The handover stocktake and audit was scheduled for 27 March this year with settlement taking place on 30 March it would be full steam ahead to finalise my takeover of a company I had been in discussion about buying for over 12 months.
Then, on 24 March, following the declaration of a worldwide pandemic, Prime Minister Scott Morrison ushered in restrictions, proclaiming that public gatherings could be no more than two people and many businesses― including beauty salons―had to close.
Quickly the States implemented their own ‘States of Emergency’ and lockdown measures. Obviously the stocktake could no longer go ahead. The future became very uncertain and while I am very good at thinking through ‘what if’ scenarios, this was outside anyone’s experience and it seemed prudent for me to put everything on hold while we rode out this period of chaos.
Having observed what was happening in Italy I had already cancelled plans to travel to Bologna for a conference, and, worried about the health of my employees, had temporarily closed my current business―the Ultimate Skin and Body Clinic in Ashmore, on the Gold Coast.
This clinic was the original Australian Skin Clinics, a business I franchised and, in just five years, took to 60 clinics. When I sold out of that business in 2019, I retained the original one and gave it a new name.
The company I was looking to buy, Issada, was a Brisbane based cosmetics company that specialised in high quality beauty products using natural, ethically sourced ingredients. The current owner was my long-term friend, Fiona Neale, and over the years we had spoken a lot about the potential of her company.
Therefore, I knew it well and it fitted perfectly into my plans to acquire a boutique company already operating in the cruelty-free, organic make-up space with a huge capacity for growth.
So, even though COVID-19 put a halt to the final due diligence needed to take over Issada, and I was legally able to walk away, it never occurred to me to do so. I was verbally and emotionally committed to the purchase not to mention excited about all the plans I had made. Importantly, with the detailed analysis of the business that I had undertaken, I was confident that if we suffered a severe downturn, I had the cash reserves to wait it out.
I was no stranger to economic shocks. I had bought a business three months before the GFC hit our shores but by pivoting to new services and with good cash reserves (I am a huge believer in cash reserves), I traded 45 per cent up on the previous year throughout the recession.
The ‘lipstick’ economy is real. Time and time again I have seen that women will continue buying makeup, botox, skin care and beauty services long after economising has meant that they have given up buying fashion, shoes and handbags. At the end of the day, handbags and shoes spend half their time in the wardrobe but you wear your face every day.
My friendship with Fiona meant that, even though I didn’t yet own Issada, together we could look at how we could future-proof the business. We shared strategies and pooled learnings. We both negotiated hard with suppliers and our landlords to try and gain cash flow relief for both our businesses. It was a time when we carefully reviewed the performance of our staff, looking at if they were contributing or dragging on the bottom line.
My first rule about buying a business is do nothing new until you have had time to fully understand not only the workings and culture of the business but the ebb and flow of trade too. This time however, Covid drove me to make changes much faster. It was a time for action, future planning and putting quality time into developing new products not to mention getting a new website developed and launching online purchasing.
While I commenced my takeover of Issada before Covid had any impact on that business, I believe Covid offers opportunities for people who are looking to buy a business. Many good businesses are failing because they haven’t set aside an emergency fund to tide them through a disruption to their business and lack of cash reserves are forcing their owners to close their doors.
However, there are people out there who have the money, or who have perhaps received lump sum from a redundancy who are well placed to pick up a good business opportunity. In addition, because many businesses are letting people go, there is a great pool of skilled motivated potential staff available to help build the dream. The more people that take these opportunities to pick up good businesses the faster the economy will rebound.
As I write this, beauty businesses in Queensland have been out of lockdown for around five weeks. The final audit and stocktake for Issada was held on 17 June and I took over the business on the 22nd. Fiona is staying on as general manager indefinitely and is as keen as I am to see Issada soar to the next level.
There are many lessons for business to learn from this period of pandemic. With Victoria now in lockdown for the second time, the stark reality that this will be our life until there is an effective vaccine or cure is evident. Periods of loosening restrictions followed by increasing numbers of infected and then lockdown.
I am a realist. I hope for the best but plan for the worst, hence my great belief in having good cash reserves. I believe we are in for a tough couple of years, so my plan is to run lean, ensure that every single staff member fully contributes to the bottom line of the business and I won’t be recruiting wildly.
A big lesson has been how vulnerable our supply chains are. We buy many ingredients and products from Europe and the US. We are still waiting on orders placed in December last year so in terms of future planning it may be necessary to hedge our bets and acquire more suppliers in different regions. I will certainly be negotiating with local suppliers too. Covid is making businesses think differently and change priorities and it will be a while before we think globally again.
Issada has over 200 stockists across Australia and while our Victorian stockists are doing it tough at the moment, areas that only have a handful of virus cases are returning to normal trading levels―there are clear signs of recovery.
Life rarely runs smoothly and business owners experience change at all levels accepting that as the norm. No-one expected this pandemic but despite the chaos so far, I’m looking forward to growing this awesome Australian business that I have finally been able to take over.
By Deb Farnworth-Wood