Don’t take the easy option. Always make a plan. Start small and test the water. Listen to the experts. It’s NEVER too late to walk away. Limit your liability.

 

We are pleased to present seven entrepreneurship lessons from Richard Chanter, Founder of Growth Rocket.

I was twenty-two when my first business collapsed. Sharing this story wasn’t easy but if it helps just one person making the same mistakes, then it’s been worth it.

Just after turning 20, I opened a small art gallery in a rural market town in South West England. I’d just dropped out of university and getting a “proper job” didn’t seem very appealing. I had some experience in art retail, having previously worked part time in a gallery. I didn’t know if there was a market for what I had in mind, but it was something I had some experience with and it was reasonably inexpensive to set up. These are not great reasons to start a business, and they were the first of many mistakes I was to make over the next couple of years.

I signed the lease on a scruffy old shop and set about renovating it myself. Without a business plan, I managed to borrow £6,000 loan from the bank. I spent the money on stock and shop fittings. I’d opened the doors by the end of May, but I didn’t really know what I was doing. I had no business plan, marketing plan, cash flow forecast or operational budget. I couldn’t afford any staff and was working seven days a week. Despite this, I had a reasonably successful first year’s trading. My best month was just over £6,500, and with a margin of over 50% this was good for a new business being run by an inexperienced, ill-prepared and over-confident twenty-year-old. Unfortunately, it didn’t last. With no cash flow planning, my quiet months started eating all the money I’d made in the busy months. I was earning a lot less than minimum wage, and it was impossible to take time off.

It was around this time that I decided I wanted the enterprise to be larger. I wanted to up my game, to make sales for thousands instead of hundreds. I needed it to be more. I could pay myself more money, take on staff and not have to be hands on all the time. These decisions were made with no analysis of my existing accounts, they were simply based on gut feelings.

I started talking to my suppliers about my plans and they thought it was a marvellous idea (which they obviously would!). I found a space I liked, and despite expert advice from a consultant that it was in a low footfall area, I signed the lease. Somehow, I convinced the bank to lend me another £20,000 (still without a business plan!). Eighteen months after opening my first gallery, I opened my second. It was four times the size of the first one, with overheads to match. It makes me cringe to think about it now. I was so obsessed with the idea of owning a flashy art gallery that I’d lost all perspective. The week before Christmas, I had a grand opening with champagne and nibbles. Almost immediately, it became clear that I should have taken the consultant’s advice. I was only a few metres from the high street but it might as well have been miles. I started ordering ridiculously priced full-page ads in glossy magazines and advertising on bus stops trying to raise awareness of my gallery. I dropped 10,000 leaflets to newly built houses and advertised on local radio.

To be fair, I had the odd week when I’d make thousands in sales to just a handful of customers. But then I wouldn’t make another sale for days. It was depressing. Six months later, I closed my small gallery (just two years after opening), to concentrate on the new larger gallery. I hadn’t made enough money to cover my third quarter rent payment, so I went back to the bank, but they turned me down for another loan. To be fair, I already owed them £31,000 by now, with more debt on two maxed out credit cards. Seeing the fix I was in, my father offered to lend me £20,000, which I gladly accepted (he didn’t have this money and had to take out a loan himself).

I know what you’re thinking. Why did you pour more money into the hole? I can’t really answer that, I just felt I had already committed so much that I couldn’t walk away. Also, I was twenty-two and thought I knew better than everyone else. This is where things get crazy. I changed nothing; I just carried on as before, hoping against hope that the situation would resolve itself.

The money lasted six months; I managed to stay open until Christmas, hoping that a decent festive season would allow me to survive. It didn’t happen; I failed to make nearly enough sales and closed my doors for the last time on Christmas Eve (just over a year after opening). I was 22, with over £50,000 of debt, including the £20,000 I owed my father. I had four years left on my lease, at a cost of £15,000 a year. I’d made no plans for this outcome and I didn’t have any idea about what to do.

My landlord took pity on me, and let me walk out of the lease, but the repayments on my loans were close to £900 a month. The day after I closed my business, I rang an employment agency and landed a job working shifts in a local factory. Within a week, I’d gone from an art gallery entrepreneur to working on a production line in a factory.

So, what did I learn from this whole fiasco?

  1. Don’t take the easy option. I didn’t open an art gallery because I saw a gap in the market; I did because it was the easiest way to start a business.
  2. Make a plan. I came unstuck because I’d spent no time thinking about my business plan. I just did it and hoped for the best. Remember, “Build it and they will come” is a quote from a movie about ghosts, NOT A BUSINESS PLAN!
  3. Start small and test the water. I did this to a certain extent, but one of my biggest mistakes was trying to be something greater than I was. I should have experimented more. I could have traded from a market stall or tried to share a space with a complimentary business.
  4. Listen to the experts. Someone with experience told me that my gallery was too far from the high street and had too little footfall. I didn’t listen, and it cost me my business. I should have taken a smaller space in a busier location.
  5. It’s NEVER too late to walk away. If I’d admitted to making a mistake earlier, I could have saved myself a lot of money. If you try something and it’s not working, then either change what you’re doing or drop it. Don’t just keep pouring money and time into something that you know is never really going to work.
  6. Limit your liability. Make sure that if everything goes wrong, you don’t end up saddled with debt. I should have been trading as a limited company and I should have insisted on a 1 year break clause in my lease. I should have tried to get as much of my stock on consignment.
  7. That was over ten years ago, but these lessons have stayed with me in every business I’ve started since. Some of these businesses have been successful, while others have failed, but by following these lessons, I’ve always walked away relatively unscathed.

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Richard Chanter

 

Richard Chanter is a writer and entrepreneur. He’s started several businesses over the years, but has most recently launched GrowthRocket.co.uk to share the experiences and insight of entrepreneurs to inspire others on their own entrepreneurial journeys.

Email: contact@growthrocket.co.uk

Twitter: @TheGrowthRocket