Keeping in high spirits - a recession lesson: Rugby Tap

Keeping in high spirits - a recession lesson: Rugby Tap

 

According to the Small Business Association, one third of all business start-ups fail in the first two years, and more than half (56%) fail within 5 years. So why would anyone launch a new business in the depths of a recession when the odds against success are even higher? We talked to Colin Arthur, founder of Rugby Tap, a specialist off-licence on St Matthews Street, to find out why he took up the challenge, and to assess his chances of success.

Established by Colin Arthur in July 2012, ‘Rugby Tap’ is a specialist off-licence selling a range of competitively-priced real ales that are held in firkins and drawn off into containers for customers to take home. He also stocks a wide range of imported bottled beers, together with wines and spirits. In addition, he has established a website to showcase his range and generate online orders. Although this only accounts for 10% of his turnover currently, Arthur told us that, for him, ‘a website is essential as a shop window 24/7 and not just for direct sales.’ When informing us about the website, Arthur said that he had a  ‘cloud based, multi-channel epos and website system that allows me to compete and even offer more than the multiples with features such as gift cards, loyalty cards, reserve and collect, click and collect’. Surely these various options distinguish ‘Rugby Tap’ from any other competition?

Arthur’s reasons for starting the business and for locating in Rugby are as much personal as commercial. He has lived and worked in the Rugby area for over twenty years, and has many years of experience in the drinks trade, having worked locally in a brewery, an off-licence, and managed a pub. He always wanted to run his own business, but decided that running a pub and trying to enjoy a happy family life would not mix: ‘It’s about getting the work/life balance right’, he told us. Working from the premise that in starting a business you are most likely to succeed if you ‘do what you know’, he decided to open a niche off-licence in Rugby town centre, catering for a market he knows and understands very well.

An in-depth knowledge of your target market is a key component of success for any business, and Arthur clearly has the trade experience necessary for success. But what else is required? Typically, new businesses fail for the same reasons: they have no real understanding of their target market; they lack a clear business plan; they are underfunded; they lack clear goals and fail to measure progress towards them; they mismanage cash flow; they have no unique selling proposition (USP); and they underestimate the competition. Any one of these mistakes can undermine a new business: a combination is likely to be fatal. So does Arthur feel he is getting it right?

Planning

In January 2012, Arthur left his previous job and devoted seven months to preparing the launch of his new business. He approached the task in a professional and systematic way: 

·      He prepared a business plan and asked people whose opinion he respected to comment on it.

·      He located a site close to Rugby town centre, but outside of the premium rent area.

·      He applied for, and received a license to sell alcohol.

·      He began discussions with suppliers – local breweries and wine merchants – to source a range of quality ales, beers, wines and spirits.

·      He prepared a marketing campaign to launch the business.

Funding

Conscious of the economic climate and the banks’ reluctance to lend to small businesses, Arthur decided to fund the enterprise from personal savings. Whilst this may have limited the scope of his plans, it means that he is not accountable to any third party, and gives him complete freedom of action to follow his commercial instincts.

Arthur decided to allocate half his funds to setting up the business – legal costs, fitting out the shop, buying stock, setting up a sophisticated electronic point of sale and stock system – while retaining the other half to cover his income while the business was being established. All too often start-ups are over-optimistic about sales, assume the business will rapidly become self-financing, and incur high costs, believing sales will more than cover them. When the projected sales fail to materialize, the company has a cash-flow crisis. Arthur has been far more prudent. He has kept his costs down wherever possible – for example, by not taking a High Street location – and he has not made decisions based on unrealistic sales projections – such as hiring staff.

Goals

To date, Arthur’s approach has paid off. After trading for seven months, he is close to reaching his first target – to break even (excluding his salary). He now aims to generate enough revenue to cover his full costs within the next six months.

USP and the competition

Rugby Tap is positioned in a clear market niche. Arthur identified a gap in the market left by the departure of off-licences, such as Threshers, and wine merchants, such as Victoria Wines. Despite this, competition still comes from supermarkets and corner stores, as well as pubs serving real ales. However, by offering a wide range of local real ales and foreign bottled beer, and the option to ‘carry out’ ale in customers own containers, Arthur is able to offer range, quality, expertise and a competitive price – a highly attractive package. Arthur believes that ‘a sound Business should be viable despite what is happening in the wider economic climate’, and it looks like a sound business is exactly what we are dealing with.

There have been mistakes along the way – money wasted on advertising in the wrong place, for example – but Arthur has avoided the major errors that so many start-ups make. His carefully-planned, prudent approach is surely the right way to take on the challenges of launching a new business in the depths of a recession, and we expect to see him thrive as the economy returns to growth. In two or three years time he should be in the position to raise the money to open further outlets. Watch out for a Tap near you.

We’ll drink to that! Shandy, of course.  Harry Cross   Rugby School   student.