SOMETIMES IT IS BETTER NOT TO START
I really wish I could advise some potential clients NOT to start a business. There have been so many times where the first briefing process has revealed that the prospect is about to quit their day job and pin their house and entire financial future on a business idea about which they’ve done little to no research at all. I get approached all the time by passionate, excited people with gorgeous ideas for cafes, retail stores and all manner of offering but who have no idea how many sales they’ll have to make to re-coup their rent, fitout, start-up costs or wages. Generally they have no experience in the industry that they wish to enter, they have not written any sort of budget, or if they have then they’ve based it on guess work and have come up with seriously inadequate figures.
With the banks tightening their purse strings I had hoped that it would become harder for poorly planned start-ups to get loans and whilst this has been the case in many instances, I’m still seeing people ploughing forward anyway, with or without finance. To further compound the problem, these prospects are leased spaces by shopping centres and private lessors who take no responsibility for scrutinising the tenant’s business plan or financial situation.
The only thing I can do is ask the difficult questions such as: what is your budget for construction? How many staff will you have? How will you coordinate takeaway versus eat-in orders and manage congestion around the POS counters?
I try to give my honest opinion on the inadequacy of fitout budgets vs the prospect’s brief but this is often received negatively as ‘raining on their parade’. Sometimes I find other people who seem to have the goods to begin with, specifically request expensive design details despite my warnings, and then freak out when the fitout quotations come in. Frequently their next reaction is to indiscriminately cut the guts out of the design, marketing, displays, furniture, lighting etc until there’s nothing unique or attractive left and their beautiful dream lies in tatters at their feet. Those who haven’t budgeted realistically from the start always end up cutting off their own nose to spite their face (as the old adage goes).
My advice to you then: If you are considering starting a business and need design and fitout then do your research first and be prepared to spend money. The money you spend on setting up and marketing a start-up business is an investment in the business’ future success. If your over-riding, number one aim is to spend as little as possible then you obviously have little confidence in your business’ ability to turn a profit and recoup the initial set up investment. Sure, you need to control your budget, set parameters and get value for your dollar but how can you expect customers to hand over their cash for your goods and services if you don’t even have the confidence to back your own business from the start?
Spaces that cry poor speak volumes about their owner’s fears. A hesitant looking business will only attract hesitant clientele, if anyone at all. You can buy the cheapest of everything and have your fitout completed at a third of the average cost, but that can be a false economy if you can’t attract customers. Far too many retail and hospitality businesses go bust within the first 12 months.
They say that a failure to plan is a plan to fail and likewise a failure to invest with confidence in your business will illicit a similar reaction from the buying public. I encourage you to ask the best operators in your industry about what they spent in setup and how they got where they are today. Ask shopfitters and designers what the average prices are for setting up the type of space you’re after. Get advice from a good solicitor and accountant. Enrol in a reputable business management course and attend government run seminars. Speak to specialist consultants in your industry and be a sponge for information as you write a detailed and realistic business plan. Surely it is better to realise early on that you don’t yet have the resources or that your idea is flawed, than to plough blindly into a potential financial commitment/risk that often surpasses the scale of buying a house?
Owning a business can have many perks and be extremely rewarding if it is done right. Please give your dream it’s due and don’t rush in. Ask the questions, find the answers, go in with your eyes wide open and all contingencies planned for. And then breathe easy and enjoy the exciting journey towards becoming a successful entrepreneur.