big brands were that helpful, only the independent wholesalers who really understood the cash flow issues of a retail store.”

Louis Copeland, co-owner of Drapers Independents Awards-winning menswear multiple Louis Copeland and Sons, had much to consider when opening in Dublin’s Dundrum shopping centre in March 2013. The process started with an in-house SWOT analysis (strengths, weaknesses, opportunities and threats) of the potential business and current stores. “You need to delve deep into every aspect of the business, which is very taxing and may sometimes reveal good and bad things about the potential business,” he says.



‘None of the big brands were that helpful, only the independent wholesalers who really understood the cash flow issues of a retail store’
Lauren Ferguson, owner, Sisters Boutique

The Louis Copeland team assessed the cost of a shopfit, staffing and rent/rates, as well as time taken to make a return on this investment. It was also necessary to consider the impact a new store would have on Copeland’s other Dublin businesses [on Capel Street, Wicklow Street, Pembroke Street and in the CHQ building], which funded the Dundrum shopfit and launch. Copeland declined to confirm the level of investment.

Father and son team Joe and Sam Middleton had a different retail model in mind when launching The Chapar, a digital fashion styling service for men, in 2012. It won the Best New Business title at the 2014 Drapers Independents Awards. The Chapar’s strategy took into account a high level of returns, as customers send back unwanted garments as part of the service. While unwilling to confirm its initial investment, The Chapar raised £500,000 of additional funding in April 2014 to expand into other European markets.

The business plan is crucial to securing finance. According to Benjamin Chubb, national enterprise manager at Royal Bank of Scotland, funding applications are traditionally assessed by the acronym ‘Campari’. ‘C’ is for character, experience and skills; ‘a’ is the person’s ability to run the business; ‘m’ relates to means and the funds contributed to the business; ‘p’ is the purpose of the funding; ‘a’ the amount required; ‘r’ whether the business can afford repayments; and ‘i’ stands for interest and insurance.

Banks are not the only route to business finance. Post-recession, new sources have emerged, such as peer-to-peer lending, crowdfunding, equity funding and grants. The Enterprise Finance Guarantee offers grants of £1,000 to £1.2m over three months to five years, with 75% of the loan guaranteed by
the government.

When seeking funding for The Chapar, Sam Middleton looked to institutional investors and venture capital, as well as angel investors, informal investors who provide capital, often in exchange for ownership equity. The UK Business Angels Association connects private investors who every year account for £800m to £1bn of early-stage investment in different sectors in Britain.

“We opted to go down the angel route and couldn’t be happier,” says Middleton. “Each angel comes with an incredible amount of experience and new ideas. Since we launched, crowdfunding has become a new way of financing and one we would consider if we were launching now.”

Ferguson, however, cautions prospective business owners to think hard before striking out alone. “Nowadays, I would advise people to buy an established store that has done the legwork. It will cost more at the beginning, but the benefits will be much more, as a new indie can lose thousands in the first few years. Everything is for sale, so don’t be scared to approach shops that have inspired you to open your own.”

In association with VIZ-A-VIZ

In association with VIZ-A-VIZ

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