Seven Mistakes Retailers Make that Need to Be Fixed BEFORE they try to sell their business.
Most SME’s go into business for all the right reasons and then reality sets in, it’s not what they expected and they will often list the business and sell at a loss just to get out of the bind they find themselves in.
But they don’t have to do this if they make the decision to buy with the intention of selling in the first place.
Here’s a list of 7 mistakes retailers make when going into business that will inevitably impact on their selling price when it comes time for business to sell.
1. Lose focus/direction/passion
It doesn’t take long for SME’s to forget the reason they went into business in the first place. They become disillusioned and tired from working long hours and not achieving results
How to Fix this: Before even looking at your first business write down all the reasons you want to work for yourself and give up the safety and security of that PAYE pay packet, or invest that healthy super fund nest egg you have grown.
Keep the list somewhere handy so you can pull it out and remind yourself when the going gets tough.
2. Try to do it all yourself/can’t let go of control
Many SME’s like you feel the need to do everything yourselves and don’t delegate enough to your team members. You understand that you can’t be all things to all people, yet still find it hard to let others handle some things.
How to Fix this: You need to let go. Think of it this way. Even if your staff are only capable of doing 80% of what you are capable of, ten of them will achieve 800% more than you can on your own. Pick the right people and your business will flourish, you’ll survive a little longer before giving up on your dream because you’ll be able to take time off, rest, refresh and recuperate.
There’s a media sales rep that keeps calling in, has built up a relationship and offers you a ‘great deal’ on a full page ad because someone has cancelled at the last minute. It’s such a good deal, you can’t say no. You rush to pull something together, put yourself under pressure because you cant think clearly when you are stressed. The ad isn’t what you needed and doesn’t work.
How to Fix this:
Have a plan and a budget...and also have a high quality, well prepared generic ad ready that fits with YOUR objectives so that you can take advantage of the super offer if it’s a perfect fit for your strategy.
4. Play the blame game
Do you play the blame game? Is it everyone else’s fault but yours? The GFC, the kids, the centre refurbishment, the roadwork’s, the floods, high rent, low sales, no passing traffic.
How to Fix this:
Even if there is some truth in what you say, it’s nobody else’s fault! There will always be something that will challenge you and set you back. Don’t go into business if you don’t have a contingency fund to get you through the unexpected and if it’s too late, you are already in business and exhausted all your resources then you simply have to start thinking creatively and rationally about your options.
5. Poor negotiators
Negotiating is selling every sense of the word. Retailers need to be able to negotiate to get the best value for money when buying stock, signing a lease, organising an electrician and on the other side of their business they need to be able to sell their product or service at the highest possible price people will pay and still feel like they are receiving value.
How to Fix this:
Do the sums on your latest Profit and Loss: If you can increase your sales by 5%, increase your gross profit margin by 5%, decrease your overheads by 5% how does that affect your net profit?
A 5% increase is not a lot but if you pay attention to each area separately and spend some time thinking about how you could achieve this result in sales, gross profit and overheads you actually might enjoy the chase.
If you don’t have the skills pay someone else to negotiate on your behalf in the big dollar areas, like negotiating your business buying price, selling price or lease terms.
6. Mistrust the wrong people
It’s so hard to trust people when you feel like you’ve been kicked in the guts every time you do but trust you must.
Your landlord, centre manager, staff, suppliers are really all focussed on the same thing you are…to make a profit. The goal for all should be to work together for mutual benefit.
It’s not easy but starting from a point of ‘I don’t trust you’ puts you behind before you begin.
How to Fix this: Be detached from the outcome. Be objective about your goals and what you need to achieve. Share your goals, your wins and your challenges. Weave your community into your vision and you’ll see they will want to be a part of your success story..and you’ll want to be a part of theirs.
7. Bought a job not a lifestyle
Some retailers went into business to buy a job either for themselves or a family member. They soon realised that retailing is more than buying stock they like, installing a great fitout and just opening the doors..or if they are a chef, cooking a great feed.
How to Fix this: Before you buy a business, sit down with your professional advisors and identify the skills gap areas. Most small business owners will have strong skills in either of the three business areas of Marketing, Financial or Operational (day to day) management of their business, average skills in one of the remaining and abysmal skills in the other.
…so if you are strong on operational skills (the usual strength for most SME’s), an average marketer and abysmal financial controller, pay handsomely for a high performer to take over the financial management, enlist experienced help with the marketing and focus your attention on what you do best.
Paying good people to perform a function better than you can yourself is an investment not an expense.