My client is an established Jermyn Street retailer on a prime London site and had been trading profitably for 30 odd years up until the recession hit. Sales dropped by 15% from peak and margins were under pressure.
I was asked to carry out a business review. The main issue was that the business was just tired and it really showed it, in the downturn. The premises looked dowdy; the staff, who had all been there for years, were not motivated and often ignored the customer and were virtually self managed. The product, although not bad, was also looking dated and needed revitalising.
My review argued that 3 things needed to happen.
Firstly a shop manager needed to be appointed to lead the customer service and to train the staff who had gotten into bad habits and teach them some basic selling skills.
Secondly the buying needed to be improved to give life to the product range and give it a more modern casual feel.
Thirdly the premises needed to be refurbished
The first 2 changes happened fairly rapidly, the staff were miffed at first to have a manager promoted over them but became relieved when they realised that something was being done and whilst they were not keen on having a new boss they were keen to keep their jobs. The product was improved as was its presentation and whilst the sales recovered to their previous level margins were still under pressure. It was not enough.
The business needed to attract more customers and that was not going to happen without the premises being refurbished and breathing life into them and making the shop a fun place to be and to be seen.
Plans for the refurbishment were commissioned and the cost came in at £500K.
The company had spent whatever reserves it had surviving the recession and needed to borrow the money. Whilst banks in the good times were prepared to lend against prime London leases, they were not in the 2009 economy.
The company had borrowed from the bank to acquire the lease some 4 years previously and frankly the bank were nervous because under their new valuations methods their previous loan was not secured as they would like it to be and they had no appetite for lending further money.
I had the idea however of pursuing a loan from the bank under government EFG Scheme whereby the government guarantees 75% of the loan for the entrepreneur. The loan was structured in such a way that enough money was raised to pay for the refurbishments and to pay off the company overdraft. Structuring and presenting it to the bank in this way was attractive to them because it improved their overall security. A win win situation.
The company got the loan and the premises were re-furbished and the effect on turnover was dramatic. Sales rose 20% on a like for like basis in the first week of re-opening and have stayed at that level and slightly above ever since.
The company is now more profitable that at any time in its history and the directors are considering a roll out to other locations with what is now a winning formula.
I am still involved with the business.
