In business, you build success by treating every knock as an opportunity

 Having run a successful business for 47 years, I have had a substantial number of massive knocks and problems on the the way. No business survives if it does not adapt to changes in the marketplace. For my main business, a music rehearsal studio, the landscape could not be any more different to when I started it. Back then, it started as a musicians collective, pooling assets, sharing costs. This model lasted about six months until the other bands I formed it with split up or moved on. 

It then became a partnership and this model persisted until 1994, when I bought my partners out. I had a very different vision to one of them. The business had been running for fifteen years, but our customer base was almost identical. It was blokes who wanted to have a jam in the evening and very occasionally someone who wanted a rehearsal during the day, usually in school holidays. It was a ramshackle operation, but it made money, because there was demand and no local competition. Leading up to the change in 1994, lots of issues became clear about what we were doing wrong and what we were doing right. I realised that it could be a well run business and grow. I put my ideas and plans to the rest of the partners and one of them was very dismissive. It was clear to me that the only way to develop the studios was to buy them out. Luckily I'd had a redundancy payment at the time and had the cash. It wasn't what I wanted. I thought they'd be excited and realise that if I put a loan into the business to fund it, we could have a tidy little business that had huge potential to grow. As it was, the money I had set aside for the plan went on buying them out. 

So I found myself with no partners and no cash to invest in the business. Of course when my original offer was rebuffed, I started to plan. When I made the offer, I had already got a new partner lined up. Someone who shared my vision and understood why I felt there was a massive opportunity. At the time of the buyout, we had two studios. My plan was to have five studios, a small music shop and a recording facility within five years. This was contingent on units becoming available. We were just about breaking even with two, and had 50% peak time utilisation.. We also used the studios for our own projects. I agreed with my new partner that all growth would be funded by the business and we'd do the fit out work ourselves, keeping costs to a minimum. We did exactly this. 

I had to throw my business plan out of the window and start again. But the constraints made us think very carefully about every purchase. Every time there was spare cash in the business, we discussed all of the things we could buy and worked out which delivered the most potential revenue generation at the least cost, or alternatively the highest cost savings. When bulbs blew, we got energy saving bulbs. When we bought amps and drum kits, we looked at what was most reliable and would have the lowest maintenance costs. Had I just gone and re-equipped the cash from my redundancy, I'd not have spent the cash wisely. 

What was initially a blow and a problem actually became a secret weapon. The financial discipline we imposed on ourselves, through circumstance made us a far better business. When my previous partners were part of the set up, we bought the highest spec gear we could. We actually found that most bands preferred simple to use basic gear. If it was to complex, they'd be baffled. We had thought we were providing a better service, but many of our customers are novices and highly complicated systems just caused problems. 

The biggest lesson was that every knockback is an opportunity. We achieved our initial goal within three years and within five, we had ten studios, a shop and a recording operation, and we massively exceeded the financial projections, which one of my former partners had dismissed as 'pure fantasy'.

ULEZ, NI hikes, Brexit, Business Rates hikes, etc - God help you if you are trying to run a post Covid small business!

Pic Courtesy of Daily Telegraph, click for article

Over the past couple of weeks, I've found myself, rather unexpectedly, as a minor star of the anti ULEZ movement. I've done TV interviews with ITV, BBC, had an article in the Daily Telegraph and even had a request from GB News to have a chat with Andrew Pierce today about the issue. Unlike most ULEZ opponents, I am not rabidly anti Sadiq Khan. I do not like the way he runs City Hall, but it is not a personal thing and nothing to do with his racial origins. He is just pretty useless as a Mayor and doesn't listen. His only real talent is being very astute at assembling an electoral majority in London. He's been helped by the complete inability of the Tories to pick a candidate who has a Scooby Doo!

But Sadiq Khan and ULEZ is just one element of a very hostile environment for anyone trying to run a small business. My business is facong multiple existensial threats. After 46 years of successfully running a music studio business, April could well see the end. We will not go down without a fight, but at what stage does a man who is 62 say "Sod this for a game of soldiers". So lets look at each of these threats and how they affect us.

First of all, our business has not fully recovered from the pandemic. Looking  at the year so far, our turnover is 16% down on what it was for the equivalent period in 2019, which was the last full pre covid year. In 2020, as the pandemic hit, we were 6% down, In 2021, when lockdowns were in place for some, we were 70% down, in 2022 it was 30% down, in 2023, it was 20% down, in 2024 it was 8% down and this year, it has dipped again. The first quarter is always a strange one. The day of the week the year starts on affects the turnover in January and also the day of the week that Valentines day falls on (musicians don't rehearse, so you lose a days turnover. Also, we tend to do maintenance in the 1st quarter, as we did this year, which closes studios etc and affects turnover. But even so, we are nowhere near back to pre pandemic levels. There is simply less work for musicians and this has a knock on effect with a lack of need for rehearsals. The only real saving grace is that most of our competetors, who were around in 2020 have ceased trading. 

So what are the challenges. 

Business rates. The chancellor announced that Business Rates relief for leisure and retail busnesses will reduce from 75% to 40%. With the rates increases to these, that means that our rates bill will double from 2024. Barnet council only collect rates for ten months, we get some respite in February and March, but we will have huge bills in April. If we trade at the same level as last year, this will gobble up all of our profit.

NI hikes. The government has changed the thresholds for NI. It is unclear to me at this point how this will affect us. It may be that we can partially mitigate this, but it is a tax on employing people. We have changed our staffing patterns, we may have to rejig things further, amend our opening hours, so we are not paying people at quieter times. We've always opened, even if there is only one band rehearsing and it doesn't pay wages. As these wages and NI costs have spiralled, we need to review this. 

Minimum wages. Historically, the studio has always paid above minimum wage. We did this as we wanted the best staff. As the government realised they can cut benefit bills for people in work by raising this, they've massively hiked employment costs. Up until 2019, this wasnt' so much of a problem. Now with the business on life support, it puts a huge strain on our budget. We've cut two members of staff and run single man shifts at quiet times. Cutting staff costs is just about the only tool a business such as ours has. The government makes these changes, businesses like us cut staff costs and the government gets less tax. It means that they can't balance the books. It is basic econmics.

Brexit. This has affected our business in three ways. The first way is that tier 4/5 bands (bands playing small venues, working professionally) used to survive by touring Europe. Brexit has made this almost unfeasable for small bands. The tax rules around selling merchandise and getting paid make it impractical. Less work means less rehearsals. The second way is that less musicians are coming to London to work from EU countries. That also means less work. The third way is that our music equipment company has stopped selling in Europe. It is just too much hassle for the rewards.

ULEZ - We are on the edge of the ULEZ zone. For bands and musicians living in Hertfordshire, rehearsing, or buying strings, etc, if they have a non compliant vehicle it adds £12.50 to the bill. If you are a guitarist and you want to buy a new E string  for £1.50, as you have a gig tonight, will you pay that money or will you drive to Hatfield/Watford and buy them there, even if it's three times as far and it costs a couple of quid in petrol and parking (parking is free at our place). There is also the hassle of paying the charge. Around 40% of our customers are based outside of London. Of these 25/30% have non compliant vehicles. Our tracking of booking data indicates that we are seeing 10-15% less bookings due to ULEZ at a conservative estimate. Being on the edge of the zone, it effects us disproportionately. The same is true of pubs, restaurants and other businesses on the boundary.

Energy costs. Like everyone, we've been clobbered by rising utility costs. UK businesses pay the highest energy costs in Europe. We have largely moved to energy efficient bulbs, etc and are looking at other savings, but I suspect we've drank this well dry. 

So what can we do to survive?

Staff - As mentioned above, we are looking at our staffing patterns and opening hours. Should we trim these? Do our opening hours really suite our customers and our business model? Is there scope for reorganising things.

Advertising -  We've done very little advertising in the last two years. We've recently run some rather innovative campaigns, that have delivered a great response. For years we sinply relied on Google adwords to bring in new customers. We've moved away from this. It has saved money and we are using far more targetted advertising. We've also realised that targetting Hertfordshire is pretty much a waste of time.

New income streams - Attracting different types of business, which have not traditionally used the studio. We've done OK at this historically. Adding dance and photography studios has paid dividends. We are also used for things such as casting. The tuition side of the business has also brought in a reasonable amount of income, as well as building a strong base of future customers.

Add ons - this is making sure our customers spend more money when they are in the studios.  We recently installed a better coffee machine. We hope this will increase our drinks turnover by £1-2,000. Not a huge amount in the scheme of things, but such small margins make can be the difference some months, between paying the bills or not.

Raising studio costs - We did this in January in anticipation of the cost hikes in April. It is a double edged sword. Price rises always make customers review their arrangements. There seems to be a movement towards shorter sessions. Bands book 3 hours where they previously booked four, etc. As they use less electricity etc, you make a bit more per session in profit, and it frees space at busy times, but it takes a year before you really appreciate the effects.

Other cost savings -  There are always savings to be made. It is a question of seeing the wood for the trees. Energy contracts, insurance costs etc are always worth looking at.

So where are we? The rest of this month, I will be spending my time looking at all of this. When you've run a business for 46 years, you don't just throw the towel in. In 2020, my expectation would be that by 2025, we'd either have shut or we'd be making a fortune. In truth, we are doing neither. We are just about breaking even and I suspect that this is what we will continue to do. I wouldn't advise anyone to start a music business now. The Mayor won't support you, the government won't support you, your utility suppliers will shaft you and everyone is out to screw you. 

Here's a song that sort of sums up how I feel about it all right now, as we crunch the numbers. I am sure that by the end of the month, I'll feel better!

Businesses need clear guidance on lifting the lockdown, not waffle

There are enough armchair experts pontificating on what Boris should or shouldn't do for the country. As I'm not an expert, I have refrained from getting too involved in writing lengthy tomes on my blog on how the country should be run in these difficult times. However, I run a business. I have twelve people who work for me. I have over 6,000 regular customers, all of whom see making music as a central part of their lives. Many live in flats, so cannot make the noise they need to (especially drummers), without driving the neighbours mad. We closed our business when the government introduced the lockdown. We were given no notice of the closure. We had to make all sorts of major decisions on the hoof. I had a couple of sleepless nights, working out what is the best for all. Now all of our staff apart from two are on furlough. When you have spent 40 years building a business, finding out you will have zero income for months on end is a very difficult situation to plan for. Fortunately schemes such as the furlough have lessened the blow for our staff. But now it appears we are planning to come out of the lockdown. Whilst to some extent, I can forgive Boris the panicky way he brought the lockdown in, as he was metaphorically caught with his pants down by the virus, they've had two months to plan the end of it. The roadmap should be clear and the timescales easy to understand. If they have to caveat it for unknowns, then fine, but give us some proper idea of when and how we can open. To me, the announcement last night was flawed in several ways, from the business perspective. The message wasn't clear. The timing, 7pm on a Sunday was quite unhelpful, giving some businesses less than 12 hours to prepare for a return to work. There was no clear roadmap of the wider lifting. The colour coded phasing was all very well, but the criteria could and should be clearly spelled out. What is the R rate for each phase. How many people can be infected before it is safe. When will the apps, the testing and the PPE be sorted out. Personally, I think that with chaos in the testing and PPE sector, we are not ready. Boris has stated that we need capacity in the NHS to deal with it. Without PPE and testing for everyone who needs it, we are clearly not there. This isn't a criticism, it's a statement of fact. 

We have been doing what we can for the community during lockdown. Last week, we opened our doors to be used as a distribution depot for a local relief scheme, where food parcels were bagged up.

We may be closed as a music studio, but we were open today as a food distribution point for a local Covid food distribution scheme. pic.twitter.com/Wzx2TZ5Bj2

— #MillHillMusicComplex (@MillHillMusicCo) May 6, 2020

We wish there was more we could do. The response of our local community has been amazing, and I think we can all be proud. But our response works best when we all understand the rules and messages.

Last night we had the most confusing announcement imaginable. I was hoping for some sort of sensible roadmap that would allow me to give guidance to our staff and customers. As a very niche business (or group of businesses to be technically correct), reopening will be a situation that we need to manage. If we have a degree of notice, then we can act accordingly. This means letting customers know we will be reopening, making new staff rosters, working out what we need to buy and when we need to resume refuse collections etc. When Boris announced that 'people who can't work from home, should go to work' what exactly did that mean? There is no point our staff coming to work if we are shut. As best I can understand, the announcement indicated that we should prepare to reopen in June, albeit with some sensible social; distancing measures in place. If we reopen on Monday 1st June, then what will this mean? Musicians don't generally just turn up for a band rehearsal. They need to organise it, so it will take at least a weeks notice to get anywhere near a situation where it is worth opening the doors. Of course there are considerations. Should we get the yellow tape out so that musicians know where to stand so they have 2 metres distance between them and their band mates? Should we simply allow them to use their common sense? We normally have two staff on for busy shifts.  We need to protect their wellbeing, so what procedures will we need for this? 

There are practical issues as well. How do we enforce social distancing in the toilets? One approach would be to only open our disabled toilet. That is a single occupant lavatory, whereas the male and female have two cubicles. These glamorous conundrums are key to us getting the studios open again. 

One of the major criticisms I have of Parliament is that there is virtually no one who has run a small business sitting as an MP or in cabinet. Whilst Boris was a journalist and Sir Keir Starmer a leading lawyer, none of them has ever had to worry about the logistics of keeping tea machines working, toilets unblocked and bins emptied. They won't have any concept of the joys of staff rosters and shift patterns, and they clearly don't have to worry about their customers being to scared to come to use their services. 

The one minister who has demonstrated a grip on the situation is the Chancellor. His measures have thus far saved millions of businesses. It will be difficult, but the various schemes have made a real and material difference. There is now talk that the Furlough will be scaled back. If this is done before businesses can reopen, it will all have been in vain. The scaling back can only be safely done when the income starts to roll back in. Even if people had no fear of returning, it would doubtless take us a month to get back to anything like a normal workload. Some of our staff will not be returning any time soon as they are in long term self isolation for health reasons. I am envisaging that our hours will be much shorter than they have been initially. But this is a major challenge, as we'd need to reconfigure our online booking system, a task that has costs of its own. 

I think Boris gave businesses a major headache announcing that everyone should go back to work at 7pm on a Sunday evening. How on earth can management deal with that situation. If he'd said 'from Wednesday' then that would have given everyone time to plan and work out how that could be safely implemented. Those working in construction will potentially be faced with workers turning up, before the sites have worked out safe protocols for performing tasks. 

The Federation of Small Business

I am at a loss as to who actually is advising Boris. Organisations like the TUC, CBI, FSB etc should be consulted and their feedback sought. No business deals well with sudden massive policy changes. Most businesses want a safe environment for staff and customers. They want to be treated as grown up partners by the government. I don't expect Boris to speak to me personally, but I joined the Federation of Small Business, as did hundreds of thousands of other small businesses, so that they could have a seat at the table and work with the Government to deliver policies that work for the UK economy. 

In short, the government needs to develop clear guidelines, give proper timescales and work with the organisations that represent the various sectors of the economy, for the mutual benefit of all.

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Please note that I am writing this as a personal view. I am not writing it to represent the Federation of Small Business or anyone else.