I see many small business owners during the course of a year. Some are ongoing clients and others need advice but not a continuing service.
In the current economic climate there are many people who have been made redundant. Some have received quite substantial redundancy payments in recognition of long service, or they have been able to draw down a considerable amount of cash from their pension pots. Many recognise they will not be able to get another job if they are over 45, or at least they will not get another job they will feel comfortable taking.
Fields of dreams
So many of us, and I include myself, have had dreams of running our own business. We may have some cash from our former employer. Now must be the time to start a business, surely, if we have just finished employment? Even with a recession, there must be an opportunity to realise those dreams?
Often there is a niche if we can just find it. Perhaps it is something which has not been done before. It may be something which can be done from home, such as drop-shipping in a particular specialised product. Such a business is capable of expanding considerably to the extent that it may need premises, but the business will not be limited by the premises themselves. If we have the knowledge and skill, we can make a lot of money.
However, some businesses are limited by the premises; that is the shop or retail outlets they have. In particular, catering businesses have particular challenges. If a café is in a busy thoroughfare, the rent is likely to be high and the competition fairly fierce.
I was once consulted by the owners of a sit-down diner in a seaside town, but with many other cafés in the immediate area. There were very obvious problems:
- The rent was considerable because of the location and the size of the unit.
- The heating bills in the winter were large because of the size; they were on two floors.
- They were not getting in enough people because of the competition and because they were not better or different from the others.
- They had to employ a number of staff because of the requirements to wait on tables.
The café was losing money fast and their current model couldn’t survive. The solution I offered was to sub-let their first floor as an office for which there was already planning permission in place, and to get rid of most of the tables and (unfortunately) their waiting staff. They needed to run as a fast food and sandwich bar for the many people walking past. There was only one potential competitor doing that.
Sadly the café proprietors ran out of money before they could follow my recommendations and they went out of business. They lost their life savings. It need not have been that way if they had thought in advance about their business model. They didn’t need a sophisticated plan. All they had to do was to add up their outgoings and do some research as to what sort of café would have been most lucrative with a higher margin. In busy business and seaside streets that is generally sandwich bars and hot food takeaways. At the seaside you can combine the two if you do it right.
Planning is everything, isn’t it?
Photo credit: seq Jehane