Opening in a downturn: the best time to set up shop?

Paul Wheeler, sales director for buying group MHK UK, has more than 20 years of industry experience including running his own showroom. Here he looks at why starting a new KBB retail business in a softer market can be a real opportunity

Paul Wheeler, sales director, MHK UK

In most industries, setting up a retail business in a soft market would be enough to get your peers picking up the phone to check you’re OK. In the KBB industry, however, a downturn can be an opportunity – for many reasons. It may seem a maverick move, but thanks to the three Rs, opening a showroom in a downturn can be very astute. 

The three Rs

• Rent: It’s important to remember that rent will be the biggest and most significant cost in setting up a retail business. That being said, in times of bricks-and-mortar struggles, landlords are more likely to engage in rent negotiations and potentially even a period of free rent if they are struggling to fill premises. 

• Redundancy: Sadly, redundancies can be inevitable in a downturn. On one hand, redundancy payouts are a safety net, but on the other, they can be seen as an opportunity to reinvest in the future.

• Recruitment: Redundancy can also provide business owners with recruitment opportunities in the form of a pool of experienced and knowledgeable people that will be key to building a new KBB business. Fitters, designers, showroom managers – they are the foundations to growing your business.

Some may choose a quieter time to exit their business of their own accord, allowing a more controlled way to leave or wind down. This can make way for opportunity to take over an already estab­lished showroom business or set up a new business in an area where there has previously been demand.

Success will depend entirely on the infrastructure you put in place. The number one thing you can do to future-proof a new business in a downturn is to set up a robust system for cash flow, which can be easier said than done. Here’s a helpful list of the things that will help you put your best foot forward when starting from scratch:  

• Get backing and fast: As a new business, financial backing and support will mobilise growth plans. Some­times it can come down to a piece of paper from a partner, investor or supplier saying they support you to get you to the next step with a landlord. 

• Increase cash flow: As a new business, cash and credit will be key to growth plans. Without trade credit, a business limits the speed at which it can grow, as every new piece of business requires capital to pay for trade goods in advance. As a new business you will need to be competitive. Taking large deposits from clients to pay your suppliers will be trickier than for an established business. If you can take the onus off the client by offering lower deposits, this will allow you to be competitive, attracting new business in the early days. 

• Be smart with time: Unless you have a dedicated member of staff that is highly experienced in the art of finding suppliers, comparing prices, and negotiating terms for brand new businesses, you’re going to need some help. Either go in with an extremely clear and narrow vision of which brands and suppliers you want to work with and focus on them alone, or consider working with an organisation, such as a buying group, that can support the introduction to multiple new suppliers. 

• Accept help: Aside from people, product and place, in setting up their businesses, all KBB retailers are going to go through a process of mobilising the business with external help – from warehouse and storage to website development and sourcing suppliers. Being part of a community can help.

This month  kbb Birmingham, the industry’s largest UK trade show, takes place to connect suppliers, retailers and experts providing an unapparelled opportunity to learn from peers. We’ll be there and strongly recommend anyone thinking of setting up a new retail business to attend. With the right connections and experience, fledging retailers need not lower their ambitions to set up shop. If you can survive a soft market, you’ll most certainly thrive when it becomes more buoyant – and, the KBB industry has enjoyed many a bounce back. 

Home > Indepth > Opening in a downturn: the best time to set up shop?