Have you ever gone to visit one of your favorite retailers only to discover an empty store with a For Lease sign posted in the window?
I’ve read many interviews of store owners on their last days who often blame their store closing on the economy and online competition. But, what’s really happened in most instances is the owner and their managers made bad choices about crucial items; some even before they opened.
I don’t want that for you, so here are the 9 common mistakes that doom a retail business:
Wrong partner. The right partner can help you immensely whether they are a side-by-side partner or a silent partner. But when you don’t do your due diligence of vetting each other, expectations may be wrong. Deadlines can be missed and the great relationship you thought you had at the beginning frays. You need to make sure you each know what the other brings to the table, what you’ll do with disagreements, and exactly who will do what. Your partner isn’t an employee you can fire easily. Opening a new business is a rush, but when that rush fades in a few months, you both need to be bound to each other in order to succeed.
Wrong location. Everyone’s heard it a million times. Location. Location. Location. But what does that mean exactly? Few of us know about correct egress and ingress to a center, traffic patterns, and demographics. Fortunately, rents are a good clue. Yes, you can save 30% with a location that’s off the main road but you’ll probably give that 30% back – and more with advertising to try to get them there. You never want to be 100 feet from success. Yes, Starbucks can go just about anywhere, but you’re not Starbucks.
Going it alone. While it’s great to have a vision, going it alone is really difficult. You can do the jobs of two or three people, but you can’t BE two or three people. You need to hire management to help you – whether that is office staff, a store manager, or an assistant. You need someone who can help you do those multiple jobs so you don’t burn out, become bitter, stop being customer-focused and lose that vision to cynicism.
Enamored with your products. It’s wonderful to curate a great assortment of products from all over the world, ones that aren’t easily found at the big boxes or online. What’s not wonderful is looking at your store full of merchandise and hearing customers tell you, “I love your store” – but who refuse to pay full price to take any of your products home. You need to sell the merchandise at full price.
Not focusing on the fundamentals. Profit and loss, breakeven, and cash flow are the basics of running a business. If you don’t want to learn those basics that’s okay, but you’ll have to pay someone to do them for you. You need to be cognizant of your fundamentals, like retailers' profit margins, or you won’t have enough money to cover expenses…which can lead to stupid things like not making your employees quarterly tax payments…which can land you in jail.
Hiring the wrong employees. It's great to have friends but they shouldn't get a pass on standards and accountability. In fact, you should just pass on hiring them. The best retailers get comfortable recruiting talent. That could be as simple as handing a restaurant server your business card and telling them, "If you'd like more hours, come see me. I think you'd do really well" to taking a couple of hours each month to shop stores and recruit.
Not managing the people. Your job isn’t to be the boss. Your job is to manage and train your people so they do better than you on your sales floor. Do that right and you can build a business that is competitor-proof. Miss that opportunity for retail sales training and they’ll either rob you blind or turnover so quickly that you’ll give up on training them… which is where many retailers find themselves today. You need to invest in your people, or they won’t invest their time or loyalty in you… that leads to them not investing in your customers… which leads to that For Lease sign.
Not leading by a good example. Yes, work/life balance is important, but when you’re at work, you’re at work. Letting your smartphone tie you back to your personal life, when you should be working on your business, is a real trap. Employees will see you and do likewise – or even worse when you’re gone. That means no long lunches, no bringing your three-year-old to work with you, no going home early. You need to balance your distractions or you’ll end up with just a personal life and no business.
Reliance on sales. It's fine to have a sale now and then to clear out merchandise or juice your traffic in a slow period but constantly using them usually means you feel you have to pay customers to come in. If you don't know your margins and costs, you'll never achieve break even. You have to believe in your products and pricing and train your crew. I know one woman restaurant owner who shows her new hires how a simple thing like a ceramic coffee cup if it gets chipped has to be thrown away. That's why they don't stack their cups, saucers, plates in the sink or they will get chipped which affects profitability.
All signs point to a continued recovery with strong consumer confidence and a higher stock market. Don’t let these mistakes lead you to throw in the towel.