There is a cafe near my office that grew in popularity from opening several years ago. The food range was excellent, the quality high, the service friendly and the coffee good.
Three months ago, the business changed hands. The new owners replaced the staff, changed the food range dropped the food quality and demonstrated little care for customer service.
Now, in apparent desperation, they have signs at the front of the café offering discounted deals. I suspect they will be out of business soon. The signs are sometimes shrill in approach, acting as a turnoff.
The best way to build traffic and success for any business, especially any retail business, is from within – through offering products nearby people want and that these are offered with friendly service.
The best way to take over a successful business you have paid a good price for is to ensure you understand how the business operated to achieve the numbers you paid for it and to ensure that at the very least you do what was being done before.
While a poor business you take over will demand change, a successful business you take over will benefit more from considered nurturing. That’s where the people who took over my local coffee shop have failed. They made a successful business bad, they are driving it to failure.
Taking on a retail business is not rocket science, not even if you have no retail experience whatsoever. Take your time, understand successes in the business and support them. Discover weaknesses and work on them. Back your judgement as it’s your own money on the line every day.
In the case of the café near my office, they took the business down market and in doing so misread what locals wanted – that they would pay more for quality product. These new owners offer cheaper product as a strategy, I suspect, to grow volume. The reality is they’d make more by selling less but for a higher margin.
I see newsagents make this mistake. They chase cheap products and happily sell them at a low margin. While sales may be okay, how many customers who buy on price come back? I’d say that number is less than those who find products they cherish and for which they pay a higher price.
The only way for the new owners of my local café to turn around their situation is for them to start selling quality products backed by friendly service.
Mark, I have an opinion on this and I would be interested in your view. It seems to me that many small business purchases today are driven by business immigration motives, not necessarily straight commercial motives.
Hence a large bankroll to fund short tot medium term operating losses, is the investment required to move your family to Australia.
If you are fortunate enough to be in this position, I say good luck to you. However the implication for other competing businesses, landlords and suppliers is that there is false economy going on in regard to demand for retail space, stock, and businesses themselves. I likewise had the local cafe bought out for what seemed to me a high price for a business with little or no good will nor exclusive licenses.
The cafe recently reopened as a restaurant (not operating as a cafe during the day), some 10 months later. How on earth is that possible in the normal course of commercial realities. I dont think it is and something doesn’t stack up. The short term commercial success of the business is clearly not a priority.
James, While I see some newsagencies purchased as part of business migration, many are not.
The business ignorance and newsagency operation ignorance I see and worry about has no ethnic basis. bad operators are bad operators.
I agree about capital. Too many buy businesses with little understanding of the capital required.