There is no doubt that with the economy in crisis, many retailers are at a serious risk of going bust. We witnessed the downfall of Woolworths after an iconic 99 years of trade, and said our goodbyes to many other stores, including Zavvi and JJB Sports.
Shazan Qureshi provides an insight into the reasons behind the retailers’ suffering, as well as helpful tips on how to survive in such a risky climate.
1. Produce regular forecasts
These should be at least quarterly, and preferably monthly, with cash flow being the most important. Make sure that items of capital expenditure are identified well in advance. Remember that you only go bust when you run out of money!
2. Set realistic banking covenants
These should reflect the true risk of the business and should not simply be intended to achieve the cheapest cost of borrowing.
3. Don’t hold on to old stock
Old stock ties up working capital, so if it isn’t selling, discount the price and get rid of it.
4. Check out the competition
Keep a watchful eye on competitors and if you are doing something different, make sure that you are right and they are wrong. Adjust your business model when required.
5. Stay alert
If you realise there is a problem, act on it and work out a solution that can be presented to creditors. Recognise that banks, in particular, don’t like shocks.
You can read the online article in full and get access to confidential, one-on-one advice, by clicking this link for Issue 2 of WorkLife.
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