When the GFC hit, businesses everywhere were struck by the sudden and intense impact that the worldwide collapse had. But for Paris Cutler and her custom cake business, things hit particularly hard when she had no back up in place.
Planet Cake is an established and well-regarded brand, gradually built over the last eight years.
“Planet Cake has since expanded its business to include Australia’s largest cake decorating school which attracts students from around the world and has written four cake decorating books. In 2011 we filmed our first TV show Planet Cake hosted by Lifestyle Food network; the show became one of the networks highest rating shows for the year. Planet Cake has created cakes for A-list celebrities such as Nicole Kidman, Celine Dion, Rihanna and Lady Gaga as well as for television and many magazines. We have also created a host of amazing ‘stunt’ cakes the most famous being a realistic replica of the Sydney Opera House for Australia Day 2011, which weighed over 1.3 tons and required 32 cake decorators to make,” explains founder and owner Paris Cutler.
However things for Planet Cake haven’t always been so rosy. When the global financial crisis moved into Australia, suddenly people weren’t spending as much on luxury items like designer cakes.
“Within a month we literally went from 40 cakes per week to under 10,” says Cutler.
“We had just recruited extra staff and had huge expenses, I had invested most of our profits in expanding and developing the business, so I was blindsided by the GFC and had no financial buffer.”
The sudden drop in sales was so dramatic that Cutler believed the business could potentially go under.
“In essence I could not pay my bills and that’s how businesses go under, they run out of cash and it can happen very quickly.”
“I felt that I was entirely responsible for the crisis, if I had not been so foolhardy reinvesting our profits in expansion then we would have had a healthy buffer, I felt and I still do, that my decisions had taken us to the wall. It was a very lonely guilt ridden time. I remember sleeping about 2-3 hours a night during this time and working 7 days a week,” recalls Cutler.
In order to save the business, Cutler had to make some very tough decisions.
“I had to cut costs and that meant cutting staff. It was probably one of the worst things I have ever had to do, retrenching great staff who have always given me 100 percent.
“Lying in bed at night trying to decide which staff you will keep and which ones you will let go, I shed over 40 percent of my staff in one week. It was terrible. I promised myself then that I never wanted to go through that again.”
In attempting to turn the business around, Cutler needed to focus on what made Planet Cake profit.
“That was the cake school, which was fairly undeveloped in 2008 when the GFC hit. We turned the focus of the business to education rather than cake production and this ultimately saved us. Throughout the GFC and in the current economy, people still spend money on their hobbies and the school is now our main revenue generator. So our business evolved from being famous for our cakes to now being the number one educator in the industry. In essence I realised the real value and profit in the business was in our intellectual property.”
Knowing this, and focussing on keeping the courses running, meant that Planet Cake could weather the storm and go on to get bigger and better. Cutler has these three top tips to help other businesses weather their own storms.
- Don’t freeze or go into denial, you must act quickly. Recognise the problem for what it is- waiting a few weeks can be the difference between success and failure.
- Face the fact that you will have to cut costs and it will hurt like hell. There is no getting around this, the longer you leave it the worse it will get. Rip it like a bandaid and move forward; ultimately you will feel relieved.
- Don’t flog a dead horse. Work out where the profit lies in your business and what is selling and focus on it. Anything that’s not selling or is not developed to a point where it is making a profit has to go- it’s that simple.