I Need Some Advice Please!!

Business By tdybear1978 Updated 26 Nov 2008 , 1:18am by Juds2323

tdybear1978 Posted 21 Oct 2008 , 10:30pm
post #1 of 25

I have had my storefront and been in business for just over 2 years now. Things have gone EXCELLENT! Business has been good, as I was very scared when I started because I started this whole thing up with about $16,000 and pretty much faith in God that he would help me to do this. So, currently this year I have beat my last year number and passed them by over $10,000, so I consider that to be pretty good. Anyways - my dilema (sp?) My lease is up in August of 2009, I have really wanted to buy my own facility or build but not really sure where to start with all the financing stuff or if I would even qualify since I have not been in business for a real long time. I am currently located on a pretty busy intersection in a strip mall where me (and many other stores) are kind of hidden because in our parking lot towards the street there have been other buildings built, but even with this business has been good here. I just found out today that the owners of this strip are going to be building another small strip up towards the street (the front of the building would be facing the street) and would be very visible.

I have been going back and forth - when my lease is up should I try to move to a more "trafficked" area where I would get more exposure (and pay more $$ I'm sure) where I would also be renting or should I maybe just move into this new little strip that is coming in where everyone at the intersection would be able to see me and sign another lease and get more time under my belt so the bank would look at me more seriously? I don't know how the bank financing would even work, if I would even have a shot at it but I am being told that I have not been around long enough to get that size of a loan, is this right? Even if I were to move to a new place to rent I am going to have to look into a small business loan or something because I would have to do some construction on it and get some more equipment.

So, sorry this is so long - if you have stuck it out please give me your opinion. I know August seems so far away but I think it will be here before I know it and I will need to have a decision made sooner than that if anything is to be done.

thanks all

24 replies
-K8memphis Posted 21 Oct 2008 , 10:58pm
post #2 of 25

Got a question for yah--how much of your stuff is impulse buying? Are you putting in doughnuts & stuff? Or are you doing cake to order. But if you have increased ten thousand dollars since last year I think I'd stay put & watch it grow. Those new buildings will still be there in a few years.

I mean--what about a nice sign--like on the bus stop right out on the street--or get your vehicle wrapped with a big color design and park it out where folks will see and walk over to the shop--Y'know those big wraps they put on vehicles now--y'know--there's a lot more things you can do to attract attention without pulling up stakes at this delicate time in the life of your business and the life of our country--keep growing in the meantime. Do a bridal show or something y'know.

Best Baking To You, Cake-Buddy

MacsMom Posted 21 Oct 2008 , 11:08pm
post #3 of 25

My opinion is that buying makes better sense. Renting seems to be throwing money into the wind while owning a place is an investment.

You said that you likely have to re-model anyway, so why not use the re-modeling money toward a built-for-you store? Research different areas of town to make sure you can get the best price per square foot.

Getting a loan may be more difficult in these times, but banks will loan money to someone who is just starting out - I'm sure that having a year with increased sales you can prove on paper will help you the size of loan you are after.

You have clientele, so I wouldn't worry about losing business.

MacsMom Posted 21 Oct 2008 , 11:09pm
post #4 of 25

My opinion is that buying makes better sense. Renting seems to be throwing money into the wind while owning a place is an investment.

You said that you likely have to re-model anyway, so why not use the re-modeling money toward a built-for-you store? Research different areas of town to make sure you can get the best price per square foot.

Getting a loan may be more difficult in these times, but banks will loan money to someone who is just starting out - I'm sure that having a year with increased sales you can prove on paper will help you the size of loan you are after.

You have clientele, so I wouldn't worry about losing business.

tdybear1978 Posted 21 Oct 2008 , 11:22pm
post #5 of 25

I have to say that this location has been good for me but being out at the street would be really nice. But also another issue is that I have outgrown the space that I have, we are falling over each other and would really like the extra space. If I had to stay where I was I would make it work but would really like to expand. Just not really sure what to do at thiis point.

-K8memphis Posted 21 Oct 2008 , 11:29pm
post #6 of 25

$10,000 more than last year is not enough growth to buy or build a place. You can call the landlord now to fix the parking lot etc. I mean you're doing good but you ain't doing that good.

I mean there's a reason we as a country are in this bad financial fix as a nation--too many people for whatever reason got mortgages without being qualified. I mean they checked us between our toes etc. when we got our mortgage. I've heard that they didn't even ask some people where they worked!!!

So I'm on tangent but are you qualified to build and buy? I mean you said you're too new to qualify--there's a good reason for that. Wait.

Besides you don't want the best price per sq foot you want location location location is what you said right?

And I mean building is killer to your time and brain and money--do you have a bunch of people working for you that you have that much time to devote to building? $10,000 is great but it is a puny teddy bear to hug at night when you're working your bakery and keeping contractors from ripping you off by day.

Stay put. icon_biggrin.gif

So what is your business? Cakes made to order? Walk-in business?

MacsMom Posted 22 Oct 2008 , 12:21am
post #7 of 25

In's and out's...

Figure how much more your loan payment would be than the lease in the new location where you would be happiest.

What it boils down to is - can you comfortably make the monthly strokes and be happy with what you are bringing home.

CakeForte Posted 22 Oct 2008 , 12:46am
post #8 of 25

"The grass is only greener where you water it." and "Most businesses fail within the first 5 years." Just something to think about.

If you look at things from strictly business/ numbers perspective...trying to own or moving in a "better" location will equal more money going out, than coming in and it will take some time for the scales adjust.

When you own you have to take care of every problem and thus pay for it, whereas renting...the landlord pays for maintenance and repairs. So you are really taking on another/ larger liability (because money is going out) rather than gaining an asset. At such a critical phase in your business...is that something that you can handle this early in the game? Others mentioned the time factor and dealing with contractors too. That means that in years 3-4 of business, there will be some significant amount of time where you are NOT bringing any money in. Unless you plan to keep the lease AND build/ purchase at the same time. Which still means even MORE money going out and little coming in.

I think you should "water" what you have and cultivate to the best it can be. There is a lot you can do without being in a "prime" location and if you have a good product, people will go to you regardless of where you are.

luv2cake Posted 22 Oct 2008 , 1:09am
post #9 of 25

I have no experience w/ owning my own shop, but I do have a house that has been hard to sell. It is finally under contract and we can't wait to move. Whenever we do move, we will be renting a house, mainly because we did lose money on this one (couldn't sell it for a decent price) and we'd rather not be "stuck" again. This is a unique time in our economy and the real estate market. I always thought that renting was "throwing money away" and that buying was an "investment" but that was all proven wrong in our experience w/ owning our own home for the last 6 years. We would've been better off renting for these 6 years.

So, I guess I just say all that to say, that it would be my opinion to keep your current space or look into renting a better, bigger space. If you buy or build your own place, you are "stuck" with it until you can find a buyer. You might not be able to get out of it quickly if you should happen to need to.

Anyway, that's just my opinion. Glad that your business is doing well though - that's great! icon_smile.gif

tdybear1978 Posted 22 Oct 2008 , 1:51am
post #10 of 25

okay, so if I get the "owning" my own space out of my mind and stick with renting - do you think it would be a good idea to go for the larger space? It would be twice the size of my current space - in the same area as I am now but with more visibility and it would cost me about $1,000 more per month. Of course there would also be some $$ to prepare the new place so that would need to be taken into consideration.

Oh by the way, I am mainly a by order bakery. No donuts or anything, mainly cakes, cookies, pastry's and other then the few items (cookies, cupcakes) that I keep in the case, I am by order. I also sat down this afternoon and looked thru my numbers and according to last years numbers and my current year to date numbers I have surpassed last year by $16,380

baking Posted 22 Oct 2008 , 2:19am
post #11 of 25

If you own you have to pay property taxes over the building, If you rent you can deduct it from your revenue and pay less taxes.

-K8memphis Posted 22 Oct 2008 , 2:50am
post #12 of 25
Quote:
Originally Posted by tdybear1978

okay, so if I get the "owning" my own space out of my mind and stick with renting - do you think it would be a good idea to go for the larger space? It would be twice the size of my current space - in the same area as I am now but with more visibility and it would cost me about $1,000 more per month. Of course there would also be some $$ to prepare the new place so that would need to be taken into consideration.

Oh by the way, I am mainly a by order bakery. No donuts or anything, mainly cakes, cookies, pastry's and other then the few items (cookies, cupcakes) that I keep in the case, I am by order. I also sat down this afternoon and looked thru my numbers and according to last years numbers and my current year to date numbers I have surpassed last year by $16,380




Is that $16,380 profit? Is everything else the same as last year? Same amount of employees?

How big is your current space?

You seem especially driven to move and expand.

I have an entrepreneurial streak but, dude, I would batten down the hatches and hope to goodness I could do it again for a couple years in a row before I moved. Have you watched any news lately? I mean maybe you will be the exception to any rule and do great by expanding in this achy breaky economy. But I do not have the guts for it.

What about a walk-in out the back door? Would that free up some space inside where you can remove refrigerators? Can you free up any space above you for storage or anything to free up more space? Can you get one of those storage things to put on your property to help ease the squeeze?

Do you really feel you have enough going to move? Did you start out in a space too small??

Ok look. $16k in 10 mos is $1,600 a month. In your new place, your rent just doubled and your utilities probably will too. You might need another employee to handle the increased workload. So you do the math--is that more than $1600 a month?

It is premature. You might just make it, but you might not. Big risk.

Make a list of all the pros and cons. And think about it for 18 more months. icon_biggrin.gif

tdybear1978 Posted 22 Oct 2008 , 2:54pm
post #13 of 25

Okay, couple of things - my lease comes up for renewal in August, I am almost sure that she is going to ask for more money (the tanning salon down the strip from me got raised almost $800 when they came up for renewal). I don't think that I started out in too small of a space, the one that I am in is 1,300 sq.ft. and I have it packed to the max I think. Landlord won't let me go out the back door for a walk-in. As far as everything else being the same as last year, No, I did not have an employee last year, it was just me all by my lonesome haha.

Another thought, the new bldg. coming in (which is in the exact same area as I am just with more exposure) the size of the spaces are pretty much the same size as what I have. I was thinking of how much I could if I were to rent 2 of them - that would give me a very nice size kitchen with room for a nice size lobby and space for a "consultation corner" and with room to still grow a bit, this was my original thought. But also what if I just went for 1 of the spaces (same size as now) and just had the layout differently to allow for more room. The new space will just be an empty shell and I could put walls where ever I wanted them to be, my current space already had walls up (in kind of weird places) and I just had to work around them. I mean looking at my space now, I can see how I could try to free up some space but could only accomplish that by tearing down many walls and then redoing partial areas of the floor and then putting the walls back up in their new place. The price comparison of the new place would be about $200 more per month and then I would have the cost of the normal start out stuff like buying and laying my floor (which we have family in flooring so get a good price and then I laid the floor myself where I am) I currently have a LARGE banner out in the front of our shopping center and lots of people see that but I still get people often who come in and say that they did not know I was here haha. I don't know, I think I am just throwing some thoughts out there.

K8memphis, you are a bit discouraging haha but are bringing up points that I think are very important to also think about. what do you think about what I have brought up. As far as moving goes - I don't think that will hurt me business wise, my regular people will still know where I am and it also opens me up to more eyes. Staying where I am will save me the money of getting the new place ready. But I have obviously have what I need to function (oven, mixer, pans, etc.) I don't know, what do you think

-K8memphis Posted 22 Oct 2008 , 3:07pm
post #14 of 25

I think that it's premature especially since your product is not an impulse product. *Knock out some walls. You need that money for wiggle room--invest it in advertising. Try to rearrange. You'd be getting the same size place???

You can get targeted exposure in many other ways.

So you added one employee and have an increase of $16k--this ain't profit is it--it's their part of the extra work they are doing--which their extra output for you requires you to pay them a bunch too.

I think you are very ready mentally and not ready financially.

Could you scan a floor plan, show plumbing and electric, floor-standing equipment, tables, counters and we could brain storm with yah?

1,300 sq feet??? <faint faint> That's a lot--dang those walls huh.

Maybe you can negotiate with the landlord and get her to spot you for improvements* you make?

tdybear1978 Posted 22 Oct 2008 , 3:28pm
post #15 of 25

Yeah, I am at a loss with the landlord, they don't help out much around here lol. I don't know - am I just looking at this wrong? Would there be a real risk in moving if I am only putting out an additional $200 per month in rent? Being the same size I at least have an idea about utilities. Having opened this place 2 years ago I have an idea as to what my floors and walls will cost and then it would be a matter of moving all my stuff over.

I have looked into moving the walls and it will cost me around $2,200 (everything has been nailed into the floors so they would have to be almost destroyed to get out) and maybe about $150 to get the floors fixed since I can do that myself, where (in the new place) it will cost me about $1,200 to have walls put in and about $800 for the floor.

I know it sounds like I am really pushing for the new place haha when I get something in my mind I try everything to justify it so that is why I like to bounce my thoughts off of other people to see if I am just excited and naive or if it can actually work. In my head the 2 spaces would be awesome but yeah you are right it would be twice the rent and utilites as now and at this time I THINK I could do it but it would be really really tight. But again, in my mind, going to the one space with just an empty shell the possibilities seem so attainable and not at a HUGE price especially when compared to what it would take in my current store to get more space.

I also think that if I were out at the street with more exposure then I could get more walk in business. Right now we don't have a lot of walk in mainly because the other stores around are not really like shopping stores so lots of people don't really come in here to even see me. But out at the street they would see us just from driving by and then maybe I could do more impulse buying. Currently I keep about 3 dozen assorted cookies, 2 dozen cupcakes and about 2 dozen iced cookies in the case and we usually sell out of those everyday. OH and also some breads.

Auryn Posted 22 Oct 2008 , 5:23pm
post #16 of 25

if I were you, I would stay were you are for at least another year.
You are doing well were you are and you are developing a customer base.

Street exposure isnt always a big deal. Some of my favorite stores are really far away (like a 45 minute drive) and impossible to see from the street.


I would take that money you want to spend and spend it on advertising.

Just to give you a quick example, I work in a completely different industry but its the same dilemma.
We have been in the same building for almost 8 years. We outgrew it in year #2 but we never moved.
Our competition grew quickly and moved into a humongous facility and hired 100 new employees over a 3 year period.

Now that the economy is taking a nose dive, we are still moseing along w not too many worries, the other guy had to send half his people home 2 weeks ago and his production is down 50% but he still has the overhead of the huge new building.

If I were you I would stick it out where you are for a while longer until you have some real capital built up behind you.
Its a lot easier to sleep at night with a good chunk of change in the bank and having to worry only about having enough space, rather than having all the space you could possibly need but not enough money to cover your expenses.

tdybear1978 Posted 22 Oct 2008 , 5:30pm
post #17 of 25

but is there really a risk when I am staying in the same area and only putting out about $3,000. my current "regulars" will not be confused as I am still in the same parking lot and "new"customers will have more visibility of me. I am going to draw up something and put on here to show how our shopping center looks

tdybear1978 Posted 22 Oct 2008 , 6:04pm
post #18 of 25

okay, here is the layout of my shopping center
LL

-K8memphis Posted 23 Oct 2008 , 2:57am
post #19 of 25

You are dividing your business interest. You make your money in special order cakes yes? People who want special order cakes will find you. 16,000 more of their dollars found you this year. If you bake it they will come... and spend.

If you move to get more exposure to sell more muffins and cookies in impulse purchases what do you have? A few dollars in muffins and cookies plus somebody devoted to baking them fresh and another somebody standing at the counter selling them.

Local bakeries all over the country went belly up because cookies and muffins and bread will not the mortgage pay.

There's really no reason for you to move except you want to real bad. I mean go ahead but I never would in your shoes.

CakeRN Posted 23 Oct 2008 , 4:46am
post #20 of 25

You said you thought your rent would increase 800 dollars more in August. If you go into the new building will your rent increase only be 200 more than it is right now or 1000 more than what you are paying? If you are only going to have a 200 dollar increase over your present rent then I would say move but remember too that you would have to really plan the move so that you are not losing any business or have to be shut down for any length of time during the move. If the same amount of space could be divey'd up better in a new location then I say go for it. Again write down the pro's and cons of both places. I would not look at buying or building at this stage of the game with the way the economy is. If later you want to do that just make sure you are putting your profits away and save up a big bunch of cash for when the economy gets better.

wespam Posted 23 Oct 2008 , 11:54am
post #21 of 25

I think the answer lies in prayer and waiting upon our Lord to guide you. He knows your needs and hearts desires and wants to prosper you. When we depend on Him we know that we are in His perfect will and cannot fail. Jermiah 29:11.

I would stand back and take a really hard look at what you have already, a few dollars here and there to improve your space and give it a new look may be a better answer right now, decide what direction you want your business to go and seek Gods will. The building does not make a better business but the heart and soul that dwells within. Pam from Bama

SugaredUp Posted 5 Nov 2008 , 2:55pm
post #22 of 25

K8memphis is right in that walk in business shouldn't be your main motive to move. I think nowadays people are spending less money on those little impulse buys. They are watching their money more closely. Also, you'd have to sell a lot of little bite sized pastries to make up for the money you'll be investing. I think if things are going well for you now, stick it out another year. Don't worry about jumping to move right away. More than likely, most of the businesses that do take up those new spots won't last anyway. You'll have the opportunity to move again later. Unless you KNOW it's the right move, stick with what is working. That's my advice...

CoutureCake Posted 5 Nov 2008 , 9:32pm
post #23 of 25

I have to say that I wholeheartedly agree with K8 here!!! Right now is NOT the time to make a move from a numbers crunching perspective. What happens when no one takes up space in the new building. I also think you need to negotiate the rent increase because the economy is going south and even though the tanning parlor's rent went up doesn't mean that you can't negotiate better for your space given its location and attraction to the mall. Granted, the best place for a bakery is right across from the gym, but anyways...

What you need to do is start saving up $$$$$$ for building or purchasing your own facility. Realize that there are a lot of costs that are going out from that rent you're presently paying that you'll have to pick up with ownership (lawn mowing, parking lot upkeep, building upkeep, etc.). Yes, ownership is always better than renting no matter who or where you are. OTOH, you've got to have the $$$$$$ built up for the investment and live with what you've got for the time being, put the money you would spend on remodeling into your savings for building and renovating a new space that you own. It's a lot easier to head to the bank with $30,000-40,000 saved up and asking for an additional $40,000 loan than it is to ask for a $80,000 loan with $10,000 in profits from one year... Or better yet, not even having to go ask for that loan and being able to pay good ole' CASH for the purchases...

I'm also not wanting to be Debbie Downer here, but given what the economic times are pointing you're far better off to have a 0% interest loan than you are to have one with 30%, or better yet, have an interest gaining savings account or CD that will pay you to be saving that money up for the transition to the new location so you can have what you want without having to plan to make a major overhaul shortly after getting into the new space. Use what you've got for now and keep the business building.

Good luck!!!!

queenarmadillo Posted 25 Nov 2008 , 12:04am
post #24 of 25

I would not look at this as "can you get the money for your own place" so much as "would you make more profit in your own place". Once you have sorted that out it will be much easier for you to get the money if you need it. Many people with businesses get distracted by prestige and size and ownership. rather than profits, but it is profits that pay the bills and keep your business going and a pleasure to run in the long term. Are you currently operating at full capacity (space-wise and time-wise)? If not why do you need more? If you are, advertising is useless to you as you cant handle the additional business, and do need to expand.
You could also perform a risk analysis on moving to the new premises:
-once you take on a mortgage/rental contract, you have to accept that you may be tied in for the full life of the contract, and in the currant climate a similar length of time on a mortgage if you cant sell.
- work out what your average profit per cake is, and use this to figure out how many cakes you would have to sell to cover rent in each scenario. How do these figures compare to the realistic sales projections you have made for each location?
-another exercise you can try is to assume that next year your sales will only be the same as in the current year (which is likely to be considered a fair standard, unless you have solid reasons to assume your growth will continue). Does this number cover the higher fixed costs at the new store? What about if you halve the number to reflect a potential impact of the recession? Are you still managing to cover your new store costs? If not, consider whether you can then support the business from personal funds until it regains profitability. What if your order figures show the same increase as last year? Can your old store contain this? (If yes, then there is not really a reason to move yet). If not, consider which of the moving options will show greatest profitability.

For my advice, I would say that you will have to sell an awful lot of small impulse cakes to make up for the additional cost of the stores. For any kind of larger purchase people are willing to go a bit out of their way, and I would bet that advertising space in the potential new store area is cheaper than the rent increase. It is also a non-fixed cost, as if it does not pay off you can just stop advertising, and is therefore less risky.

I would be very reluctant to move stores until you know you are turning away sufficient orders due to your lack of capacity that even with the increased fixed costs, the new store would actually be more profitable.

Juds2323 Posted 26 Nov 2008 , 1:18am
post #25 of 25

One other thing to consider is the economy. When the tanning salon renewed what was the market. Right now I am working with the landlord for the company I work at here in california - office space. But the market is going down. So rents are dropping. The landlord quoted us his asking price at 3.15 sq ft for the space we want to move in and I had spoken to local commercial real estate company that works with tennants to negotiate leases. I got the lay of the land and found they were asking about a buck more than the area. Once I told them we were considering looking else where they started talking lets make a deal. Since the market is expected to continue to slide for the next year. So, I would suggest looking around when negotiating your lease. They want top dollar you can say you need improvements etc. and work them into the deal as well.

HTH

Judi

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