Friday, 7 December 2012

Independent = Dead End?

First it was Marjon Jewellers in Kamloops, now McCallums and Warringtons.  Three perfectly good effective businesses have or are closing their doors, rather than selling to the highest bidder.  What is it about independent jewellery stores that a savvy businessperson wouldn’t just snap it up and keep the ball rolling?  Is it that inventory liquidation is more lucrative than negotiating 2.5X annual earnings plus inventory and fixtures?  Is it that aged inventory requires such a steep depreciation?  Is it because it takes more than just any businessperson to run a jewellery store?  Is it because an independent jewellery store isn’t profitable enough to justify the outrageous mall leases being asked?

People buy into franchises all the time.  The typical franchise prospectus asks the new franchisee to have $100,000 to $500,000 in unencumbered cash, plus additional net-worth to back equipment leases, credit lines and real estate leases.  And then they have perpetual franchise fees and royalties to deal with.  Why aren’t more of these people making you offers on your jewellery store?

 Most of the answer lies in the book The E-Myth.  According to Michael Gerber, your store is only entrepreneurial, franchiseable and resaleable if you’ve defined and documented all of the functions so that others can step-in and do what you do.  If purchasing, pricing, hiring, training, appraisals, and key client management are all done by one very capable owner, then the only buyer for your store will be a protégé already working along-side you.  This is where key-staff reading this should pay attention: you may be a unique candidate to buy-out your owner one day!

Best wishes to Orm Schulz (who with his son Parker will continue to run Jonathan’s Jewellery) and Brent McCallum as they enter a new phase of their lives.

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