Latest / The Resilient Retail Game Plan - retail insights, retail trends and best practices / Retail Profit vs Turnover: When £3 Million Nearly Broke the Business

Transcript

Retail Profit vs Turnover: When £3 Million Nearly Broke the Business · The Resilient Retail Game Plan - retail insights, retail trends and best practices

• 0:01
  On paper, Anna, founder of Anna Lou Jewelry, had a
• 0:04
  story that reads like the kind of trajectory every product founder
• 0:08
  secretly hopes for. You start making things at home. A buyer
• 0:12
  spots you, suddenly you're in Selfridges, then Topshop, then Harvey
• 0:16
  Nichols. Your pieces are popping up on celebrities.
• 0:20
  So it grew and grew and grew to the point where I was turning over
• 0:24
  almost £3 million but not making any profit. You're doing
• 0:28
  shows on QVC, journalists are calling. You have a shop on
• 0:32
  Carnaby street in London and the orders keep climbing.
• 0:37
  Welcome to the resilient retail podcast Game plan. I'm Catherine Erdly and in the next
• 0:40
  few minutes, you're about to get powerful real world retail strategies from
• 0:44
  insights shared both from my guests and myself, backed up by
• 0:48
  my 25 years in the retail industry. Keep listening to learn how
• 0:52
  to grow a thriving, profitable product business. Let's jump in
• 0:56
  with this latest episode. It
• 1:00
  all sounds incredible, doesn't it? It sounds like proof that the whole thing
• 1:03
  is working, because that's what we're taught to believe when you're busy, busy. Busy
• 1:07
  and you've got the pressure of making the sales back because you just bought all
• 1:10
  this stock, you're not grounded and you're not
• 1:13
  aligned with yourself. Big stockists mean success. High
• 1:17
  turnover means stability. Visibility means safety.
• 1:21
  But that's not what was happening behind the scenes. The numbers were telling a
• 1:24
  very different story, one that most business owners don't talk about until
• 1:28
  they're on the other side of it. And that's why I wanted you to hear
• 1:32
  Anna's experience directly from her. Not the glossy version,
• 1:35
  not the look where I ended up version, the real one, the one that played
• 1:39
  out underneath all the noise while everyone else assumed she was flying.
• 1:44
  But instead of starting with the highlight reel, I asked her to explain
• 1:47
  what the business actually looked like during that turbulent period.
• 1:52
  Financially, operationally, emotionally. And she didn't hold back.
• 1:56
  Here's Anna. I was actually a multi seven figure
• 1:59
  business, so it was actually more than a million. Yeah. And I was in Selfridges
• 2:03
  and Topshop had a concession in Topshop, Harvey
• 2:07
  Nichols, Liberty's Harrods, Issa Tan in Japan.
• 2:10
  I mean, the stores that people would dream of.
• 2:14
  And I have to say that I even had a show on
• 2:17
  qvc. I was quite young, but I was selling, selling, selling,
• 2:21
  selling, selling, selling, selling and not really looking
• 2:25
  at the proper numbers. And I was manufacturing.
• 2:29
  How it all started was when I first got into
• 2:32
  Harvey Nicks, I then slowly got into the other department
• 2:36
  stores. It's kind of a bit of a ricochet effect. Once you're in one,
• 2:40
  then sort of. The others tended to follow suit. But what
• 2:43
  happened was, is that I had an interview with another
• 2:47
  high street company called Reese. I think Reese is
• 2:51
  still going. I'm not sure if they still are. So they asked me to do
• 2:54
  a collaboration with them, which was obviously really exciting. And
• 2:58
  I had never made in China before, but what happened was I was
• 3:01
  making at home, in my bedroom, selling in
• 3:05
  these department stores. So I'll see my turnover wasn't massive. And then
• 3:09
  all of a sudden I get this meeting with Reese and they said, how
• 3:13
  many pieces can you make a week? And I just plucked out
• 3:16
  of the sky, oh, 50,000. I mean, I'd never made
• 3:20
  more than about. Probably 35, to
• 3:24
  be honest. Yeah, 35. Not 35,000, just 35.
• 3:27
  35, yeah, exactly. Well, maybe a bit more, but anyway, so this meeting
• 3:31
  went exceptionally well and then I received this massive order
• 3:35
  for 48,000 pounds worth of jewelry. And I thought,
• 3:38
  oh, my God, I'm going to have to go and get these made overseas. So
• 3:41
  I literally made the samples myself, took them over to China, because I'd
• 3:45
  been suggested some places to go and had the
• 3:49
  whole collection made over there, delivered back to Reese. So it
• 3:53
  grew and grew and grew to the point where I was turning over
• 3:56
  almost £3 million but not making any profit.
• 4:00
  Wow. Wow. So that was
• 4:03
  partly lack of experience. I was just really
• 4:07
  inexperienced and I have learned so much since.
• 4:11
  From the outside, that kind of growth looks amazing. On the
• 4:14
  inside, it was overwhelming. Stock everywhere, spreadsheets
• 4:18
  everywhere. And a business that only worked if Anna never
• 4:22
  stopped sprinting. I guess it's because you've got a
• 4:25
  spreadsheet of items that people are ordering
• 4:28
  regularly. You know, every day we've got new boutiques,
• 4:32
  people saying, oh, but I want that one in a pink and not a blue.
• 4:34
  And then have you got that one in more of a lighter blue, not a
• 4:37
  darker blue? You know, all of those questions that go on and in the end
• 4:40
  you realize, actually we've got far too much stock, we've got far too
• 4:44
  many options, we've got cells on spreadsheets. The cost
• 4:48
  of managing those spreadsheets of the staff
• 4:52
  was just not feasible for me. I got
• 4:55
  pregnant, actually, with my first child and I just thought,
• 4:59
  whoa, this isn't going to work, this is not sustainable. And I
• 5:03
  have to say, I did have options of getting investment and a lot
• 5:07
  of competitors that I've got now did take investment and
• 5:10
  they've grown and they're huge and they're Amazing brands,
• 5:14
  but that's a choice I chose to be a mum at home
• 5:18
  and basically pivot on. Keep the brand going,
• 5:22
  but making sure that it was online only
• 5:25
  and made to order. The other hidden piece here, and
• 5:29
  it's an important one, is what Anna was sacrificing personally to keep
• 5:33
  all of this moving. Not just financially, although that alone
• 5:37
  was huge, but emotionally, energetically, in
• 5:40
  ways that never show up on a profit and loss sheet, but are really real
• 5:44
  for founders. Because when you're running a business that looks wildly
• 5:47
  successful from the outside, there's this unspoken pressure to keep the illusion
• 5:51
  going. You don't want to admit, even to yourself, that you're not
• 5:55
  paying yourself well while you're paying staff, paying for concessions,
• 5:58
  paying rent on a shop on Carnaby street, paying to fix mistakes that
• 6:02
  other people made. You don't want to acknowledge how much of your time is being
• 6:06
  swallowed by admin, by stock issues, by the endless cycle of
• 6:10
  saying yes so people don't lose interest. And honestly,
• 6:13
  most founders don't even notice the toll until something forces them
• 6:17
  to stop. Pregnancy burnout, a big bill they didn't see
• 6:21
  coming, or simply the quiet realization that they haven't enjoyed
• 6:25
  their own business in a little bit too long. Anna hit that
• 6:28
  point. She didn't make a big, dramatic announcement about it. She didn't have a
• 6:32
  breakdown in a boardroom. She just saw it. She
• 6:36
  saw the gap between what she was projecting and what was actually happening behind
• 6:40
  the curtain. And then there's the values piece, the part
• 6:43
  we often ignore because we think it's secondary, something that you sort out later
• 6:47
  when things are calmer, except it never gets calmer.
• 6:51
  And meanwhile, she's making acrylic pieces she no longer feels aligned with,
• 6:55
  moving stock around the world because the wholesale machine demands it, and
• 6:59
  dealing with buyers who want 10 variations of everything but won't commit to any
• 7:02
  of them. At some point, it stops feeling creative, it stops feeling
• 7:06
  meaningful, it stops feeling like her. And that
• 7:09
  internal tug, the misalignment, the discomfort, the
• 7:13
  this isn't who I am anymore feeling, that's often more powerful than
• 7:17
  any spreadsheet or sales report. Because when your values start whispering
• 7:21
  that something is off, you can only ignore them for so long before it
• 7:24
  becomes physically exhausting to keep going. So, yes, the
• 7:28
  financial strain was real, but so was the emotional strain of running a business
• 7:32
  that didn't reflect who she was anymore. And that combination,
• 7:36
  the numbers and values colliding, is what ultimately pushed her into
• 7:39
  rethinking everything. That's the moment I Want you to hear next, because
• 7:43
  this is where the shift really begins for Anna. Here she is. Well,
• 7:47
  I really wasn't paying myself that much money. I was paying all these people.
• 7:51
  I had, like, nine members of staff. I had people working in the concessions
• 7:55
  and also just the managing of all the stock in all these different places, like
• 7:58
  Selfridges. I hate to say it, but they didn't really know where half the stock
• 8:01
  was and the cupboards would be lost. And it was very.
• 8:05
  I'm being a bit too honest here, but it was very, very
• 8:09
  stressful that in the end you just think, oh, my
• 8:12
  God. Like, this is. I've made some wrong choices and you just have
• 8:16
  to have a long, hard chat with yourself. I mean, that was one of
• 8:20
  my first rebirths that I would call was really
• 8:23
  hard because it was my baby that I had built from nothing
• 8:27
  but pure creativity and passion. And I just had to face up to the
• 8:31
  fact that I didn't have a financial controller. I had some
• 8:34
  people working in the shop that weren't particularly honest.
• 8:38
  I had a shop in Carnaby street, which was a really brilliant shop and it
• 8:42
  was packed, had loads of tourists coming in day in, day out. It
• 8:45
  was brilliant and it was popular, you know, it was in the magazines. We had
• 8:49
  celebrities wearing the pieces. We had Kate Moss, we had Lily Allen, we had
• 8:53
  Paris Hilton, Kylie Minogue. So many different people. But
• 8:57
  it just wasn't enough. You almost needed to have a lot more
• 9:00
  investment. You needed to have like a boost of investment to go
• 9:04
  really big. That's not an excuse. But that was something that I just
• 9:07
  thought, I'm not going to be able to get that investment because I'm pregnant with
• 9:11
  my first child. I won't be able to give the investor
• 9:14
  necessarily what he wants because I want to look after my baby.
• 9:18
  I'm interested as well about the stock piece, because one of the things that I
• 9:21
  quite often run into is that people will say, well, I need to have the
• 9:24
  stock to make the sales. So they. There's a sort of mentality that
• 9:28
  more stock equals more sales, but then what they don't
• 9:32
  realize is that more stock also equals less cash flow. And
• 9:35
  it's like finding that balance between, you know, like you said, someone said, oh,
• 9:39
  do you do this in pink? And you were saying, yes, and adding it to
• 9:42
  the spreadsheet. Was there ever a point at which you thought, what if I just
• 9:45
  stop. And I
• 9:48
  actually
• 10:02
  realized that wholesaling was basically moving stock
• 10:06
  around the world so that that shop wasn't going to have it. Well, then that
• 10:09
  shop might have it and then that shop might have it. And in the end
• 10:12
  I was a bit like, we just like transporting stock from
• 10:16
  shop to shop. One, you know, this is all just a bit strange.
• 10:22
  ...
• 10:43
  bringing
• 10:59
  more plastic into the world. I've made some interesting
• 11:03
  choices with this business because I love it still and I do still think we've
• 11:06
  got my handwriting. The plastic quirky products
• 11:10
  definitely were the things that gave me a name because they
• 11:13
  were bold and bright. Yeah. And then since then it's been
• 11:17
  letters and names and now I've kind of moved into
• 11:21
  much more, you know, wellbeing and personal journey
• 11:24
  pieces. From the outside, people still assumed things were great,
• 11:28
  but Anna had already decided to step back from a lot of that prestige
• 11:32
  and, and rebuild on her own terms. I've always been quite
• 11:35
  brutally honest and what I realized is that people didn't really need
• 11:39
  to know that we weren't in those stores anymore because
• 11:43
  they still had the database of people. It's not like, oh my God, big
• 11:46
  announcement. We're not going to be in Sally's gift shop
• 11:50
  next month. Right. We don't need to do that. I mean. And
• 11:53
  Harvey, Nick's just sort of slowly sort of dissipated and I just had
• 11:57
  enough of those. You know, the payment terms was getting longer and
• 12:01
  longer and longer and longer. And we just can't work with
• 12:04
  120 days payment terms. So you deliver them the stock and
• 12:08
  then it would be four months until you were paid.
• 12:10
  That
• 12:29
  was
• 12:29
  actually
• 12:34
  QVC Japan that said that it wasn't QVC UK. We did used to sell
• 12:37
  on QVC UK but it wasn't quite so strict. But you still have to put
• 12:41
  the stock up front now. I think I'm highly investable
• 12:45
  actually as an entrepreneur that's been through
• 12:49
  every possible.
• 12:52
  Mistake that you could possibly go on
• 12:56
  and still be around. You know where the hurdles
• 12:59
  are. If I was about to invest in someone, I'd want to use somebody
• 13:03
  like me who knows where not to go wrong. So what does it
• 13:07
  look like when you come out the other side of all of that? For Anna,
• 13:10
  it's a mix of very practical number watching and a much deeper
• 13:14
  focus on her own energy and alignment.
• 13:17
  And
• 13:32
  I buried my head in the sand with the costs.
• 13:35
  And I remember I had this shop in Carnaby street and then I just realized
• 13:39
  I couldn't really afford the rent. And then they said, well, you know, we'll
• 13:42
  give you a bit of an extension. They said it was like a pop up
• 13:46
  store rent, but it was like a long term pop up store rent. But anyway,
• 13:49
  in the end I just realized I just had to bite the bullet and be
• 13:52
  like, oh my God, like I haven't really been looking at the
• 13:56
  numbers properly. One thing that I've learned is that I have
• 14:00
  an accountant who is literally like in my pocket.
• 14:03
  Not a rich husband, but an accountant that is in my pocket.
• 14:09
  So, yeah, I definitely know that the numbers are
• 14:12
  absolutely vital and I'm looking at
• 14:15
  graphs all the time, all the time. However depressing it
• 14:19
  is just looking at numbers, looking at the data, looking at. Everything, looking
• 14:23
  at the costs right now. Looking at the costs way more than I even
• 14:26
  look at the sales, actually always looking at the other way
• 14:30
  around. To be honest, this is the part of the conversation I keep coming
• 14:34
  back to because it's one thing to say, right, I need to look at my
• 14:37
  numbers properly and quite another to actually change how you run
• 14:41
  your business day to day. Most product founders I work with don't struggle
• 14:45
  because they're reckless. They struggle because they are unfocused.
• 14:49
  They chase sales and keep running after shiny new tactics instead of
• 14:53
  focusing on what really makes a difference to the bottom line. And Anna did
• 14:56
  exactly what so many of us do. She focused on the exciting bits. The
• 15:00
  orders, the interest, the stockists, and ignored the
• 15:03
  extremely unsexy truth sitting right underneath all of it.
• 15:07
  Costs, margins, capacity, cash flow,
• 15:11
  the stuff that doesn't sparkle. What I love is that she doesn't
• 15:15
  gloss over it. She's blunt. She didn't look at the numbers. She didn't have the
• 15:18
  right structure, and she paid for that. But she also
• 15:22
  rebuilt herself around it. She started tracking the right things. She
• 15:25
  brought in an accountant. She learned the actual rhythms of her business
• 15:29
  rather than the imagined ones. And then this is the deeper bit.
• 15:33
  She realized it wasn't just about spreadsheets. It was about her nervous system, her
• 15:37
  alignment, her ability to make decisions from a place that wasn't
• 15:40
  purely panic or purely yesing or pure external
• 15:44
  validation. Because you can have the best systems in the world, but if
• 15:48
  you're permanently overwhelmed or out of sync with your own business, none of it
• 15:51
  sticks. But when Anna talks about this, you can really hear the shift.
• 15:55
  She's not just a founder who learned financial discipline. She's a
• 15:59
  founder who learned herself. Here's how she explains it in her own
• 16:03
  words. One of the things that I do now is actually
• 16:06
  check in with myself before anything. So this is
• 16:10
  the first thing to just make sure that that stockist
• 16:14
  feels aligned, that everything that you're doing feels aligned. And when I
• 16:17
  say feels aligned, it's like when you're busy, busy, busy, and you've got the pressure
• 16:21
  of making the sales back because you've just bought all this stock, you're not
• 16:24
  grounded, and you're not aligned with yourself. And to
• 16:28
  me, that's really, really important, number one.
• 16:32
  And dealing with your own nervous system, actually.
• 16:36
  Because if we're calm and we're high vibe and we've got good
• 16:40
  frequency and we're eating well and we're sleeping well, then the business will
• 16:43
  take care of itself. As I said before, like, not to strip
• 16:47
  away kind of what looks good and have a
• 16:51
  look at what's actually making you the profit,
• 16:55
  which is easier said than done, because I have also been really guilty,
• 16:59
  being a designer, of going, no, I'm not taking it off the website
• 17:02
  because I love it. And then it hasn't really sold at
• 17:06
  all. But I'm so adamant that I won't take it off because I love
• 17:10
  It. Which is not
• 17:13
  great, but. But then I'm like, there will
• 17:17
  be that person out there that loves it. It is why they call it the
• 17:20
  art and science of running a retail business, because it's part science about the
• 17:24
  numbers and part of it is the art of picking the right product. Yeah.
• 17:28
  And you're so right about the science. And I think that that science is
• 17:32
  something that is. You can learn that science. And it's also. I think
• 17:36
  with investment, there's a science to investment as well. There's a science to
• 17:39
  all of it. And I didn't know that science before. I was just given this
• 17:43
  amazing opportunity and I ran with it. I remember when I was in
• 17:47
  Tokyo and I was with the British embassy and they'd taken out
• 17:50
  like six brands to showcase their work for the accessories embassy.
• 17:55
  Honestly, I think I did a million pounds worth of sales alone
• 17:58
  in that one trip. Wow. And I
• 18:02
  remember the ambassador, British fashion ambassador,
• 18:06
  she said, we've never seen anything like it. Like, this is
• 18:09
  absolutely unbelievable. And I was like, well, you know, I didn't think.
• 18:13
  I thought this was normal. But now when I look back, I was just so
• 18:16
  blase about it. And that feels like the right place
• 18:20
  to leave Anna's story today. Because where she is right now is
• 18:24
  such a strong place in terms of having created a business that works
• 18:28
  for her. It actually fits her with a focus on things that matter
• 18:32
  to her, like meaningful pieces that are aligned with her interest in personal
• 18:35
  development. She's taken control of her manufacturing and shifted her
• 18:39
  model from overproduction to made to order. And I think that's the
• 18:43
  real takeaway here. We spend so much time chasing things we're told matter.
• 18:47
  The big names on the stockist list, the perfect Instagram feed, the revenue number
• 18:50
  that looks impressive when you say it out loud. But none of that guarantees
• 18:54
  stability, and certainly none of that guarantees joy. And
• 18:58
  none of that guarantees a business you actually want to wake up and run every
• 19:01
  day. What Ana's story shows is that the pivot points, the
• 19:05
  uncomfortable moments, the pauses, the rebirths, they're not
• 19:08
  signs you've failed. They're usually moments when you finally see the truth clearly
• 19:12
  enough to do something about it. So whether you're at the start of your journey
• 19:16
  or you've been running your brand for years, I hope this conversation gives you
• 19:20
  the permission to step back and check in with yourself. Not just with your numbers,
• 19:23
  though. Absolutely do that. But with your energy, your capacity,
• 19:27
  and your values. Because the businesses that last are rarely the ones that grow
• 19:31
  the fastest. They're the ones built with intention, honesty, and a founder
• 19:35
  who's willing to evolve. If you'd like to find out more about Anna, you can
• 19:38
  check out Anna Lou of London on Instagram. That's A N N
• 19:42
  A L O U of London on Instagram, and we'll put
• 19:46
  all the links in the show notes. And if you're finally ready to get help
• 19:49
  with some of the challenges we've raised in this episode, you might want to book
• 19:52
  a call to talk about my Retail by Design program kicking off in January.
• 19:56
  Go to resilientretailclub.com and click on Retail by Design to find out
• 20:00
  more about the Focus Framework that I use to help you get
• 20:04
  in touch with the business that you really want to run. And I'm looking forward
• 20:08
  to talking to you next week in episode 281. That one's all
• 20:11
  about how to run a stock clearance sale. See you next week.