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The cost of growth

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Susie Loudon’s business, The Bay Tree, a high-end kitchen and tableware retailer, isn’t like the average small business experiencing growth. In fact, Loudon’s most significant growth spurt happened only two years ago, after more than two decades in business.

Business has been in Susie Loudon’s blood for some time. Before The Bay Tree, there was a successful real estate business that she ran for 10 years.

“I needed a change, I needed motivation, I needed something to be stimulating.”

So when The Bay Tree became available, she jumped at the chance. “I come from a family that is really passionate about cooking,” she says. “The business came up for sale and the decision was instant, and I’ve never looked back.”

Patience and persistence pays off

The Bay Tree, a brand established in the 1970s, was responsible for introducing Australia to some of the world’s best cooking brands. Despite its reputation, when Loudon came on board, the business consisted of two rooms, with an upstairs ‘attic’ for storage.

“We just had no space, we were literally into the rafters!”

With one eye on the business and another on the local real estate, Loudon knew she needed a bigger space, but couldn’t find a space that was right for the business.

“The [old] building came up for sale about two or three years after I moved in and I thought no, it’s far too small, we’ll only be here for a year or two, we’ll have moved on.”

She stayed there, though, for 19 years.

“A number of premises came up that we could have moved into, but they weren’t big enough. They would have only allowed us two or three years’ growth,” she explains. “Once you move a business, the costs involved are great, but also the fact that your clients need to find you and you need to be stable. If you start to move the business every three or five years, not only does it make bad economic sense, it also doesn’t give your client a good sense of security.”

Good things come to those who wait

The new shopfront – in a heritage building, six times the size of the old building – took Loudon almost 18 months to secure, refurbish and move in. She admits that the strain on finances for a growing business, particularly one about to move, is not without challenges.

To top off challenges with managing stock levels, just when Loudon thought she was ready to move stock into the waiting shelves, she discovered the builders had removed all the shelving.

“It puts a massive amount of pressure on finance. We stopped trading for two weeks. And when you open the doors you need to be absolutely up and running, in full force, and you also need to start a massive advertising campaign to let people know. Whether that’s in magazines, newspapers, mail-outs; everything you can think of to contact clients and new clients.”

The long list of new clients surprised Loudon, somewhat. “It’s brought us a huge number of new clients who didn’t know we were here, because we weren’t on a main street.”

Lessons learnt
Follow the cash flow

“We look at cash flow every week. I also look at previous cash flow because we have highs and lows. In December, our cash flow is about six times our regular effort. So it’s very, very important that we gear ourselves up for that.”

Know your quiet times

“You’re obviously not going to buy a lot of stock prior to then. Especially when you’re coming up to a quiet month.”

Nothing’s set in stone

“You can only use cash flow as a guide. If you don’t have the money, you can’t spend it. It’s as simple as that. But there may be a product that arrives that is fabulous. It may not be the perfect time for your cash flow, but your business needs it. So you have to run with that. It may come in a lean time, but you make it work for you.” 

There’s no place like a new home

Though it was a long time coming, this big growth phase is only the beginning for The Bay Tree. “Having a bigger store means we can hold more stock, which means we can go to a bigger market.”

In the past, the business mainly focused on supplying cafes, restaurants and caterers with tabletop products, such as crystal glassware and salt and pepper grinders. Now, though, with the extra space they can expand their offering to everyday products such as plates and cups. But, Loudon insists, in The Bay Tree’s usual specialised way. 

So, if you’re looking to work on your business rather than being stuck in it, book in for a complimentary business assessment today with Switzer Business Coaching

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Tuesday, May 25, 2010

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