Store owners generally do a really good job of planning store openings, but hardly ever consider planning an exit strategy. Store closing is a subject that is taboo for most furniture store owners to think about, much less plan for. Promotional companies, or liquidation specialists, thrive on working for furniture stores without an exit strategy that are on the verge of bankruptcy.
If you are one of these owners who has not given serious thought to an exit strategy for your business, you need to read on. The information you will find in this series of articles may just help you salvage your future and go happily into that goodnight! This article will inform you of the danger signs that strongly suggest that it is time to plan to exit your business. It also includes tips and suggestions to assist store owners with conducting a successful store closing event.
“What are the signs that would suggest that I should start thinking about closing my store?” I’m glad you asked! Here are the five major signs followed by an explanation about how each might impact your business.
1. An economic downturn in your city due to the closing of one or more major employers.
2. One of the major big-box national furniture chains opens a store very near your own location.
3. Strip shopping centers in your area begin to close up.
4. Your business has declined for the last three years.
5. You have personally financed some or all of the operations of your business more than three months in a row.
#1 - An economic downturn
As a store owner you know it is up to you to stay informed about business conditions in your community. This is especially true if you live in a small to middle sized town with one or two major employers. The first thing you need to understand is that you have no control over a company moving operations to another city or worse yet, closing their doors. You can, however, control what you do when this happens.
Whenever a major employer moves or ceases operations you need to get out and visit other retailers in your area. Talk to the owners or store managers and find out if their business is being affected by the actions of this employer. When people, who live primarily from paycheck to paycheck, lose their jobs, the first thing they do is to stop buying anything but what they need to live. All purchases that can be postponed usually are: that includes clothes, homes, cars, new electronics, appliances and unfortunately furniture.
Besides getting out to find out how other retailers in your area are doing, you need to take a very close look at who your customers are. If many of your customers were also employees of the company that is closing or moving out of town, start preparing for the worst. Get in touch with your cities’ economic development department and find out if there are any new companies looking to open a location in or around your city. If so, find out when they plan to start operations and how many people they intend to hire. If this new company will be able to compensate for lost jobs within the next 6 months, you may be able to weather this downturn in economic activity. If this isn’t the case you need to seriously consider exiting the market before you lose your business.
One good way to keep informed about the employers in your area is to join the Chamber of Commerce in your city and participate in the Chamber’s activities. Most major employers will also be members of the Chamber. Network with their representatives so you can stay ahead of the curve and have time to conduct a high impact event to raise extra cash while your customers still have jobs.
#2 - A major big-box retailer comes to town
On your way home from work you come up on some new construction and you read that dreaded sign; “Big-Box Furniture Store Coming Soon”! There are two responses you can choose when this happens. One is to hang your head and decide that the end of your business is near. Or, you can invite all your current customers to participate in an event. If there was ever a time to accelerate communications with your current customers it is when you know a “big-box furniture retailer” is coming to town.
Before you panic, you need to also consider whether or not this big-box store will cater to your customers. Will they offer some of the same products you offer? Consider the price points they offer in each furniture category. After all this consideration if you come to the conclusion that you are going to be fighting for the same customer, you may want to start making plans to exit the market. You don’t have to execute these plans but you definitely need to have a plan in place. Get in touch with a reputable company that can give you advice about how to maximize a store closing event. Get all the particulars such as realistic sales projections, the proper level of inventory to have on hand, a plan for graduating the discounts during the course of the event and a complete plan on how to set up your store for the event.
Hoping for the best without preparing for the worst in this circumstance is why many furniture store owners find themselves out of business with nothing to show for all their years of hard work. There have been many national furniture chains that are no longer in business because they had no exit strategy in place. No business is too big to fail!
#3 - Strip shopping centers begin to close
As seasoned retailers we all know that success is often about location, location, location! Retail shoppers are mobile, but retail stores are stationary so, when you see stores in Strip Shopping Centers closing their doors, it usually means that shoppers are relocating to another area. If you are a well-established furniture store with a large enough customer base that you don’t need new customers, these store closings may not have any effect on you. If you still need new customers to support your business you need to consider moving your business to a new retail location if possible. Sometimes the cost to move operations to a new location is just too high. So what do you do?
Typically a furniture retailer stuck in this dilemma will resort to offering their products at a discount to entice shoppers to come back. This often leads to the store becoming a discount retailer with barely enough profit margin on products to keep their operation alive. It may make better business sense to consider closing your operation at the first sign that the retail market is moving to a different local. If you have a solid exit strategy in place before your retail market collapses, you may be able to liquidate your store and use the proceeds to move to a better location. In retail we know that timing is everything. If you are not prepared to respond to a change in your retail market you could end up an unemployed business owner with little or no financial safety net.
#4 - Your business declined for the past three years
There are many reasons why a retail furniture store could have a decline in sales from one year to the next. But when store sales have been in decline for three years or more this is a strong signal that change is needed. As a store owner you have three options; re-invent your store, move location or close.
What happens more times than we care to admit is the store owner tries to “ride it out.” Sales continue to decline until the store closes down.
A better response to this circumstance would be to have a high impact orderly liquidation of all inventory and open a new business in another location. This can be accomplished only if you have a carefully thought out plan to exit your market. This is where a professional familiar with orderly furniture liquidations can help. Having your exit strategy in place months before you execute it gives you the best opportunity for a successful event. An even better plan would be to work with an exit strategy consultant before sales begin to lag and have your plan ready before it’s too late to execute an effective store closing event.
#5 - You are personally financing your operation
You may be in trouble if you have personally financed some or all of the operations of your business more than three months in a row.
The very first time you have to take some of your own earnings to support some or all of your store’s operations should raise a huge red flag! If your business is not cash-flowing and funding all operations you need to act fast. This does not mean that you shouldn’t invest personally in expanding your operations. That is a totally different business decision. What I am warning you about is spending your own money to keep your business open. The first time this happens take a close look at your payroll. Are you overstaffed? If so, will your business be alright if you eliminate or limit the hours of one or more employees? I recently talked with an owner who had a three-store operation. He also had a central office filled with employees who supervised the supervisors in each department in each store. In other words, he was paying more than double the amount necessary for his supervisory team.
If you have cut your payroll as far as you can and you are still funding your operations personally, one solution is to consider running an “Emergency Cash Raising Event” and see if you can raise enough cash to get your operational expenses covered. Maybe a well-orchestrated “Wall-to-Wall Liquidation Event” will get your business back on solid financial ground, allowing you to re-invent your store for future success. You need to think very carefully about how you will respond to your current business situation. The point is this; if your store is not cash-flowing, you need to do something radical fast!
About Jeff York:
Jeff York is a veteran of the furniture industry with over 15 years of experience in management and consulting. He was a Managing Partner for the furniture division of a consulting and liquidation firm where he prepared marketing packages and managed store closing events for furniture stores from Sarasota Florida to Cleveland Ohio. Currently Mr. York consults with small business owners and prepares custom marketing packages for furniture store owners who want to do their own Store Closing, Going Out Of Business or other High Impact furniture event. To find out more, visit his website at www.diyfurnpromo.com
Furniture World is the oldest, continuously published trade publication in the United States. It is published for the benefit of furniture retail executives. Print circulation of 20,000 is directed primarily to furniture retailers in the US and Canada. In 1970, the magazine established and endowed the Bernice Bienenstock Furniture Library (www.furniturelibrary.com) in High Point, NC, now a public foundation containing more than 5,000 books on furniture and design dating from 1620. For more information contact firstname.lastname@example.org.