How to avoid failure before you’ve even begun

How to avoid failure before you’ve even begun

What an upsetting weekend! Yet again I find myself wanting to cry into my hot chocolate as I witness another local business venture close its doors to the public.

The word on the ground is that increased rents and of course the dreaded business rates played a big part in its closure. I can’t help wondering though if other factors may have affected their lack of success.

The business was a small café located off my village high street on a corner of two admittedly busy roads, but with no other shops located along them and no available parking. Not surprisingly there’s lots more passing cars than passing pedestrians a.k.a potential customers. I know available and affordable good locations are hard to find, but if one is not available it has to be worth rethinking rather than settling on a position that offers limited chance of success.

The other factor which I can’t help thinking may have influenced the inability to meet the demand of increased rents, again relates to the property itself. The café had a total of no more than 5 tables which (at the risk of sounding boring with the detail, but essential to the story) suggests a maximum seating capacity of about 15 people (or 20 if you don’t mind sitting thigh to thigh with a complete stranger –  maybe that’s another kind of café style worth investigating…but I digress). The menu of hot drinks and a few cakes suggests a possible AOV of £3.50 to £4 per customer. So, assuming (best case scenario) 15 customers all day every day they can expect to take c.£420-£500 per day. There was no local delivery service that I am aware of. Take off all costs, overheads etc. and I can’t imagine that leaves much wonga to wave around or pull out of the bag when the rent goes up – which unfortunately is probably inevitable at some point.

What’s more, look in any of the many other coffee shops already in the village and you’ll find them 80% occupied by mums with babies and young toddlers and the subsequent buggies and paraphernalia that comes with them. So, returning to our said café, there was barely room for one pram and don’t even think about a double buggy. Having been one such mum not so long ago I know customers won’t put themselves in the humiliating position of getting stuck wedged between 2 tables – no way forward, no way back. And although tempting, one can’t leave the little ones on the doorstep…..fast track to social services and mummy ostracization? Possibly this was by design to offer a sanctuary for kid-free adults but it clearly didn’t attract enough of them.

With the decline of the high street we all want to support independent businesses especially during the tough times. Of course I do not know the full story of this particular closure and other factors may have been at play. However, I do find it upsetting when people fail to cover the basics of a business plan before embarking on launching their dream venture. Even when you have a solid, well thought out plan success is tough enough, but without one it appears that only the few very clever and innovative entrepreneurs with outstanding gut instinct win out.

The reason I feel upset…this café was someone’s dream. They probably put their heart and soul and possibly their life savings and house on the line to open this business.  I know us marketers and ‘retail experts’ bang on about ‘know your market, know your customer.’ But that is because it is ESSENTIAL for success.

As FMCG sales specialists we meet many passionate entrepreneurs excited about launching their new food or drink product onto the shelves of UK retailers. My role: to play devil’s advocate. The first thing I ask is what research has been done? Do they really know their market, their competition, their target consumer? Have they thought about every element of getting their product on shelf and costed it accurately? You’d be amazed how many people have not worked out what profit they could make on the sale of their product. They can give a cost price and then asked what retail they think they could get – a quick back of a fag packet calculation and ooops they’re lucky if they’ll break even.

I embrace entrepreneurs. I wish I had the balls and tenacity to be one myself. The world needs forward-thinking people with passion and vision. But, I wouldn’t be doing my job properly if I didn’t caution would-be foodpreneurs to not give up their day job or re-mortgage their home unless they can confidently answer the following few questions – and these are just for starters.

  • What makes your brand different? What is your USP?
  • Who is going to buy your product?
  • Why will they buy your product instead of your competitor’s?
  • What is the market potential for your product?
  • Can you afford to sell at the right retail price?

Assuming the answers to the above are positive and suggest real potential then the hard work really begins…..production, financing, packaging, marketing, sales strategy. But that’s another story….

 

By Donna Chappelle