The Failure Shop

Photo by Jon Stow

Photo by Jon Stow

There is a new business in our urban village and I really hope they are successful. The owners have taken a shop at the end of the “main drag” and we have a new florist. It is quite a good position for passing trade. I bought a pot plant from them which was on display outside the shop, and perhaps the position will suit a florist more than the other businesses that have occupied that shop. Oh, yes, there have been quite a few.

It is important for any new business owner to do their “homework”. How much is the rent? Will the turnover sufficiently exceed the running costs to make a good enough profit for a “living wage” for the owners? How well connected are they to encourage visitors from outside the village to pick up the telephone and order from them? Have they thought about networking? Can they crack the corporate market and supply flowers to office reception areas? Any long-term contract can be very lucrative for a florist.

Being specific, the shop now occupied by the new florist has previously been occupied by two different estate agents and by a bookseller, all within the past five years. One would have thought that passing customers or “footfall” might have been quite good, but those businesses have gone.

I can see one big obstacle for our newcomers. There is already a very well established florist in the village by the entrance to the main shopping car park. That florist is very good, and my wife and I have bought from them on many occasions. Our customer loyalty tends to be towards them, naturally enough.

I do hope there is enough custom locally to support two florists well, so that “The Failure Shop” no longer has that title in my mind. The owners seem like nice people, and I wish them well. They will have to go several extra miles, but maybe they can.

Don’t follow your dream? You can if you plan it.

 

Life by the sea

I am all in favour of dreams. I have them myself. The trouble is that as a tax and business adviser, I have come across a lot of shattered dreams.

 

Life by the sea

I was reminded of this again the other day when watching a re-run of a Relocation, Relocation programme. If you haven’t seen it or don’t live in the UK, it’s all about people moving from one part of the country to another, as the title suggests.

A couple were looking not only for a new home in the South-West of England, but also for a cafe-bistro to run. It sounded a lovely idea.

As regards the cafe they were looking at, the owners wanted about £70,000 for the business, which might be roughly what their profit was, plus about £200K for the premises. £70K sounds great doesn’t it? However, the couple would have to borrow the money. It struck me that they could well end up paying about £20K in interest. Had they thought about their children’s childcare? Running a cafe is pretty full-time. If they weren’t going to be on the premises all the time wouldn’t they need more employees to cover the childcare times?

The thing is, the idea of running a cafe in a seaside location does sound idyllic, doesn’t it? It just needs planning and adjusting not only lifestyle in terms of time, but in terms of costs of living. Do they want their luxuries or do they want a comfortable life without pressure to spend on extras? These are questions that have to be asked.

Déjà vu

Some years ago, I saw another couple who had started a cafe in a seaside town, because it had been their dream. They really hadn’t thought it through. Yes, there was plenty of trade passing, but not so much coming in, because there was a cafe in every other shop along the main drag. The rent was extortionate, and they were trying to supply full short-order hot food. That meant more electricity and gas, but the few times they were full up, they had simply not enough covers. In small premises a cafe-type business is better supplying cold food, sandwiches, rolls and cakes with a choice of eat-in or takeaway (or carry-out). The turnover and therefore profit would be much higher. This couple went out of business and lost their savings because they had not done their homework.

Planning the dream

I am all for following the dream. It’s just that the dream needs a plan which involves adding up the costs including the rent, the utilities, the business rates to the local authority and also employee costs. Then think about how much you need or expect to draw out of the business to have a good life. Then look at the expected takings. See if you find out how other similar businesses in the area do.

Ask the previous owner about takings and profits if it was a similar business and check that the accounts they show you make sense. Get a second opinion from a professional. I have been asked to check the accounts produced by a vendor and could see that they were complete fiction. Don’t take it all on trust.

Do follow your dream. Just plan it first. Take advice. Write down the plan. You might have to write one for the bank when you need a loan, but write a proper plan for yourself. One that makes sense. Not one to try to convince yourself it will work if you know in your heart it won’t.

If after you have thought it all through properly and taken the advice you need you know your dream is there for the taking, grab it and hang on to it.

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Someone told me

HP Printer
Image via Wikipedia

I heard those magic words while doing a little shopping the other day after running my breakfast networking meeting. “Some told me…”.

Of course that is all I heard as I walked by, but I do worry how damaging gossip can be in a business sense. I always think we need to do our own research. Often a bad customer experience may be very isolated in terms of a business’s overall delivery. It is when things go wrong that people talk about the problems much more than when they receive a great service. Ironically, very often a generally exemplary service will start to be taken for granted so that when there is a minor glitch people complain far more than they would if the general service were fairly average but in line with expectations. Hence people are less likely to complain about the mail service merely because our expectations have declined over the years. Our postman is a nice guy incidentally and I wouldn’t want him to be upset. I don’t blame him.

I like Dell computers. I have three. I have always had very good customer service and support from Dell. That doesn’t mean we shouldn’t do proper research because we have a responsibility to our business and ourselves.

I bought a Dell branded printer a year or so back. I hadn’t done my research. Someone told me he liked his. Maybe his usage of it was very light. The printer was a real dog and far too expensive to run, plus the fax facility never worked reliably. Yes, I know there are alternatives to a fax line but that’s another matter.

I should have found out the printer was made by Lexmark and if so I wouldn’t have bought it. I have now a new HP printer. I had always previously had HP printers. They have been reliable. When one went wrong shortly after I had it, HP replaced it in a couple of days.

If someone told us that someone told them, we need to check the credibility of the story and the context in which it has been passed on. We cannot rely on tittle-tattle re purchases we make because we may not make the best buying decision. We should do our own research and listen to those we trust for recommendations.

I got it wrong with the Dell printer. I wouldn’t hesitate to recommend their computers. Have you made a buying mistake as I did through lack or research or because someone told you or you told yourself?

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