Opinion: Cash in the bank? Here’s what you could do next

Returning to CyclingIndustry.News, Orbea agent and BA Data Specialist John Styles and colleague Matt Wrigley ponder what bike shops should be doing with any cash reserves that may have survived the stock starved close to 2020…

A very good retailer, who I have known for many years, has just invested in a shiny new van, new shopfronts and refurbishing his stores. This is a very good plan for his business, and most likely one he would have carried out anyway, regardless of the lockdown-induced bike boom and sales surge.

These things are very tempting when you have more cash in the bank than you expected. It raises the flag for your business in the local area and they are immediate and obvious improvements. They make you and other people feel good about your business.

Whether it’s a good idea for your business to invest in these three areas is perhaps a different question. So, before you spend your (very) hard-earned cash from the summer sales boom, perhaps take a moment to reflect first. Here are six other areas where you might wish to invest your time and money:

• Downtime and Health

You’re exhausted. Your staff are exhausted. The whole industry is exhausted (not NHS frontline exhausted, let’s get some perspective huh, but certainly more exhausted than we have ever been). Whilst you might not wish to look the government’s “essential business status “ gift horse in the mouth, you may wish to divide your team into an A and B squads if downtime is desired for any deserving staff. In that way you might all get a solid week off in the near future. Or work some shorter days over quieter periods. It’s good for your mental and physical health. Most likely it’s also good for your business in the longer term as it will give you the time and space to consider what comes next. Mental health is possibly overlooked in the bicycle trade (as of course many of focus on the physical and fitness side of things). If you don’t look after yourself, how will you be able to look after your business?

• New and Existing Staff

I know many existing staff who haven’t had a wage rise in five or even ten “austerity” years. Although trading has not been easy until the recent boom for many stores, many of those staff have stuck it out and seen you through. It may be a good idea to look at their wages or some sort of pro-rata bonus or profit share (in case sales ever fall back in the mid-long term, only likely though lack of stock rather than consumer demand by the way, IMHO). The danger is that if you don’t, you may end up with a competitor three miles down the road. I’ve seen it happen so many times it bores me, so please don’t say I didn’t warn you. A few thousand pounds to keep your best staff from going elsewhere or (worse still) going it alone may be the best money you could ever spend.

The industry has been working long hours to cope with this year’s uplift in business, especially in the workshop. Recognising that it is extremely difficult to train up and recruit new staff when you are extra busy, now might be the time to look ahead to next summer and bring in new talent because:

1. If you don’t, others will: https://www.theguardian.com/business/2020/nov/18/halfords-to-train-1500-extra-technicians-to-work-on-electric-cars-bikes-and-scooters.
2. You may get help to do this, but so far I’ve only heard of a few stores so far taking advantage of this government funded scheme. https://www.gov.uk/government/collections/kickstart-scheme

• Stock and Forecasting

Having sold pre-order packs for almost every category of P&A, as well as Bikes, I know very well that some stores struggle to look ahead and guess what consumers may want. I know you don’t have a crystal ball. But, given the industry’s lack of stock you may need to order earlier to get what you need. In today’s market there are very few “bad” stock choices and you have a good idea of your core best sellers, so why not spend time in planning and securing your stock for 2021? (wherever suppliers will allow). If someone offers you the 300 lights packs, or 150 helmet bundle, maybe you actually want that this year?

Bike suppliers in the past have been able to churn out an extra few bikes with as little notice as 3-4 months. Right now to take a bike from a finished idea to stock in the warehouse it’s anywhere up to 15 months in some cases.

Giving your suppliers pre-orders also helps their planning. And how are we at planning ahead? Many shops were already selling out of kids’ bikes in November and had no Christmas campaign. We need to be talking about Xmas 2021 already. We have been so busy as an industry that we have got behind ourselves. Now is the time to think ahead and get ahead of ourselves, much further ahead. I can’t see supply (or logistics) getting better any time soon and we can perhaps expect more disruption at the port, not less. This is the new normal.

• Credit Limit

By paying your bills on time, switching to direct debit and/or taking advantage of early settlement, you enhance your credit limit with your suppliers. This means you can order (even) more stock, should you ever need it. It’s likely that you will also be in a better position to acquire scarce items as and when you need. There is also a knock-on effect; if more and more stores pay on time or in advance it puts the importers and UK brand offices in a stronger position to acquire more stock from the (oversubscribed) international brands and factories. If you want more stock from your suppliers next year, pay your bills now. I think many of us “value” a business by its visual identity, its name, its storefront, its branding, its reputation. Last time I looked though, people don’t pay much for “branding and goodwill” if you come to sell your store. Perhaps a business’ real reputation and value is how much trust and value other businesses place in it – i.e. your trade accounts and credit limit.

• Understanding your Cash-Flow & Good Accounting Software

Things have been tough over the last few years and we’ve seen many shops fall over sideways due to lack of profitability. One thing to remember is that if you were running at a loss or at little to no profit, you weren’t getting the dreaded corporation tax bill. This year will be different in that stores around the country will probably have the biggest corporation tax bill they’ve ever faced. And for some it may even be the first in a long while. Good accounting software will be able to tell you how much cash you need to have saved right now to pay the dreaded tax man.

Then of course there is VAT. If I hear a single store say that they are struggling with cash flow this year because they “had the VAT this quarter and it was a bit of a surprise” I think I shall scream. You know what you’ve bought, and you know what you’ve sold. As well as running good software, invest time with your bookkeeper and accountant so you know what you owe. Ahead of time. No surprises. No excuses.

• Website & EPOS

Consumers have increasingly turned to online purchasing, as well as Click & Collect during the pandemic for obvious reasons relating to health and Covid restrictions. However, the industry’s shortage of stock has driven this further still – as people try their local bike shops, can’t get a bike and are then forced to hunt things down online. This trend isn’t going away as the industry will face a variety of shortages for the next few years.

So, consumers are not going to be “wowed” by your new shop front or new shop environment so much. They are going to thank you for having a really good website that tells them what you have in stock. Some of them will drive 250 miles to buy “that bike” from you. Whatever you have in stock, somebody, somewhere wants it, right now.

A great investment is just letting people know what you have. And, by the way we weren’t very good at this as an industry even before the pandemic. I needed a new hydration pack before the weekend, I had to phone 11 stores in my area to find out who had one in stock, because nobody‘s website would tell me. If your EPOS system is integrated to your website, it’s all done for you. Talking of EPOS, are you making the most of it? Again, now might be the best time to put new processes in place before getting even busier in the summer.

Of course, the best business don’t need to be told this. Struggling businesses may not be reading this website or article. Which leaves those of you in the middle, those of you who aspire to make your business just a little better. For you, I hope you found just one useful thought that you can action this winter.

If any retailer takes this on board now, they should find that this time next year there is little more they can do to improve their business. Which will mean the only things left are a shiny new van, refurbishing the store and a brand-new shopfront. Which brings me back to the store I mentioned at the beginning, it was the right thing for him, because he’s got the other things dialled already.

So, I leave you with this thought. A rising tide may lift all boats, now is the time to fix any leaks.

John Styles works as a sales agent for Orbea in the South East, and is founder of consulting firm Cyconomist.

Matt Wrigley is a sales agent for Orbea and Assos in the North of the UK.