With London Fashion Week nearly upon us, many can look forward to what is arguably one of the highest profile fashion events in the world.
Whilst many hope the orders will run high for the Spring/Summer 13 season, there will be many other businesses in the industry worried how they are going to fare from now until then.
After all it hasn’t been an easy year for the fashion world, even some of the most respected and well-known names in the industry have suffered; Aquascutum had to be bought out of administration, Jaeger was acquired and Nicole Fahri announced lots of job losses. And now economists are talking of the UK plunging into further financial chaos next Spring.
For anyone worried about their business, read Bobby Lane’s pointers on how you can get your business back on track:
Regardless of the economic climate, collecting debts from customers is an absolute priority. This has been a big issue for many of my fashion clients – some of them waiting up to 120 days to receive their payments. The key thing is don’t ignore the problem - chase the debt. For serious issues there are many good and respectable collection agencies in the market that can assist businesses.
The working capital cycle has been stretched at both ends with customers taking longer to pay and suppliers requesting earlier payment or bigger deposits on transactions. This all requires cash. Previously businesses were heavily reliant on overdraft facilities and bank loans however within the current climate unless the business owners have security to offer by way of assets either within the business or personally these forms of finance are proving difficult to obtain. Invoice discounting and factoring facilities represent a potentially easier, faster and more appropriate solution as a result of their lower security requirements and ability to grow with the business.
Do forecast not just profitability but cash requirements and prepare timely and meaningful management information. Many businesses lack the management information systems required to run their business effectively. Without this information you will be unable to control your business and make informed decisions in a timely fashion on matters such as cost cutting, salary increases, new hires and margins which require accurate information.
Keep your costs low and flexible
Try to convert as many of your fixed costs to variable as possible. This will mean that your breakeven point will be reduced and the costs of opening the doors are lower.
Do make sure all of your costs from production to overheads are reviewed and kept as low as possible. Do renegotiate with landlords - with so many high street shops empty, there’s plenty of room for a good deal.
Planning rules are also being relaxed to make it easier for temporary retailers or “pop up shops” – to take on disused outlets for short periods until a permanent tenant can be found
Most of all don’t bury your head in the sand if there is a problem. The struggling businesses that take control now will be in much better position to weather the storm regardless of whether a triple dip recession emerges in the Spring Summer season of 2013.
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