The Business Leaders Book Club: Lessons From the Recession

I have recently contributed to a great new book which is available as a free download from www.theebooklibrary.co.uk. The book is called Lessons Learned from the Recession and is the first in a series of books for aspiring and proven Business Leaders around the world. To find out more and share any feedback, check out:
www.thebusinessleadersbookclub.com.

In the book, 60 carefully selected business leaders share their personal experiences of what they have learned from the most recent recession. The chapters are a mix of success stories containing personal stories interwoven with detailed practical advice.

But as a taster I thought I would share my chapter with you here. I hope you enjoy it and it will inspire you to download and read the other 59 chapters.

The eBook is free to download but if you would like a discounted hard copy of the book, priced at £12.99, then enter BLC1004 at the checkout and you will pay 50% of the SRP.

Please share this blog and code with anyone who’d enjoy this book. Please leave your thoughts or comments  below!


Chapter 5: Retail Knows First

At the time the recession hit, I owned a multi-channel home furnishings business; I was the founder and CEO. The company had started as an internet business in 2001 and in the autumn of 2005 we expanded into a bricks-n-mortar retail storefront.

At first when we opened the storefront, our sales increased quickly as people discovered us. Soon we showed only modest growth that was below our targets. We were getting great feedback from the community and everyone who walked in to the store “loved it”, but no one was buying.

If at first you don’t succeed try and try again

To increase sales, we brought in new product lines and tried to move older merchandise. We found that when furniture was deeply discounted, it moved. But our lease had a clause saying that we could not operate a discount outlet.

So we tried EVERYTHING; we added design services, held classes, advertised, improved store signage, held promotions and events, did direct mail pieces to new home buyers, hired better trained sales people and so on. But nothing increased sales. We developed relationships with interior designers and estate agents but to no avail. I was racking my brain and couldn’t figure out for the life of me why no one was buying.

Strengthen what is NOT broken

The saving grace had been our internet store which produced a steady six figure revenue. Then in the summer of 2007, petrol prices doubled, our shipping costs skyrocketed and our margins dropped.

Not a good thing. Our primary internet supplier started to slip on delivery times from six weeks to 24. Our customers became angry (and sometimes hostile) and our supplier began lying to us. I looked into expanding our internet offerings to limit our vulnerability. The problem was that the bleeding at the retail store required more of my attention.

Look for and listen to the signs

My first clue that there was a more global issue came in early 2008 when one of my sales reps congratulated me on doing so well for opening my store during the worst two years the industry had ever seen. He said they were losing accounts everywhere; that stores were shutting down.

In the meantime, Colorado was leading the nation in foreclosure rates. I thought it was concentrated to low income areas. I didn’t know it was a national issue, let alone global. I wasn’t alone.

The 80/20 rule is wrong!

In business school I learned to analyse my business financials in three ways: best case, worst case and most likely scenario. In the worst case, you should calculate that 80% of the things can go wrong 20% of the time. Well, they were wrong! EVERYTHING can go wrong at once!

Do your research

The only thing we hadn’t tried was a different location. So that’s what we did. After talking with other independent furniture stores in the proposed new location AND hearing rave reviews about how
well they were doing – two out of three had just renewed their lease.

We switched locations in April 2008. We moved to a smaller space in THE most upscale shopping district in the state. We lowered our rent and reduced our payroll. These changes cut over 50% off our expenses but it was already too late.

Diversify while you are strong

In May of 2008, the month we opened in our new location, our supplier for our internet products raised prices by 15%. The result?

All sales CEASED! Our steady six figure sales dried up and we did not see another penny of revenue from the internet for the next six months.

Sometimes it’s beyond your control April 2008 was the first month of the recession in the US but it wasn’t official for months. By August the furniture shop across the street from us said their clients had stop signing contracts. In October the stock market crashed. Customers put their plans on hold. The streets of the shopping district were empty.

By November, top architectural firms around the city were slicing their staff by 50% or more. One even laid off all his staff and moved his business into his home. There were rumours of architects standing on the street corner holding a sign and begging for work to feed their family.

Life DOES go on

I remember sitting in the store and feeling completely overwhelmed; it was like the world was crashing in around me and I was losing everything. And then the light went on and for the first time in three years I felt hope. I went home and joyfully told my husband, who was unemployed at the time, “You know, the only people who died during the great depression are the ones who killed themselves. We still have each other. We have three beautiful, healthy, wonderful kids. I’ve got everything I need. I don’t care if we live in a tent. I have a great life.”

The new store never achieved any sales worthy of note. We closed at the end of December 2008. We could not even sell our inventory at clearance prices. There just weren’t any buyers in sight. Two out of the three stores we had talked with, who had claimed strong sales, closed shortly after us.

Watch the trending of the big guys

William Sonoma, owner of Pottery Barn, is one of the leading publicly traded companies in home furnishings. At the time I opened my store in August 2005, William Sonoma’s stock was trading at $40 per share. At the time I closed my store in December of 2008, their stock was trading at $7.85. Had I thought to track their revenues at the time, I may have shut down sooner. Needless to say, I didn’t have the deep pockets to weather the storm. Sometimes it’s best to stop.

Learn how to quit

Going into business I knew that I should put a floor as to how much time and money I was willing to invest before pulling the plug. But three things happened: firstly I was emotionally attached, this was my baby; secondly I was humiliated to fail and so I hung on; thirdly I didn’t know how to stop – no one had taught me how to shut down a failing business.

Watch the growth of the industry

Nine months after we closed the business, I had dinner with a friend, a successful venture capitalist, who made a comment which I will never forget. He said “the number one thing that determines how successful a business will be is the growth of the overall industry”.

Have a plan B

After shutting down the store, I regrouped. I looked at what had drawn me into the home furnishings business and what I had most enjoyed. Then I designed a new business that maximised my strengths and minimised my weaknesses. I began to share my internet marketing expertise with other entrepreneurs to help them grow their business.

The architects and designers I know weren’t so fortunate. Many are still unemployed, their skills not transferable beyond their industry. Those that do have jobs saw their pay checks slashed.

Develop a functional expertise that can transfer across industries. Have a skill you can fall back on.

Retail knows first

In closing, if you want to know what’s happening in the economy, ask a retailer. They know three to four MONTHS ahead of the government what’s happening at the consumer level. They are the pulse of the consumer. You want to know? Ask a retailer.
 


Again, to read the entire book and the contributions from 59 additional authors, go to www.theebooklibrary.co.uk. to get the free download. You can also order a hard copy at a 50% discount when you enter BLC1004 at the checkout.

I encourage you to read the fantastic tips and lessons shared by the other 59 authors.

What did you learn from the recession? Please share your own experiences and tips you would want others to know. Share with us below.

 

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