Turning the Retail Joke into Real Success

Heard This One Lately? (You’ll Die Laughing…Not)

SRT May/June

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 a real knee-slapper right? The only problem with this joke is that if it wasn’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 you are ask yourself the following questions:

• How did you get in 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 that are in this miserable state and aren’t even aware that they are. They have become so comfortable with their status quo that they don’t even know there is a more prosperous way to live. How do you know true success if you have never experienced it and spend the majority of your day-to-day life on negatives?

I recently came across a situation where a retailer had gotten into such a negative cash position that the majority of his time and energy was spent appeasing coaxing threatening pleading and negotiating token payments on past due invoices with vendors hoping they 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 a drug addict who refuses treatment in favor of the next fix. This is a short-term solution to a long-term problem.

Cash Flow Challenges in Retail

To be fair I am not suggesting for a moment that there aren’t times for most retailers where cash flow is stronger than other times. In this particular situation what available cash reserves had been available had been drained through a combination of poor merchandising decisions and even worse financial control.

• A costly new store build-out
• An unrealistic lease
• Shrinking margins due to aggressive promoting needed to generate cash to pay the maxed-out credit cards and line of credit that the bank now wants to reduce
• Declining sales due to lack of fresh product
• Interrupted deliveries from not paying vendors on time causing the inventory to be out of balance

All of this forces the operating expense percentages to rise by default. Without intervention of some sort this downward spiral will continue until everything crashes. Sound familiar?

Who Needs the Stress?

Is the business really worth all of this? You need someone to talk to. The vendors want you to pay what you already owe so they can ship you some more. Your accountant bless his heart is constantly reminding you of the dire position you are in but doesn’t have the answers you need to solve the problem. Your wife (husband) is weary of hearing about the store’s problems and just wants you to do something—anything.

You can’t go to the employees with this so you keep the happy face on trying with all of your might to stay 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.

You might even be attempting to mask the pain by overindulging in whatever it might be that you indulge in. You see I don’t see the humor in the joke because I hear stories like this all the time.

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.

(Ritchie Sayner is …follow him on Facebook at …)

Ritchie Sayner

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