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A pathway to profitable growth for SME retailers

“The 2018 summer of discontent on the High Street and the rise of the CVA, as one retailer after another looks for a way out of their current financial difficulties, are signs of how tough retail trading conditions have become.

By adopting a systematic and analytical approach to cash flow management, SME retailers can improve their operational stability and future proof their business model by focusing on profitable growth.”

Roberto Lobue – Retail Sector Advisor



Increased consumer caution, combined with a shift in spending habits and the rapid growth in online shopping through digital platforms such as Amazon, have led to a reduction in high street footfall while increased competition is proving hard to bear for many small and medium-sized retailers, regardless of whether they are operating on or offline, or both.

Prevention is better than cure

A series of high profile retail collapses has provided a stark reminder of the challenging trading conditions facing retailers of all sizes, triggering numerous discussions about the way forward for the sector.

2018 has seen the rise of the CVA (Company Voluntary Arrangement), which struggling retailers such as Mothercare have used to continue trading whilst renegotiating payment terms with creditors. Similar to the personal IVA (Individual Voluntary Arrangement), the flexibility offered by CVAs means that they have regained popularity amongst retail businesses as a platform for formal insolvency procedures. Additionally, the challenges facing department store, House of Fraser, has sparked the Chancellor to suggest the need for an “Amazon tax”, to level the playing field between online and traditional retailers.

For SME retailers, prevention is better than cure. Instead of allowing profits to dwindle away, there are steps they can take to strengthen their business model and establish a platform for profitable growth.

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The challenge of cash flow

According to research among SME retailers by Menzies LLP, getting into cash flow difficulties was identified as a top four risk factor. Findings from Retail Week in its “Retail 2018” report also indicates that retailers have woken up to the dangers of poor cash flow management.

Rather than burying their heads in the sand, it is essential for retailers to take control of their destinies by adopting a proactive and multi-layered approach to working capital management and monitor cash flow closely. When performed correctly, this will enable businesses to see into the future; enabling them to take preventative action to mitigate financial risks.

In January 2018, 52 per cent of UK retailers surveyed said they were planning to either make no investment in new shops or reduce their property portfolios.Similarly, at the start of the year, 53 per cent of retailers were planning a 50:50 split between driving growth and reducing costs.

Five steps to forecasting the future of your retail business.

More about Menzies Retail sector expertise.

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