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.
