| For some people, at least, FCUK got it right when one of their adverts announced: “Apparently there are more important things in life than fashion. Yeah, right.” This attitude might be alien to those of us who aren’t dedicated to following the latest trends or obtaining the most classic threads – but it’s an essential consideration for prospective clothes shop owners. For unlike that other life essential, food, a certain amount of passion is required to run a successful business in this sector. Dean Edwards, Director of Adams & Co, explains: “There are businesses, such as fish & chip shops, that anyone could buy and anyone could run successfully. But there are others in which you need a real affinity and understanding of the product.” For example, if you’re selling shoes, you need to have some understanding of how they are made and be able to appreciate the qualities of a well-made shoe. It’s important to remember that this is a sales role. As clothes are important to people, you’ll need to be credible and trustworthy, making people feel better about themselves and their image.  | | STOCK IS KEY | Eye for the product The assistant’s eye for the product – and the ability to combine different clothes and accessories to fit the customer – is the key to selling a hat or handbag alongside that dress. Bulk purchases can often make up a large percentage of the turnover of a successful business. None of this will help unless the stock suits your customer base. “It depends on where you pitch the business – if you go for the top end of the top end of the market, you will be buying direct. It’s a very different level to the majority who will be dealing with wholesalers in London,” Edwards says. Whether you’re dealing with a British supplier or visiting the collezioni uomo in Milan, an eye for a product that caters for the market is vital – whether your shop is based in a trendy urban area or a rural retreat. Stock is the most important aspect of the business Regardless of the label attached to your clothes, stock is going to form a huge chunk of the start-up costs – far more than if you’re buying a newsagents, for example. To Edwards, this is often the first mistake many buyers make. “A lot of people look at a clothes shop and think, I could afford £35,000. But they forget how much stock is needed – it’s a considerable amount of money. “In a successful business, buyers can expect a profit of between 30% and 40% of turnover,” he says. So to achieve a net profit of between £30,000 and £40,000, you’ll need a turnover of around £100,000 a year. Changing the stock can be a stressful experience, so many only do so twice a year. This means that you’ll need to invest £50,000 in stock at the beginning of your venture – a substantial amount of capital. “More and more shops are turning stock twice a year – and you can just get away with it if you change midseason.” Edwards adds: “But I’d like to see it changed around six times.” Clearly, smaller shops won’t be able to hold as much stock. In some businesses, this could be a disadvantage. But here, it means that – within reason – you can hold less stock and change it more rapidly without locking up as much capital. It might make more sense to fill a small shop with £20,000 clothes and swap collections five times a year, rather than spend £50,000 twice annually kitting out a bigger shop. It’s also going to attract repeat visits on a more regular basis if the stock remains fresh and in keeping with the seasons. True value The value of the business will – like any other – depend on the adjusted net profit, which can be a very different figure to that appearing in the accounts. And as usual, it’s important to engage some reputable advice. “The bulk of businesses sell at between one and two times adjusted net profit. The higher the degree of knowledge and skill, the lower that multiple, as the potential market is smaller,” Edwards says. As clothes retail falls into the latter category, they usually sell for around one and a quarter times net profit. So a business making around £30,000 a year will sell for around £37,500 – but, of course, you will have to add the cost of the stock to this. A head for figures is needed alongside salesmanship and knowledge. So if you think you’ve got all three, then perhaps you could spend your days surrounded by the most important things in your life – and a substantial number of other people’s.
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