Case study on budget at a fashion retail business.

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11.2  How does a company budget efficiently?

From rags to riches – twice!

Jeff Pearson never learnt to read or write yet became a millionaire.  Born into a family of market traders in Liverpool he started working life as an apprentice television aerial erecter in the 1960s and ended up running his own van before he was 20 years old.

After meeting his wife to be, Gina, they set up in business with an open-air market stall selling teenage girls’ fashion.  Visiting warehouses in Manchester and London they bought stock and sold £140 worth on the first day.  They decided to make their own styles.  Finding the right product was the key to success.  Eventually they raised £15,000 to buy their first shop, whilst still keeping their market stalls.  By the time Geoff was 27 he had made enough money to buy a large Victorian house, with 6 bedrooms and 3 bathrooms.

At Christmas 1982 Geoff and Gina made their best business decision.  Looking for stock for a sale they paid £700 for 70 pairs of girls’ leather trousers and advertised them at £1 a pair.  On Christmas Eve a queue started forming outside their store, 3 days before the sale started.  When their doors opened 1,000 people were in the queue and the business took £25,000 on that day alone.

The shop ‘Girls Talk’ became Liverpool’s number one fashion boutique and more shops followed.  Being quick to see fashion trends they made £750,000 on a line of printed T shirts and before too long Jeff was a millionaire.  They opened a new store with the patented name of Tickled Pink and this too was a huge success.  Their brands became household names and they ended up supplying over 600 independent shops.  

In 1992 recession hit the high street and consumers stopped spending on fashion clothes.  Retailers stopped paying Jeff; the bank reduced their overdraft limit by £200,000, and they were forced to sell stores at knock down prices.

Following the collapse of the Exchange Rate Mechanism the government raised interest rates to 15 per cent and borrowing became even more expensive.  Their business was finished but they managed to avoid liquidation.

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Jeff had always paid his suppliers promptly and given his retailers credit.  In one way this was a cause of his failure – cash flow became a huge problem, but in another way it was a reason for his later success.  He went back to market trading.  He had no difficulty getting supplies – people trusted him.  As a salesman he was good.  On his first day back in the market he took £750.

When things were going well with Tickled Pink, Jeff took an interest in horse shows.  Now his connections enabled him to get stands at ...

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