The agriculture industry is not the only facet of the economy that faces trials and tribulations of business dysfunction and changing trends. Today, we will focus on two businesses, with which I have worked, in the process of either closing their doors or seeking new ownership. Although different, both serve as good examples for today’s businesses and managers; especially, during economic reset.
One of the businesses was a locally owned, custom clothing store that provided quality products and stellar service to the community for almost 50 years. Recently, the business displayed the infamous “going out of business” sign. In retrospect, telling signs preceded the sale; very few customers coming in the door, clothing lines shrinking, and owners who were less than motivated as a result of decreased revenues and profits. This business was started during a major recession and has since weathered seven other economic resets. However, it was not the most recent economic downturn that squeezed this business. This local clothing store was directly impacted by a megatrend.
Contributing to the slowdown, the store clearly did not target the younger generation and was more traditional in its selection. On the first day of the closeout sale, approximately 95 percent of the customers were over 50 years of age. Additionally, on the occasions when younger customers came into the store, they did not purchase large amounts of clothing. In general, per the megatrend, younger generations usually make online purchases; often at discounted prices.
The second business closure serves as a common but classic example for any business to avoid. The business was food service and the owners were focused on business expansion as well as other outside activities. Their time for seemingly menial tasks like bookkeeping and office paperwork was limited. Consequently, the financials were turned over to financial officer to meet the bills, service debt payments, pay taxes and maintain general financial and business compliance.
After a phone call from a supplier, the financial mismanagement was discovered. Despite receiving their monthly withdrawals, the owners realized bills from lenders and suppliers were unpaid and delinquent. In addition, the food and beverage and local taxes were also arrears. Cost projections for the business expansion were not tested through scenario planning and business plans were not communicated clearly inside the business for daily operations. Interestingly, this food service business was booming with customers. However, failure to monitor daily, monthly, quarterly and annual financials placed this business in an extremely difficult position. In fact, the business could not recover and was sold at a discounted price.
As the agriculture industry continues to reset, both of these stories should command particular attention. While one was hit by a changing trend and the other by business dysfunction, neither is generating a profit anymore. In the case of the clothing store, the owners lost their passion and allowed changing trends to render their business out of date. Economic megatrends can be your ally but, only if your business is aptly positioned for change. The other closure clearly demonstrates the importance of maintaining a systems approach to your business. Business planning, monitoring and execution hold great power in your business success. A good manager must master the big picture view as well as the minutia of everyday operations. One perspective without the other clearly leaves the business vulnerable and exposed.
In summary, always monitor your financials. Audited financial statements and tax minimization are fine. However, successful businesses employ managers that are not only engaged in business financials but also use that information for short and long-term business strategy and execution. Position your business for success by monitoring changes and trends both inside and outside the business.