03-02 Small Business Basics

When father was planning his own retail clothing business he did a lot of early planning that started in 1931 when he was told by his boss that he would not be promoted if he married my Jewish mother. And it is one of those Small Business 101 realities that about two-thirds of small firms start for a negative reason.
He went to night school to study accounting and his teacher was Joseph Newman. Jose and his brother formed Newman and Newman and they were his accountants all his life. Eighty years later this accounting firm is called Newman, Sharpley LLP.
And, of course, he made personal contacts with all the suppliers in the business. At that time he was selling quality clothing in a special high end part of the new T. Eaton Co. Limited College Street store.
Being pretty careful, he focused on learning all aspects of the business while working for someone else and was able to determine how he was going to generate sales and secure quality suppliers.
The Eaton’s supplier for made to measure suits was the Schiffer-Hillman Clothing Company on Spadina Avenue, in a building called the Balfour Building. Of course, dad made an arrangement for his clothes to be made by them as well. They liked him as the top salesmen at Eaton’s and the fact that his wife was Jewish.
And he made an original arrangement to pay his bills within 60 days but ask his customers to pay cash. This is the only way he could finance day to day operations when he found he was unable to get an operating loan from any of the banks.
He had saved about $500 and received $500 from his mother and father in Ireland. This was the total of his capital. The job of fixing up the store was left to a neighbour who was a carpenter and worked for the promise of free clothes for five years.
His wife was mother’s best friend for life and her name was Mrs. Irwin. She worked for the CNE and got me summer jobs there in later years. I remember running around when dad and Mr. Irwin were making shelves.
It is a basic small business financing challenge that owners of new ventures do not have any collateral to finance leasehold improvements, and all over the world governments today make guaranteed loans available for this purpose. But being undercapitalized determined a number of his original policies, such as location and pricing.
He rented an old grocery store just a block away on the corner of Hayter and Bay Streets, and the photo shows his store in the 1950s when he had taken over the large office and factory area upstairs.
It was his goal to start-up his own business before his April birthday in 1938, and he opened for business a month earlier. He was always proud meeting his personal goal that he had set back in 1931.
The store location was a good two blocks away from the main shopping street of Yonge Street and this meant he had to have a low-price policy that would make it worthwhile for his clients to come over to his location.
His original clients would be his customers who he had serviced at Eaton’s and his secondary base of clients would be employees of Eaton’s who enjoyed a ten percent discount off the College Street prices. The letter he sent to his prospects in 1938 is a treasure.
Dad priced his main line of made-to-measure suits at a price 25% below College Street prices. His one price policy regardless of material and size was also Eaton’s policy. And his original promotion policy was to spread the word amongst Eaton’s employees that they could buy a suit for less from John Bulloch Ltd across the road.
It worked. Dad was a charmer and knew everyone at “Eatons” from being in the Santa Claus parade for seven years. His first customer wanted 30 days to pay his account and dad said no. Years later when customers asked for credit he used to say, “If I could refuse credit to my first customer when I was desperate to make a sale, I have no difficulty refusing a credit sale today.”
His basic plan was dead simple and he never changed it for 40 years, “The best value in Toronto.” And don’t you love his handwritten mail-out ten years after he started in business. His basic value proposition was obviously paying off.