I operated an independent store for more than two decades and during that time I discovered that the task was both full of opportunity and risk.
To buy my business I had to sell the house my wife and I lived in along with our three children and use the equity for the purchase. The risk that I was confronted with was that failure to make a success of our venture would leave us homeless.
My wife and I were confident that between us we had the retail skills to make the business a success and that I had undertaken a sufficiently thorough due diligence process.
Success was not guaranteed, but after some significant financial challenges along the way (like Black Wednesday, when my loan interest rate increased briefly to 20%) things turned out well.
My confidence in investing our entire wealth into our village store was built on the fact that both my wife and I had many years of multiple retail experience – and I had been through the WH Smith management training programme and felt that I had the ability to make our succeed at running my own shop.
Failure is something that every business needs to understand because there is a degree of failure in every enterprise. It can range from small losses, like products sitting on your self collecting dust, all the way to the most extreme versions, seen on the high street last year when BHS and My Local closed down.
Managing failure in a business is always going to be better than being forced into administration because you no longer have the money to pay the bills. My measure of success and failure was based on the business plan that I created before I bought my store.
The business plan was developed from a very cautious stand point and in the first few months of taking over the business I checked sales and costs against the plan.
The first couple of weeks were the most challenging as the store failed to reach my sales projection and we had started to build stock. It was worrying at the time, but sales soon started to grow and within six months our business plan looked decidedly restrained.
Without a business plan that includes your vision, turnover, costs and cash flow budget you will have no idea if you are making the most of the opportunity that your store location offers or if your business is running in to trouble.
Check out Part II on dealing with failure – how to kill your low-performing SKUs