DAVID PERRY

Irregular Thoughts

Money talks, but I don’t always listen, despite my Peter Dominic credentials

Many years ago when there were a few chains of wine shops and managers had deputy managers and deputy managers had staff, we invested in staff training.

My view was that my deputy’s job was to do my job and that my job was to train him to do it well. That worked as it allowed me to go off and do other things, confident that my shop would be OK in his hands. Peter Dominic (remember them?) had just embarked on a journey of takeovers and mergers and I was one of three shop managers selected to design and deliver training to the staff of overtaken companies.

A few times I had to drive from Derbyshire to Brighton and back. The mileage allowance more than paid for the purchase of my old Citroen 2CV even if I did have to stop for 2-star petrol three times on the journey.

A lot of the training was mundane systems stuff. Some of it was more exciting, like explaining the importance of stock control on return on investment. I taught the theory but didn’t live it in practice.

Back in those days we were encouraged to aim at 4.3 weeks’ stockholding to improve the company’s return on investment. My area manager would ask why I had eight weeks’ stock and I would say I have exactly 4.3 weeks; the problem was that he was calculating it based on previous sales, whereas I was using forecast sales.

I argued that reducing stock meant

I couldn’t improve turnover. Reduced stocks meant reduced sales leading to further reduced stocks, and then we are on a downward spiral. I had ordered huge amounts of stock on the expectation of selling it all and how could I hit my dizzying targets without the stock to do it? Grand Metropolitan could afford it and my well-trained staff would make it happen. Miraculously, the following week, one customer bought all 12 of the Château d’Yquem I’d just ordered, and my area manager turned a blind eye to my profligacy from that point on.

Fast forward almost 40 years and I understand the importance of cash flow. It’s a lot different when it’s your own cash, or rather that of your suppliers. 4.3 weeks is about the average credit term from a lot of suppliers, unless your ordering cycle is very precise. In the early days of owning Shaftesbury Wines it dawned on me that managing cash flow and ensuring everyone got paid in full and on time was achievable but there was never a point when you could just stop. You had to buy more stock to sell to pay for the stock you had just ordered. That was OK. Everything was more or less under control as long as I kept a close eye on cash flow. We muddled along, remaining solvent and without an overdraft for years. Then the potentially existential Covid crisis hit.

Initially we didn’t know if we could trade or not. I sat down in front of my beloved spreadsheets and did the sums. The shelves were pretty much full and the cash in the bank was by now, after 10 years, enough to clear all current invoices and leave enough to pay the rent for about 12 months. I realised that I had achieved that magical point where I could just stop – if I had to. I could put everything in mothballs, and isolate for a year – if I had to.

I’d got as far as putting boards over the window displays when, a few days later, we found out that we were “essential”. We were allowed to open. The problem was that the rest of the population was under house arrest. I had a lovely time driving around deserted lanes in the spring sunshine delivering vast amounts of entry-level wine to the wealthy parents of children evacuated to their homes in the country. It sounds smug, and I apologise to the many people, including my wife, for whom lockdowns weren’t much fun, but the pandemic was great for our business. I’m quite nostalgic now and sure we were not alone in coming out of it in better shape financially than we went in.

When I pay an invoice now I don’t have to look away from the screen or squint to avoid a panic attack. I can order as much as I want in the knowledge that it will get paid for, even if it doesn’t sell in 4.3 weeks.

I could take advantage of discounts for larger orders. I could, but I don’t have enough space. I know that stockholding expands to fill the space available but, with virtually no space available, we still have to live hand-to-mouth with multiple, smallish deliveries almost every day. (Suppliers, please take note!) This means a low(ish) stockholding and a healthy(ish) looking return on investment. Lucky, really, because I’m damned if I can remember any of the training.