Business Management

The death cycle in retailing is a series of events which, if not caught and corrected in time, will cause the financial demise of the store/business as surely as the sun rises in the East. The death cycle usually starts as a result of buying more merchandise than the Store can sell profitably. As a result of this overbuying there are invoices remaining unpaid, that must be paid before the supplier will deliver again. It is difficult to pick and chose which suppliers will be paid without the unpaid suppliers being aware they are being treated unequally, and my cause the "running stock" suppliers to stop deliveries as they see the business in a crisis. Cash payments on delivery becomes the norm with suppliers as the business no longer is viewed as having any "credit worthiness".
This then causes the retailer to borrow money from a bank (if they can) to get current with their resources. At some level of borrowing, the bank will want a personal guarantee from the owner. At this point the business is no longer standing on its own two feet.
If this cycle continues, the bank will eventually raise the interest rate since their risk has increased and if there is no improvement, they will discontinue loaning additional funds and at some point call the loan for payment. If the owner is unable to raise cash from personal sources to pay the called loan, the business fails. All of this does not happen in a vacuum. While all of this is going on several other things are going on:
The owner becomes increasingly frantic and starts making short-term decisions to try to correct long-term problems.
Key employees get very insecure and may leave.
A whole host of record keeping inefficiencies set in. Among them are tracking the bank balance on a daily basis and keeping up with both checks written post dated checks given to suppliers.
Precious time is wasted by the most valuable personnel, including the owner.
Stock deliveries slow down while suppliers wait for their accounts to get current.
Another key employee just left lured away by a competitor.
Important work falls behind.
Chaos has set in.
Sales continue to fall.
Management loses confidence and becomes catatonic; important matters go undecided.One of the features of the death cycle is failure to use an effective retail reporting system. All too often we see an excessive amount of records being kept that cannot be pulled together into an information system. Many times manual records are being kept to generate lists that could be available automatically from the store's computer system. Many times retailers have computer systems that are not integrated, with invoices being entered twice because someone did not take the time to investigate, plan and execute.
Another feature of the death cycle is the deplorable waste of management time and talent. As a result of a lack of training (who has time?) and personnel turnover (often the most productive employees leave first) and the inefficiencies mentioned above the store staff becomes embroiled in unproductive activities that waste their time. Necessary activities (such as record keeping, order entry, receiving etc), get ignored. One of the common ingredients to this cycle is a lack of planning and control over buying and expenses due to the lack of a management information system, which focuses management's attention on the big picture. Important decisions are made without investigation and thought. Unfocased cahotic Store owners like to shoot from the hip. They like to complain about their plight and about the advantages the big chains have and how unlevel the playing filed is, yet too often they are not willing to perform the management tasks the big chains consider vital.
All of this can be corrected, if outside help is called in and time permits. It amounts to pulling the business up to a ninety-degree stance instead of lying flat on the ground, so the line of vision is established. That's what we do for our clients: help them grasp the big picture, plan ahead, make the right decisions, eliminate stress and enjoy retailing for the rewarding career it can be.