In our first series, Maree Morrissey talks to Denise Meagher, founder of The Business, a new concept in the retail sector, about her current difficulties.

VITAL STATISTICS

Denise Meagher, founder and entrepreneur behind The Business.

Business Name: The Business Year of Set Up: Founded May 2004 Founder: Dr. Denise Meagher Location: No.1 Summer Hill, Nenagh, Co. Tipperary Business Type: A fashion boutique that also sells books and select items of art and vintage with a café selling coffee and wine.

The Business, is the name of a top fashion retail outlet located in Nenagh Co. Tipperary also selling stylish handmade furniture and vintage products all with the idea of one going to the store to unite their fashion and home-style as one. Located on the bottom floor is a quirky Jazz Café with a license to sell wine. The aim of founder, Denise Meagher, was to create something different in retail culture in Ireland by introducing more atmosphere and charm into the retail experience.

OBSTACLES

After only her first year of business Meagher has come up against fierce obstacles which have left her with some hard choices to make. At the top of the list is location.

"Being from Tipperary, I decided to choose Nenagh. As well as knowing many people in the county I felt that the location was good due to its centrality. We're not far from Galway, Limerick, Kilkenny, South Tipperary and accessible from Dublin," explains Meagher. However today Meagher feels that the location may not have been the right choice having found that the market she is after is not in Nenagh and those she hoped to gain from the outer regions, have proved difficult to attract despite Meagher's obvious flair for successful marketing strategies which has attracted her huge media attention.

"The shop made a massive impression among the fashion aware." With two TV3 appearances demonstrating one of her big successes, Ozwald Boateng's tailoring from London, along with features in The Irish Times and Image magazine, it is clear that the concept was definitely causing a stir. With all good press, behind closed doors, like most new ventures, the business was struggling financially which Meagher felt her accountant could have played a more proactive role in guiding her along. "My accountant gave very little advice and no feedback during my first year of business which led me to changing accountant's mid-stream."

RAISING FINANCE

The finance was raised from two sources, AIB Bank and Anglo Irish Bank, who provided the largest part of the finance, a healthy sum of €250,000. However, as costs were beginning to mount and some mistakes were proving costly, Meagher's overdraft mounted and monthly loan repayments were beginning to take their toll. Meagher feels she underestimated her set up costs vastly and found herself overspending on items like stainless steel sinks, lighting, graphic design and overspending on stock, which resulted in huge losses.

SO WHERE ARE THINGS NOW?

"I am in a position to clear the Anglo Irish Bank loan and the AIB overdraft through the sale of the asset involved as security," explains Meagher. While this will sort most of the financial problems, it may not give sufficient cash flow to relocate which is now a very real consideration. "I am researching a move to Kilkenny City which I feel is a more sophisticated location with more footfall." Having found a unique building selling for a tidy sum of €300,000 both Meagher and her partner are considering this option as killing two birds with one stone, an excellent location and at the same time, a solid investment.

They estimate that to make the premises usable as a retail outlet it will cost a further €50k. "The advantages to this are that the repayments will cost significantly less than our current loan and we'll have no rent to pay. As well as having three times the footfall allowing me to estimate weekly takings more accurately."

ANTICIPATED IMPACT

With one year under her belt and the advantage of knowing the retail industry better and some buying and selling tricks up her sleeve Meagher is confident this will have impact upon moving to her new location. She is also hopeful many of her customers will travel to the new location with it only an hour and thirty minutes from Nenagh.

MEAGHER'S QUESTIONS FOR THE PANEL

1. Can I convince banks and one or two creditors to give me the time to reorganise my affairs?
   
   
2. Is buying the property in Kilkenny smart move?
   
   
3. Is the new location right?

Read below comments from our panel of experts about ways in which Meagher could steer 'The Business', to overcome her current dilemas.

It may be a cliché but cash-flow is the lifeblood any business and without adequate flow of cash to meet commitments as they fall due, a business can run into difficulties very early in its life, as has been the case here, where turnover has not been sufficient to cover costs and the resultant losses could cripple the venture. Denise must have a profit & loss and cash flow forecast prepared for her new business location, based on accurate market research and personal knowledge of the Kilkenny and broader market, which will give a view of the potential sales in type, quantities and seasons. Based on these sales forecasts, Denise will be in a better position to budget for her stock purchases, taking into account delivery, payments, stockroom requirements and discount arrangements. 'What If' Scenarios It is also advisable to do a number of, 'what if' scenarios to cover a reduction in sales or an increase in costs, or both. Contrary to what the banks would like us to believe, they are not risk takers and require belt and braces, when it comes to security and not the belts that Denise sells! Mark Fielding, Chief Executive, ISME

It is vital that research is undertaken to discover how many similar businesses are already in place. If they are, in fact, located there and clustered together it would be important to open as close to them as possible in order to compete directly and aggressively. The clothing industry is notorious for cash flow disasters as many international designers have found out and indeed many boutiques. You must buy ahead of the Season and hope you read it right. Credit terms are also very very tough. A Tough Pill To Swallow I wonder if Denise has yet paid herself a salary out of the business. An owner/manager is in denial if they fail to pay themselves a wage and the horrid truth is that their venture is in reality not a realistic business. While this is a tough pill to swallow, it may save a fortune and allow for much better use of a talented person's ideas and work ethic. One also wonders if there is any chance that Boateng would sponsor her? Mary Ann O' Brien, Lily O' Briens

In common with many other entrepreneurs, Denise has tried to be, 'all things to all men.' With a natural ability to spot trends and create a unique 'mood' or 'look' within a store, from a business development viewpoint a move to a new stand-alone retail store in Kilkenny is commercial suicide. Whilst the target customer may be more prevalent in Kilkenny the timing, relocation hassle and associated costs of this new start-up could put a strain on Denise that could break the camel's back. Create A Brand Within A Brand I suggest that Denise stay-put in Nenagh for the busy Autumn/Christmas period and get some cash-flow into the business. She should examine the potential of a joint venture with a retailer that is already serving her ideal customer base but doesn't have a 'fashion' element to its store and create a 'Brand within a Brand' such as happens in Brown Thomas. This would reduce the retail overheads and start-up costs and leave Denise free to develop her brand and lifestyle mood within an outlet that needs these skills. Kilkenny could be the spot but I wouldn't discount other locations. Patrick Munden, Director, South East BIC

The fashion retail business sector in Ireland is extremely competitive with little barriers to entry. The current situation highlights problems such as lack of proper research and planning prior to the business start up, gaps in the management skills required to operate the business and weak capital structure and financial performance i.e. significant borrowings and inadequate cash flow which is not sufficient to meet the absolute minimum required break even position. Recommendations My recommendations at this juncture would be to revisit the original business objectives, research and planning format, in order to restate the business case to ascertain whether a viable business opportunity exists. Location is just one aspect of this assessment. Assuming that a viable business case does exist, prepare a realistic and thorough business development plan for going forward. John Dillon, Manager New Enterprise, Shannon Development

Denise needs to be satisfied that any move to another location is ultimately going to benefit her business. This means Denise needs to have done her homework on the proposed location and have concluded that her offering will be in demand so as to make the business viable. It is a little bit like buying a house. Location can be key and in the fashion retail business, it must be location, location and location. You can never have enough market research. You need to know what your potential customers are looking for so that you can meet expectation. You need to know that what you have in your shop will sell and that the public want to buy it. If your product is not purchased then cash flow becomes an issue and the bills can't be paid. Patience and self-belief are also required and sometimes these get tested when the money is not rolling in as you try to build the business. David O' Donnell, Corporate Partner, MasonHayes & Curran Solicitors

Denise has certainly shown grit and determination to date, which is very positive. I would suggest that she upscale knowledge and experience on a smaller range of product initially. This can be achieved by work experience. Seek out an experienced advisor/mentor who will guide through R&D issues, location, product range, purchasing issues, competition, profitability, funding and marketing. No Such Thing As The Quick Buck In raising the proposed possible new funding, if funds are for working capital issues only, it will be more difficult to obtain from retail banks without considerable third party support. Most venture capital type funds do not include retail operations. Private fundraising is often the only source in this situation. Remember there is no such thing as the quick buck. It can take many years to build a good and sustainable business. John Cranfield, Chief Executive of First Step Microfinance

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