What NOT to do...

[peacemaker]

Well, I see so many good advice threads on here telling people how to run a successful business that I feel it's time to add my own two pence!

I've been running my own high street 'retail' business now for about 6 months and I've done everything wrong, so much so that it seems I'll be closed in a few months due to my many mistakes. It may seem a defeatist attitude but I prefer to call it realistic - if I'm going to fail, I'd rather fail fast so I can get onto the next thing rather than a long and drawn out process.

Ok, so here are all the things I've done wrong in starting my business:

I rushed in too soon. I was so desperate to get out of my job and into *something* that I set myself ridiculous timescales and missed so many vital months of planning and research by just rushing.

I didn't aquire enough finance. When working out my start-up costs I failed to consider many items I'd have to pay for just to get the place open. Plus I failed to aquire enough finance to cover any quiet periods or a slow start. This ties in with rushing in too fast & other points below...

I was overly optimistic with forecasts. When I look back over my forecasts now I laugh with how ridiculously optimistic they were! I used similar sized businesses in the local area as a basis for what I could earn but failed to take into account many of those businesses took years to reach the point they are at now. Plus they have better locations, more investment in sales & marketing, word of mouth and many other benefits to help them reach those figures.

I didn't do enough market research. I thought I had a good idea and it would work so I did it. Never mind the 10 other places within walking distance doing the same thing, many of them larger chains with loyal customers. This ties in with rushing in and the wrong location too. I was just so desperate to start my business I jumped in and hoped it would work out ok without researching first.

I chose the wrong location. This one is probably the real killer for my business. Even with all the other problems, I believe I could have scraped on through if I had the perfect location. It's extremely hard to make a customer walk that extra distance to your location when there are several others closer selling the same thing.

My USP was not unique enough. Simply there are others around doing the same thing and I didn't do anything drastically different enough. There was no reason strong enough to make competitors customers change their loyalties and shop at my business instead.


So there you have it, avoid all my mistakes and you'll have a much better chance of success. Believe me, failing, while not the end of the world, is a real pain and costs a lot of time and money and stress plus it has put a real strain on my relationships.
The funny thing is, I've run other successful businesses in the past, read all the books and forums (like these!) and spoken with experienced businessmen but I still managed to fail so badly. I think deep down I knew I was making mistake after mistake but decided to ignore that little voice telling me to slow down - listen to yourself!

Anyway, those things listed are just the tip of the iceberg and I could probably talk on each point for hours but I didn't want to turn this into a really long post! If you're interested in finding out more feel free to post/PM me.

 

[Tej]

Excellent post.. glad you had the "bottle" to write about your failure, and your reasons for the failure.....

There are many that would be better off making a note of the points you have well noted.

Unfortunately, a lot of people do not like to hear the truth.. basic reality is a no no in a lot of cases.... they just want to read everything with rose coloured glasses... anything else, and you are accused of being negative

" fools rush in... etc etc.

 

[sysops]

I think your approach is spot on. Learn from your experience, and don't see it as the end of the world. Not everything we do works out - most people at some point try something which doesn't work out.

I have no doubt that with your attitude your next shot at running your own business will be more fruitful (and I guarantee there will be a next shot).

 

[GreatSEO]

A well thought out post and I am sorry to hear that you may fail in the short months to come.

Is there anything that you could do to turn things around. Could you hold stock at home and start ecommerce instead. Cut costs in some way?

Dave

 

[directmarketingadvice]

Good post. Nice to see you're identifying the problems as something that are strategic, rather than personal.

(i.e. that, if you fix these things, results will change - not believing that there's something inherently wrong with you)

The funny thing is, I've run other successful businesses in the past, read all the books and forums (like these!) and spoken with experienced businessmen but I still managed to fail so badly. I think deep down I knew I was making mistake after mistake but decided to ignore that little voice telling me to slow down - listen to yourself!

Sometimes desire can get the better of us - particularly if we're in a situation where you feel there's an opportunity that could quickly disappear.

Once you get to a point where you're too emotionally attached to an idea that you start to ignore warnings, you're in trouble.

Steve

 

[Tej]

Once you get to a point where you're too emotionally attached to an idea that you start to ignore warnings, you're in trouble.

Steve

Just a little observation here... sometimes its difficult to listen to your inner voice.. and implement what you think is the right thing to do... as often as not.. there are other people to consider.. and what effect that would have on them.... a collective decision would seem to be called for..

A kind of a "lay it on the table" sort of thing.

IMO

 

[peacemaker]

Thanks guys, I just hope my failure can help others avoid the same thing.

Dave: It's possible the business could somehow survive but it's doubtful. I've dug myself a very deep hole and it will take a lot of money to get out of it. Unfortunately I have no real money other than just enough to keep the place open (at least until the next quarters rent is due!) and it's only getting worse each month. Like I said earlier, I'd rather take action now than bleed out for months and be left with less choice in the matter!

 

[GreatSEO]

That is a fair comment

Time wasted now is time precious to the next idea.

Dave

 

[peacemaker]

... there are other people to consider.. and what effect that would have on them.... a collective decision would seem to be called for..

A kind of a "lay it on the table" sort of thing.

IMO

Tej, you're absolutely right there. For me, I accept that in business sometimes you lose and a lot of the time you're juggling money issues, bills, banks and so on and so it doesn't stress me out too much. But my wife is finding it all very hard and in all things in life we're a team so it must be considered together.
She's a very supportive member of the business and hates to see it fail too but I know without asking that this situation is stressing her out a hell of a lot. That's the main reason that I must accept my mistakes and fix them as best I can! Unfortunately, fixing in this case probably means closing the business.

 

[imadam]

as long as you have learnt from your mistakes and wouldn't do them again then imo you have done nothing wrong, it just wasn't your time yet, but you're now a little more prepared for when it will be your time. maybe it'll be another 2 years, maybe another 20, but at least now you have the experience to do your next project better you never know maybe in 1 years time you'll be writing a post about how you made the best choice in your life by closing your shop as you realised an even better idea and now making shed loads of money. good luck with whatever you do.

 

[bridges]

I guess now is the time to start 'damage limitation' I would try asking others on here who have maybe closed, retail or other businesses, how they did it to limit the amount of failure, I am guessing in doing this, it will stand you in better stead when you then move on to the next thing.

Can I ask, what is it you sell? And what are your thoughts on what you'd like to do next?

Thank you for your honesty.

 

[peacemaker]

Bridges, thanks for that good point! If anyone reading this does have any advice on how to go about closing up I'd be grateful if you could post here or PM me.

I run a coffee shop which as you probably know is a tough market to get into! As for future plans, well it looks like I'm going to have to go back to my old job at least for a few months to pay off some of the debt I've amassed setting this place up. I'm hoping they'll allow me back part-time so I can spend at least one full day a week working on the next thing. As for the next thing, I've got several ideas in my head right now, a couple I have even written business plans for before I started the shop.

 

[Stephen Berry]

great post and lots of good points.

to add - when you decide on the 'flight' strategy - do it well and do it without delay (as I read you are doing - from what I read it seems a wise decision).

learning from the zebra - the zebra has 6 F's as its reaction to unforseen threats:
F - Fight - (sharp teeth, massive kick - it can fight) our testosterone fuelled board rooms excel in this one and often take it as the default even whcih it is the wrong decision.
F - Flight - your choice - also the choice of Mars when they sought to change the ingredients of their chocolate in 1995 and wisely retreated rapidly. Or look at carrefour - great 'flight' exits from the UK, Mexico and Japan without much collateral damage.
F - Flock - joining with others (from mergers, to alliances and codeshares)
F - Freeze - assessing the position rather than knee-jerking; but don't do it for too long as Coca Cola did in Belgium in 1999 and suffered immense brand tarnishing as a result
BUT - if the first 4 fail, and the lions get among them, they have 2 others to fall back on:
F - fragment - break up and run. Some one is going to get eaten, but if you run fast enough it may not be you (the tactic RHM used - I was with the company at the time- when threatened with a Hanson takeover)
F - Frolic - run around panicking, making a lot of noise and taking huge effort but achieving very little - in business we call it a re-organisation.

Nothing at all wrong with the 'flight' strategy - you've made your decision - hold your head high and join the ranks of Mars and Carrefour who have executed flight decisions brilliantly.

I've got several ideas in my head right now, a couple I have even written business plans for before I started the shop.

good - there will be a next time and you will do things differently. Show me the person who has never failed and you will be showing me the person who has never stretched enough.

 

[bridges]

Is there no assets within the business you can sell off to take care of some of the debts?

I would imagine there may be something you can do to try and sell off items within the shop before closing.

Whereabouts is the shop?

 

[peacemaker]

Stephen, great advice thanks for that! I didn't think I'd be comparing myself to a Zebra when writing this post

Bridges, I have a few assets here I could sell but the big assets are leased so it's not a large amount of money back. I thought there were companies who dealt with buying out assets of closing companies? I shall look around...

Oh and we're in a large south coast town... don't want to say more to avoid the possibility of people I don't want to know we may be closing finding out, sorry!

 

[bridges]

That's ok, I understand. I'll start searching, see if I can find any info for you and report back.

 

[Stephen Berry]

...................Mars when they sought to change the ingredients of their chocolate in 1995 and ..............

what was I thinking of? apologies 'fat finger syndrone' - it was early 2007.

I'lll tr y to tipe butter in futur

 

[dataferret]

To Peacemaker. Thank you for writing about your experience and for being so honest. I doubt I would have been brave enough or honest enough to admit defeat and tell people exactly how it is and why.

For my part, I would like to say thanks because I will now print out your post and put it on my wall for when I get too far ahead of myself.

 

[AmberSite]

great post, nice to hear other people's experience.

 

[peacemaker]

Bridges, thanks for helping out, I'd love to know what you find!

...For my part, I would like to say thanks because I will now print out your post and put it on my wall for when I get too far ahead of myself.

Dataferret, I'm glad that posting my experience has helped you! If you have any questions feel free to PM me and I'll do my best to pass on what I know.

 

[peacemaker]

Just an update on what I've found out about closing up so far...

The advice I've been getting is to take care of my own needs first and not inform the landlord, debtors etc until the last possible moment. Therefore, I should just sell all the assets as soon as possible and break the lease agreement - this will forfeit my deposit - and write a letter to the landlord saying that due to <circumstances> I have ceased trading.

Other people have suggested speaking directly to the bank to negotiate lower payements for any debts for a fixed period which is a good idea.

I've not found much about companies that buy out closing down businesses, if anyone know anything about this please let me know

 

[JEREMY HAWKE]

This business game is all about learning you can be given all the advice there is but you would probably still go off and do your own thing and scupper the lot.

I recon if the OP was to shut his business down he would probably make a good job of the new business as he has done it before.

How many people here have only really learnt from their mistakes .I know I have (some big ones !!!!) ?

 

[Stephen Berry]

How many people here have only really learnt from their mistakes .I know I have (some big ones !!!!) ?

smarter still, learn from the mistakes of others - one reason why the OP's post is so valuable.

 

[thebigIAM]

I closed a retail outlet ten days ago, so you're certainly not alone. I was able to limit the losses because the lease was an easy in, easy out arrangement.

We chose a good location with good footfall which paid off. But me and the OH had to do a lot of running about just to pay overheads. We had a lot of problems recruiting the right sort of staff, which might sound unbelievable in a recession. I have not been able to work out why I have failed as an employer. Perhaps the job I provided was simply too boring.

The first thing I did after closing the outlet was take a week off. I needed it.

 

[london lady123]

Just an update on what I've found out about closing up so far...

The advice I've been getting is to take care of my own needs first and not inform the landlord, debtors etc until the last possible moment. Therefore, I should just sell all the assets as soon as possible and break the lease agreement - this will forfeit my deposit - and write a letter to the landlord saying that due to <circumstances> I have ceased trading.

Other people have suggested speaking directly to the bank to negotiate lower payements for any debts for a fixed period which is a good idea.

I've not found much about companies that buy out closing down businesses, if anyone know anything about this please let me know

Hi I was given a link to this forum from MSE and have just logged in for the first time tonight and saw yoiur thread.

I closed our shop in the same area after 11 years as we were going to lose our rent review and T/O had dropped by 35%. It' was a long story on why we chose to close ...we have owned shops since 1990
Do you have personal guarantees on the lease and, if so, are you 'worth' chasing from LL point of view? How long is the lease?

I am happy to pop into town to talk if you want to PM me as we used a company to advise us over the lease (very sticky as full guarantees, own by a Property Unit Trust, we have assets and another part to the business that was profitable) . You don't need to pay anyone as I can point you in the right direction for advice or tell you exactly what we did.

The company we used was fantastic and If you want his number or the forum he posts free advice on PM me...it cost us £1250 but was a very complicated situation and worth every penny to me.
His golden rule is to get 'your ducks in a row' and plan, prepare and plan more..then go.

The problem is the business rates. If you just leave, you can apply for 3 months rate free. Your Landlord may be happy to take a surrender on the lease so no worries but if he just put's it up to let, you are still liable for the business rates until the lease is re-assigned.

The business rates department are fierce so it is really important to plan your exit in the best way possible...you don't want to be hounded by the council.

Your opening post was great...we too have had ups and downs over 23 years trading. Every failure makes the next success feel even better...and I am still learning every day.

We had a happy ending and have ended up with a bigger, better and safer (for the recession) business model.....the hardest bit for me was making the decision to go after I had done all the research. Actually doing it and closing was a big relief.
Feel free to PM me if you want to ask anything.

 

[london lady123]

I forgot to add.....all depends on what is in Ltd company. If all, then more straightforward to wind it up.

Also, some LL will let you stay on rent free (you cover rates) whilst it is up to let...all depends on type of LL.

Is it worth negotiating a rent reduction and, if so, would it then be profitable?

 

[peacemaker]

LondonLady, I hadn't thought about the rates, thanks for mentioning that I'll give them a call tomorrow to see. As for the landlord, we are on friendly terms and he's a nice bloke but he's still a businessman and I get the feeling if I were to ask for reduced/no rent after only being here for a few months he might not be very happy. I suppose it's worth a try though, I shall give him a call when I have other things in order, just in case it sours our relationship!
Also thanks for the offer, I may send you a PM about the lease if I have any questions.

 

[london lady123]

LondonLady, I hadn't thought about the rates, thanks for mentioning that I'll give them a call tomorrow to see. As for the landlord, we are on friendly terms and he's a nice bloke but he's still a businessman and I get the feeling if I were to ask for reduced/no rent after only being here for a few months he might not be very happy. I suppose it's worth a try though, I shall give him a call when I have other things in order, just in case it sours our relationship!
Also thanks for the offer, I may send you a PM about the lease if I have any questions.

I have sent you a PM. At this stage I wouldn't rush into anything until you have done all your research. You have until March (26th?) rent day to plan on what to do next.
Speaking to Paul is free, posting on other forums for any tips/advice is free, looking up rules and regs on insolvency is free.

How much are you 'losing' each week? Is there any chance of pushing up the T/O and cutting costs? I am looking out the window now and 'feel' it as I know for many in the area this winter has been hard.

Are you Ltd? Have any of the debts/lease agreements got personal guarantees?

 

[london lady123]

I forgot something else....did you take on the lease by re-assignment or was it a new one?
Have you had any agents in to put a To Let sign up yet? Just to see if it can be re-assigned (or better, a surrender then new lease for new tenant).

 

[london lady123]

LondonLady, I hadn't thought about the rates, thanks for mentioning that I'll give them a call tomorrow to see. As for the landlord, we are on friendly terms and he's a nice bloke but he's still a businessman and I get the feeling if I were to ask for reduced/no rent after only being here for a few months he might not be very happy.

He'll be less happy if you just leave. Our LL was a total nightmare to deal with as I had to deal with the London managing agents. My chain neighbours were rent free for over a year (due to Icelandic banking thingy) yet they wouldn't negotiate.........until I left. Then it was too late.

 

[peacemaker]

So many questions LondonLady! I've sent you a PM

 

[london lady123]

So many questions LondonLady! I've sent you a PM

I'll reply later tonight as got to do dinner etc.

 

[deniser]

LondonLady is right.

You should simultaneously look for someone to take over the business.

A food related shop opposite mine closed suddenly 2 weeks ago. The owner just ran out of money and the company ceased trading. The landlord immediately found someone with a lot of experience and who could run things better to take it over. So the shop owner lost out on his deposit and personal debts accrued to keep the business going because he hadn't even tried to find someone to take it on. But someone was there all along.

I wish you luck in winding this business down.

 

[fergusmum]

well done for posting this, i am at the opposite end of the scale, kept slogging on for the past 6 years, making loss after loss, plugging the gap with credit cards, until im now scuppered. So while initially it may seem like failure, staying would definately be worse.

 

[peacemaker]

well done for posting this, i am at the opposite end of the scale, kept slogging on for the past 6 years, making loss after loss, plugging the gap with credit cards, until im now scuppered. So while initially it may seem like failure, staying would definately be worse.

I'm sorry to hear that, I admit it's crossed my mind many times to try and 'fix' the problem by borrowing even more (if anyone would lend to me!) and using credit cards etc. but it's a scary path to go down. Right now it feels like the only solution to fix the business as money isn't coming from elsewhere so I completely understand your situation.

Deniser, there's probably a good chance my landlord knows plenty of people who could take over and although on the one hand I'd feel bad seeing someone take all of my hard work the flip side is at least it hasn't gone to waste and can help someone else!

 

[Frimley111R]

I didn't do enough market research. I thought I had a good idea and it would work so I did it. Never mind the 10 other places within walking distance doing the same thing, many of them larger chains with loyal customers. This ties in with rushing in and the wrong location too. I was just so desperate to start my business I jumped in and hoped it would work out ok without researching first.

This is a fundamental part of beginning that so many people fail to do. Now matter how much research costs it'll always be cheaper that starting and failing! I cringe when people sometimes post 'Just do it!'. DON'T - unless you've done your research and then planned it thoroughly.

 

[deniser]

This is a fundamental part of beginning that so many people fail to do. Now matter how much research costs it'll always be cheaper that starting and failing! I cringe when people sometimes post 'Just do it!'. DON'T - unless you've done your research and then planned it thoroughly.

Absolutely right. Gosh when I think of the mistakes I made in my first business I cringe with embarrassment! I also jumped right in without a clue what I was doing. It could have gone horribly wrong but I uckily managed to turn it round once my steep learning curve started but only because I could fund the cashflow in the meantime. Otherwise those errors would have been fatal.

 

[peacemaker]

... It could have gone horribly wrong but I uckily managed to turn it round once my steep learning curve started but only because I could fund the cashflow in the meantime. Otherwise those errors would have been fatal.

Exactly! That's where I am now, many mistakes and although I've learnt a lot from jumping in the deep end unlike you I can't fund the cashflow in the gap between now and fixing all the mistakes.

I just really hope people who are reading this thread considering starting in business take these warnings seriously, because they are the difference between success and failure.

 

[london lady123]

I chose the wrong location. This one is probably the real killer for my business. Even with all the other problems, I believe I could have scraped on through if I had the perfect location. It's extremely hard to make a customer walk that extra distance to your location when there are several others closer selling the same thing.

I was thinking about this today and was going to post all sorts of stuff then looked back at your OP.
I know the area well and have seen so many different small traders go slightly off the main bit (which is expensive) and just not get enough footfall (which is why the off streets are so much cheaper).

I don't know if you live locally too but the area is very seasonal so, for example we turned over only 15% of our annual T/O in the Jan/Feb/ march quarter. Our busiest month was July. We used to build a large surplus from July- Dec to see us through the quiet times in Jan/Feb/March.
Sometimes the season started late due to The Weather......I so don't miss that part of it.

When we opened in 98, we also had a large shop in London (since 1990) and I could not believe the different flows in trade....and in Fashion, we have seasons etc.
If I could have walked out in 1999, I would have...our 1st year was dire.

I don't want to sound like an old Hovis ad and say how we turned it around but was so hard.

Is there a mistakes thread anywhere? I could fill pages on it.

It may help to do a step by step to help clear your head too as there are little emotional bits to deal with.

1; Emotional. ''Letting people down'' etc and the feelings of failure sit inside oneself and can cloud the decision making process. I write from personal experience.

2; The Money; list total debts.

Is the shop breaking even without a salary?

Do you have staff? Is everything going into the till when you aren't there? Been there too....:redface:

How big is the gap between break even (excl your salary/profit) and your current T/O.? If it's small now, then chances are the summer will pull it back. A rent reduction from the nice LL could put you back in the black and have something to build on?

Do you love it (despite the financial stress) and have passion for it?

Are you paying too much rent? Have you found out what others nearby are paying? Have you had your new rates bill yet?

In our area, we saw so many traders pay way over the odds on rent. One paid the same as a large coffee chain for a quarter of the space.

I saw fantastic small businesses close, they had character, loyal customers and did everything perfectly...but the margins could only cover the rents/rates/costs and hardly any salary for them.

It got a little bit dismissed on another thread but turnover being 10 times rent (gross) ....would that work for you?
It's a bit back of an envelope but then 20% of gross as salary? Would the sums work?

I will wait for another thread relevant but chains set the rent levels and can pay far more than an indie trader for many reasons.

My St was all independents (12 of us) and just 1 indy coffee shop when we opened in 98. I left last year and by then, it was 3 chain coffee shops and all big clothing chains except 1.


I really think you need to sound out the LL and not make any assumptions at all...he's nice at the mo as you are a nice tenant paying him nice rent.

You need to think about putting it on the market too.

Just out of interest what was the shop before you took it on and how long was it vacant?.

 

[fergusmum]

Can i just ask out of interest, sorry to hijack your post & i will prob post this as a new thread also, but secondary location has been a big part of my down fall (although prob not all), the rent is cheap, but we just don't get the footfall. There is a shop in prob the best positon in town, right next to the free parking,in between all 3 banks which are left in our town, adjacent to the wed & farmers market, which is extremely popular, it is prob 4 times bigger than where we are now, so i could expand all my ranges,especially accessories (its a female clothing shop) but of course it is massively more expensive. we pay £4K rent & 1 K rates & it is £22K (asking, would offer less) & 9K rates, which i think is extortionate. I know we would be busier down there but it is a massive jump. Any advice please??? (ps i would only be prepared to go in with a 1 year get out option)