Going Out of Business? Know The 5 Biggest Mistakes Store Owners Make
JUST IMAGINE…YOUR STORE LOOKING LIKE THIS…
WITH LONG LINES OF CUSTOMERS AND MINIMAL DISCOUNTS…
AND LOOKING LIKE THIS AFTER YOUR BIG SALE IS OVER…
How it could have been avoided in the first place.
Knowing all the intricate details of how to close a retail store are infinitely more valuable than how to run day-to-day business.
Why? – Because with a store closing sale you get ONE shot at doing it correctly, but with day-to-day business you have much more room to make some mistakes along the way.
My father used to work for Sam Walton long before Wal-mart ever existed, then he decided to venture out on his own and start his own small chain of stores that he ran for nearly 20 years.
It was during this time that I learned all about retail from my father. And why I proudly refer to myself as the “Son of a Sam Walton disciple”.
It was when my father was faced with the daunting task of having to liquidate his assets and close his stores (ironically, because Wal-mart had moved into all the towns his stores were located) that I began to evaluate the lifecycle of the casual retailer, and even the lifers as my dad was.
It was painful for me to watch, but I can proudly say that I love sharing this knowledge with other retailers when I can.
The scene generally plays out in one of three fashions:
Store owner is retiring and is financially stable.
Store owner is ready to, simply, move on.
Store owner is forced to close because of lease situations or years of poor marketing finally catching up.
Often it’s a combination of 2 or more of these.
Now there are many variables to each of these scenarios, but the bottom line is that when a store owner is in a position where they are closing their store it must be done correctly, otherwise they could end up losing a substantial amount of money, ruining their reputation, and minimizing the profit potential.
In this series of articles, I’m going to be covering some fundamental marketing concepts that every retailer SHOULD be investing in and making sure it’s being done adequately and effectively in order to stave off or avoid entirely what most retailers eventually face: store closing.
This article is going to explain to you the 5 biggest mistakes store owners make when going out of business. Or more specifically, “…when going out of business with the intention to either not lose any money and be in position to make a profit”.
You must ask yourself some questions when you first start thinking about going out of business.
Things like “How well have I run my business?”, “Do my customers like my store?”, “How large is my customer database and/or social media following?”,
“Have I engaged with them regularly to have a relationship with them?”, “How much competition do I have?”, “Are my prices competitive even in lieu of the service-oriented atmosphere most popular with small business owners?”, and other similar questions.
Depending on how you answer these types of questions will play a role in precisely how successful a going out of business sale will be for you.
For example, if you have a large mailing list of customers and/or social media following that you have communicated regularly with, if your customers like your store, and if your store is known for always being well stocked, then you are well positioned to have not only a successful going out of business sale, but also a profitable one.
This is not to say that you can not successfully close your store if you can’t positively answer these questions…it simply means it’s going to be more challenging to make it successful, and may require additional planning.
MISTAKE #1: Lack of Proper Planning
Proper planning is probably one of the BIGGEST mistakes most merchants and store owners make when going out of business.
Why? Because many have a preconceived notion that conducting a Sale of this nature is “easy” and can be done while they run their business as usual.
Also of misconception is the notion that all there is to conducting a going out of business Sale is to simply “mark stuff down”.
It’s because of this first, and BIGGEST, mistake that professional help be sought when planning a going out of business Sale.
MISTAKE #2: Timing
Many store owners think that once they’ve made their mind up to close their business that a Sale can immediately commence without any forethought of when the Sale should begin and, more importantly, how long the Sale should last to maximize profit.
This can actually make or break a Sale as well.
Preparation and length of a going out of business Sale are almost entirely dictated by the size and/or kind of inventory.
If you have an inventory that dictates a 9-week Sale, but the price reduction strategy is miscalculated, the store owner will lose profit dollars because too much inventory was sold at too high of a discount too early in the Sale.
MISTAKE #3: Marketing
A rock solid marketing plan is essential for any business, and such is the same for a business liquidation Sale.
In fact, it’s probably even MORE important for this type of a Sale because you only get one shot to make it work, unlike regular business sales where if you screw up you can always try again.
A rock solid marketing plan for a business liquidation sale is one that includes maximization of every possible tool available.
This means one that gets the store the most exposure to the right people for the least amount of marketing dollars.
It is for this reason that full and correct utilization of the Internet and social media is essential, particularly email because it’s free to send email and/or social communication over and over again.
While, generally speaking, a marketing budget for this type of Sale generally hovers around 10% or less of the inventory’s cost, there are many factors that could affect this in either direction…things like the size of your existing internal mailing list, the social media following and level of engagement, and how often you communicated with your customers and fans.
MISTAKE #4: Merchandising
In order for an Out of Business Sale to be successful a store must have a healthy selection of merchandise, priced right, and a healthy amount of traffic.
If you are able to get the traffic, but the store is merchandised poorly, it fails. If you are able to get the store merchandised well, and it’s poorly marketed, it fails.
So, why is it so important to execute a great merchandising strategy?
Think of it this way: in order to be successful with the store closing sale planning, you MUST invest in the right amount of marketing anyway.
And if you’re going to HAVE to invest in this marketing ANYWAY, then why not capitalize on the traffic that’s generated and stock your store fully with popular, regular selling items before the Sale begins?
And even if you DO take advantage of this profit maximizing strategy, the merchandise still needs to be priced and displayed well in order to tempt people to buy it.
MISTAKE #5: Management
This really coincides somewhat with Mistake #1, yet still has enough differences that it needed to be it’s own “mistake”.
Many store owners believe that a store closing Sale is just like any other Sale they may have had in the past and that they can easily and simply run this Sale while running their day to day business.
This type of Sale is very tedious and many different aspects need to be addressed.
It’s actually more like running two separate businesses at once!
Aside from all the things mentioned in this article, there’s also fixtures in most cases, so there has to be a plan in place to sell them as well.
It is for all these reasons that professional help is highly recommended if your intention is to not lose money and be in position to actually profit from a Go Out of Business Sale.
To close, here’s a summary of the 5 biggest mistakes store owners make when shutting down the business:
Proper planning – seek professional help that can help you through the entire preparation stages of the Sale.
Timing – conduct your Sale at the right time and for the right duration.
Marketing – develop a solid plan that minimizes expenses and includes a healthy mix of Internet, social media, and print marketing.
Merchandising – make sure the store enough of the right merchandise and that it’s displayed correctly to maximize profit.
Management – get a consultant that understands the process to manage the Sale…a Going Out of Business Sale is NOT “business as usual”