Turning Retail Struggles into Success: How to Avoid the Small Fortune Trap

14 MAY-JUN 12

I heard a joke the other day it goes like this:

Do you know how to make a small fortune in the shoe business? Start with a large one!

I know it’s a real knee-slapper right? The only problem with this joke is that if it weren’t so shockingly true in all too many cases it just might be funny.

How many retailers do you know where this scenario applies?

Perhaps you are even one of them. If so ask yourself the following questions:

• How did you get into this position?
• Why are you content staying in the situation?
• What steps might you be able to take to change your situation?

I know of retailers who are in this difficult state and aren’t even aware of it. They have become so comfortable with their complacency that they don’t even realize there is a more prosperous way to live. How do you know true success if you have never experienced it — especially if you spend the majority of your day-to-day life dealing with negatives?

Reactive versus Proactive

I recently came across a situation where a retailer had gotten into a negative cash position. The majority of his time and energy was spent appeasing coaxing threatening pleading and negotiating with vendors to take token payments on past due invoices. His hope was that his vendors might grant mercy in the form of some nominal credit extension that would allow him to land at least some new merchandise the lifeblood of all retailers. This hand-to-mouth existence is no different than that of a drug addict who refuses treatment in favor of the next fix. It is clearly a short-term “solution” to a long-term problem.

To be fair I am not suggesting for

A Moment That There Aren’t Times

For most retailers there are times when cash flow is stronger than others. Cash flow is a routine business concern. In the situation outlined above any available cash reserves had been drained through a combination of poor merchandising decisions and even worse financial control. Generating cash needed to pay maxed-out credit cards and the line of credit that the bank wanted to reduce was being hindered by a costly store build-out an unrealistic lease and shrinking margins due to aggressive promoting.

Declining sales due to lack of fresh product led to delayed deliveries caused by slow payments to vendors. The result was an inventory that was out of balance. The sales decrease forced the operating expense percentages to rise by default. Without intervention of some sort this downward spiral will most likely continue until everything crashes. Ever seen it happen?

Many Good Retailers Have Seen It

The questions become: Who needs the stress? Is the business really worth all of this? You need someone to talk to but whom? Look around at the possibilities.

• The vendors want you to pay what you already owe so they can ship you more so they’re out.
• Your accountant bless his heart is constantly reminding you of your dire position but doesn’t have the answers you need to solve the problem.
• Your spouse is weary of hearing about the store’s problems and just wants you to do something anything.

Ritchie Sayner

Heard This One Lately? You’ll Die Laughing – Not. Ritchie Sayner

One of the benefits of belonging to an association like NSRA is that the Association has places and people to refer you to should you find yourself dealing with “issues” from time to time.

Published in the May/June 2012 issue of Shoe Retailing Today copyright © 2012 National Shoe Retailers Association Tucson AZ www.nsra.org. All rights reserved. 15 nsra.org

To the employees with this so you keep the happy face on trying to seem positive.

Hey what about the banker? Forget it. He’ll talk to you about money when you don’t need it. And you certainly can’t approach him with the current financials because he might get freaked out and call your loan if you don’t produce more collateral which you obviously don’t have. You can’t ask your family for more money—they are going to question your ability perhaps even your sanity. You’re putting in too many hours not sleeping well and becoming short with your friends and relatives.

There are solutions available.

One of the benefits of belonging to an association like NSRA is that the Association has places and people to refer you to should you find yourself dealing with “issues” from time to time. When seeking out a business consultant mentor or industry expert do your homework. You will be spending some money to get the help you need so make sure you are getting someone qualified to help. Look for an expert advisor who has industry experience thoroughly understands your situation and can provide you with a concrete action plan that is realistic to you. Don’t be afraid to ask for references and follow through on contacting them.

I hear stories like the one I have discussed more often than I would like.

Please forgive me if I fail to see the humor in the joke about making a small fortune by starting with a large fortune.

I have a better story:

Do you know how to make a large fortune in the shoe business? Start with a small one and don’t be afraid to reach out for a second opinion if you think things could be better. There just might be a brighter future than you think.

Contact Information:

Ritchie Sayner is vice president of business development at RMSA Retail Solutions. Follow him on Facebook at https://www.facebook.com/RitchieSayner or email him at rsayner@rmsa.com.

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Ritchie Sayner

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