The way the fortune cookie crumbles

13 June, 2008
Have you often wondered how much we achieve is due to luck and how much we can actually take credit for? Tony Phillips reveals how it works
Page 13 
There have been, I admit, quite a few occasions when I've made a decision that didn't really work out as planned, such as the location for a shop. Then, through a stroke of good fortune, someone has come along and made me an offer for the site that gave me a good profit - and I always took the credit for being so far-sighted.
The older I get, the more convinced I am that luck plays a part in life: that old cliché of being in the right place at the right time has a lot of truth.Mind you, a few people always seem to get bad luck, but equally, there is a small percentage of people who are always falling on their feet, no matter how daft their behaviour.The vast majority of us get pretty average luck and the secret is to take advantage of the good.When times are good, we invest virtually all our money back into the company, so that when hard times come, most of our equipment is fairly new and everything is in good condition.Keeping borrowing under control is vital. If you go into a recession having heavily borrowed, lenders are reluctant to give you more and worry about your capacity to service the loan. One rule of thumb we have is to ask if we could carry on servicing the loan if turnover dropped by, say, 10%. If the answer is yes, then we can consider expanding should the opportunity arise.The discussions I now have with manager Neville are about which direction to take, as we want to keep our lines of distribution local. We feel there is a risk of city centres declining and rents are often far too high for our type of trade, as we sell a low-priced product involving high labour costs. Shops in secondary locations don't generate very high sales, but costs are invariably lower than city- centre sites, thus the profit to us is higher. People love to talk about their high turnover rather than high profits, a little like that golf expression 'drive for show, putt for dough'. We have diversified, but always tried to remember that our core business is being a bakery.Our main and profitable divisions are retail shops, sandwich vans, and corporate buffets, with the jury still out on chocolate and candy. We do a little wholesale, provided it is profitable to us. Stop and think how long it takes to make, pack, invoice, load and unload, set against the profit on the order. It very difficult to do retail and wholesale well, as one is quality-led and the other has to have a price and cost factor built in.I'm not saying that wholesale is poor quality - of course it isn't or wholesalers wouldn't survive. But few people can do both well and we've found that wholesale tends to take over, often at the expense of the retail. The customer phones up asking where their 36 doughnuts are and the tendency is to take them off a shop order to pacify the complainant.So it's true that you can't do everything - but you can still be lucky.



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