I usually keep a positive tone in all my posts. But this one is a bit of a downer.
Yet I’ve kept it pretty much untouched. The reason is simple:
Addressing the failures of others can warn you of a potential risk to your business.
I’ve seen many tea businesses in the last few years. And if I’ve learned one lesson, it’s that most of them fail for the same reasons.
I’ll focus here on the 4 main reasons.
Unfriendliness of your staff
What do shoppers like in a tea shop?
The quietness, the atmosphere, the time that slows down, the pleasures of good quality products, the smell, getting advices, etc.
Tea shop equals pleasure shopping.
Your job is to preserve this mood.
Let shoppers in their flow. A tea store is not in a supermarket. On the contrary. Leave them time, leave them space. Create a nice and relaxing atmosphere away from pressure.
The wrong staff people break the mood by
- staring,
- ignoring,
- being unavailable,
- not being in a good mood,
- being too pushy, i.e. trying to sell too hard, too soon,
- being impatient, e.g. customers will feel bad when asking to smell a tea.
What about being knowledgeable about tea? Yes it’s important.
Your staff should know enough about tea to advise customers.
But if I had to choose between a knucklehead and a friendly, smiling, relaxed employee who makes people feel at home, I’d definitely opt for the latter. And I’d take the time to train that person over time.
To sum up my view on this:
You can teach adults everything about tea.
You don’t teach adults to be polite and respectful.
Invest your time in teaching hard skills, not soft skills.
Consequences are easy to foresee when customers are not treated well in a shop: they don’t come back.
Bottom line: Always take extra care in the attitude of your personnel towards customers.
Lack of customer loyalty
Lack of loyalty means:
- Lack of word-of-mouth,
- Not enough returning customers,
- Running out of potential customers in your geographical area.
I won’t elaborate any further, as I’ve already written an article on the subject: “You only need 1000 loyal customers” where I explain in more detail how loyalty is decisive for your success.
Bad location
In this case your location is not attractive enough.
2 things can simultaneously happen:
- You don’t have enough potential customers in your geographical area,
- The time you need to attract enough customers is too short.
In any case, every new tea shop has an inertia challenge:
- It takes time for people to hear about you after you’ve opened your shop,
- It takes time for people to need your products after they’ve heard about you,
- It takes time for people to buy from you after they’ve decided they need your products.
The less attractive your geographical location, the more friction there is in each of these 3 steps.
An unattractive location usually means you need more time to grow your customer base.
Do you have the time (i.e. money) to wait?
The key takeaway for you: you need to compensate for your unfavorable location with extra time to develop your customer base.
Cash Flow problems
“Revenue is vanity, profit is sanity, and cash flow is king”
Verne C. Harnish
Many profitable businesses are disappearing due to liquidity problems. Unprofitable ones too.
If you’re bookkeeping Meister, you can pass this paragraph. For the others:
- Profitable means your revenues exceed your costs. But it does not tell the situation of your bank account,
- Cash flow measures what you have in the bank at any given moment. This makes it a key indicator of the financial health of your business.
For a tea shop, the main cash flow friction comes from buying kilos of tea in advance (your stock) which will seat for weeks or months on your shelves.
You advance money by paying your suppliers, but there’s no money coming in until you sell the product to your customers.
This time gap weighs on your bank account.
Most of you have 3 effective ways to solve the problem:
- Negotiate payment terms with your suppliers: The best solution in my opinion. Most tea suppliers will grant you payment terms after a few orders.My advice: don’t wait until you’re in financial difficulties to negotiate better terms. If you’ve already missed a payment due date, your solvency will be called into question. As a result, your supplier won’t be inclined to grant you better terms.
- Reduce your stock: It’s easy to set up, but it will take some time to have an impact on your finances. And it’s not without consequences. Since you have to wait to pass smaller orders, you’ll inevitably run out of some references from time to time. Which leads to customer dissatisfaction and probable revenue loss.
- Invest in your business to increase your cash flow. The money can come from you, it can be love money. But banks generally won’t finance your cash flow needs.
Key takeaways
Let’s sum it up:
Bad location, unfriendly staff, cash flow difficulties and lack of customer loyalty are 4 key reasons why tea stores fail.
Did you notice I didn’t mention profitability? It’s on purpose. Lack of profitability is the consequence of these 4 reasons.
And there are more reasons why tea shops fail. I’m preparing a follow-up to this article with 4 more mistakes you can avoid and thus help keep your tea store thriving. Stay tuned!
