Business Coach: Revive a Failing Retail Business
(Originally published on June 5, 2011; reprints previous original material published in this section)
By Ruben Anlacan Jr.
Last May 28, I received an e-mail from a reader with a business problem common among struggling entrepreneurs running a family business. Below is the exact message I received:
We have a small ready-to-wear business in Aurora that sells a mix of used clothing and toys. It is a family business running for more than 10 years now. The problem is our low recorded sales. Our business place is in a row of chain stores inside the public market so the items we are selling are mostly the same merchandise as our competitors. We also have limited funds to re-supply our store, and we lack know-how about entrepreneurship. I am taking these challenges positively though, which is why I would like to humbly ask for tips on how to become an effective entrepreneur considering the predicaments peculiar to our business. I will really appreciate your time and effort.
Since there are many details not included, please note that I had assumed several facts, which in my opinion is the case in situations like this. Since the business has been running for more than 10 years now, it is almost certain that it was profitable. What probably happened is that the owners were taking more cash from the business than what it was earning.
Here are the steps I would advise you to take:
Try to get additional working capital for needed inventory. It is apparent that there are many problems to address, but the most critical is the lack of capital to replenish the store’s merchandise. Time is of the essence here, and you must move fast before it is too late. See if you can get your family to infuse more cash or if they can borrow additional funding. If possible, increase the frequency of purchasing but with a lower amount per order to conserve cash. I know of several drugstores that were able to make money with just a little capital because they order daily in small quantities to be able to offer many items with minimal cash.
Get your family to agree to not take more than the right amount they needed. The right amount is the earnings less what would be needed for emergencies and opportunities. I guess that since this is a small family business, it is common practice to mix business and personal finances. There must be a proper accounting system to track earnings since many small entrepreneurs overestimate their income because of a lack of provision for operating expenses.
Try to differentiate your offerings. Even if you manage to sell a particular article exclusively for only two weeks before the copycats get hold of the item, you still have the potential to earn a lot before this happens. Eventually, customers will notice that your shop always has something new and they will seek you out. The search for fresh merchandise is a non-stop process and is one of the most important tasks of a retailer.
Improve your premises. Even with a small budget, you can do such things as fixing your signage, applying a fresh coat of paint to your facade, or replacing a broken glass in your counter. These things will send a message to customers that they will not regret patronizing your store, even if it is not as expensive looking as its competitors.
Accept your location for now. You seem bothered that all of you are selling the same items and that you have strong chain store competitors. However, your store seems to carry mostly shopping goods, and these are the kind of items that customers want to compare prices first before buying. This is why most stores that carry shopping goods are located beside each other, unlike convenience stores like 7-11. Anyway, for the past 10 years, your store seemed to be profitable enough to support several of your family members. So perhaps the location is not the main problem.
Do not forget customer service. One of the biggest advantages of small stores is that they usually have the time to talk to and serve their customers well. And the presence of the owner at the store will enable your staff to respond faster and better. Customer service is one area that you have the advantage over retail chains.
Running a small retail business is full of challenges, especially if it is a family owned enterprise where you also have to deal with the sensitivities of relatives. Still, a family business has its strengths and advantages. You only have to apply sound business principles to enable the company to compete in the modern market place.
Business and management consultant Ruben Anlacan, Jr. is the president of BusinessCoach, Inc. and a resource speaker for various business topics. He discusses overviews and tips for business from the point of view of a small- or medium-scale entrepreneur who has started several successful enterprises. Those who wish to ask questions or to make comments may visit http://entrepcoach.blogspot.com or e-mail firstname.lastname@example.org.
Posted on August 22, 2011, in Business Agenda Classifieds Columns, BusinessCoach and tagged business coach, how to become an effective entrepreneur, retail business, running a family business. Bookmark the permalink. Leave a comment.