Business Advice Please... I've Had A Proposition
Business By LisaPeps Updated 21 Jan 2012 , 9:04pm by jason_kraft
I'll start by saying I have absolutely no business knowledge or experience so I really am like a fish out of water.
I've had a proposition from a work colleague, I'll list the facts below. My gut instinct is negative but I just want some business advice before I turn it down completely.
The main idea:
The main idea is that I start up a business with my work colleague as a "silent partner". He will provide the financial backing while I work at the shop. I mentioned to him that a coffee and cupcake shop which commissions wedding cakes would be best but he is swaying towards a cake shop which also sells equipment. His business knowledge is coming from a friend of his and he has just started up a physiotherapy business.
My status:
I currently work for the government, which means my job is safe for the time being. There aren't any redundancies or pay cuts in my job. I earn about £1100 a month and have expenditures of £700 per month in direct debits etc + living costs eg groceries. I currently live at home and do cakes as a hobby. It takes me 10 minutes to get to work each day.
The location:
The location he has in mind is Bourton-on-the-Water - http://en.wikipedia.org/wiki/Bourton-on-the-Water. It is village about an hour away from my home. It has a population of 3297 people. My colleague says there were approx 1 Million tourists who visited there last year though I can't find any information which supports this. This is predominantly a tourist village and so it is seasonal. The shop would be located on the main high street in the village where rent would be between £1000 and £1500 per month.
The risks:
I would have to leave my job. I have no business knowledge. I don't know what his motivation is to risk so much money. I don't know how the "profit" if there is any... would be split. I don't know how "silent" he will be. He has said that once he has made back his initial outlay plus say £100,000 profit then he is happy to value the business and sell his half to me.
My gut instinct is to say no, but I wouldn't want to miss out on an opportunity at doing something I love.
You'll want to put together an airtight business plan, chances are you probably won't make a profit or draw a living wage for at least the first year or two. That's not necessarily a showstopper if your partner can provide the funds to cover you.
If neither you or your partner has business knowledge that's a red flag unless your partner's friend is available to run the business side, help put together the plan, and write up the legal contracts if you decide to move forward.
The problem is that he hasn't told me how much cash he to put into the business, it's all well and good if he has 50k to put in but he earns about £35,000 a year + whatever his side business is bringing in but that is a new venture too.
He has said that his friend who has the business knowledge knows what she knows because she had her own business running a beauty salon. I have never met this woman.
I have a new car and loans to pay for so there is no way I can not have a wage each month.
IN MY OPINION you should run the other way. There is too much unverifiable information. What kind of business experience does your colleague's friend have? How is his new business doing? How much say would the friend have in running your business? Yes, it would be wonderful to have someone else foot the bill for a new enterprise, but I would have a problem being the one to do all the work and it sounds like your collegue doesn't intend to do any.
Jason gives wonderful advice so listen to him, and then go with your instincts. Whenever I have a big decision to make, if I don't know which way to go, I wait. The answer will usually work itself out.
as I was reading your post, I sensed your hesitation. I also had a negative reaction/ bad vibe about it. That doesn't mean it won't work out. I agree with previous posts. You need to put together a business plan to see how doable it is. Good luck!
The problem is that he hasn't told me how much cash he to put into the business, it's all well and good if he has 50k to put in but he earns about �35,000 a year + whatever his side business is bringing in but that is a new venture too.
He has said that his friend who has the business knowledge knows what she knows because she had her own business running a beauty salon. I have never met this woman.
Sounds like the three of you need to have a preliminary meeting where everyone outlines what their contributions to the enterprise will be. You should be able to tell pretty quickly if the business resource is trustworthy and knowledgeable or not.
Is a business in a small village which is seasonal sustainable? The average wedding cake in the UK is around £300. Would my idea for coffee and cupcakes be better for a tourist town even though at the moment I don't know anything about coffee shops?
I really think you have a better business sense than you realize. My dh and I owned a restaurant in a tourist/seasonal area and the off season wasn't difficult, but it was boring. You're right - - your smaller items are going to keep you going, so I think the cupcake/coffee shop is a better idea. However, the first thing you need to do is question, question, question. Don't proceed until you have ALL the information you want and you're confident that it will work. Make sure you have a viable business plan before you take even the first step.
Is a business in a small village which is seasonal sustainable? The average wedding cake in the UK is around £300. Would my idea for coffee and cupcakes be better for a tourist town even though at the moment I don't know anything about coffee shops?
A business in a small village with seasonal traffic can definitely be sustainable if the price points, product assortment, and marketing strategies are sound.
Given that much of your intended audience will be relatively transient you probably won't want to focus too much on cake decorating equipment, margins on equipment are much smaller and you will have a lot of competition on that front. Then again, offering decorating classes with limited sales of supplies would be an interesting way to differentiate yourself.
You will really need to research the demographics of the area and do a competitive analysis to determine which path (if any) would be the most profitable. This may involve putting together multiple business plans for each potential type of store.
As far as I'm aware, there are no other cake shops in the area. I definitely need to actually visit the village first.
I like the idea of teaching and maybe holding decorating parties.
How do you go about starting a business plan? What has to be in it to make it airtight?
Here is a good place to start:
http://articles.bplans.com/writing-a-business-plan
It sounds like you have a lot to think about and figure out but it's still an exciting proposition. The third person you mention, the friend of the 'silent' partner. Please figure out how involved she will be and most importantly, sit down and meet her! Personality conflicts from day one can't be fixed by the best laid business plans! The numbers need to be right and you need to feel comfortable with those you are going into business with! Good luck!
Just wondering how much 'business sense' it takes to think that tourist would want to buy equipment on their holiday. 
You'd have at least 1000 people that want a cuppie and some coffee before one of us hardcore cakers would find your store.
mommachris.
Need to clarify...
I'm not a hardcore caker.
Just assumed anyone that lists 'check out local cake equipment store' on their to-do list while on vacation is hard core. 
mommachris
Hi Lisa,
As you are going through this, email me (I don't get pm notices anymore) with any information that may not sound complete. I can also make sure you don't leave out anything on your business plan.
My biggest word of warning: If they don't come to you with a preliminary business plan, just a bunch of ideas on a paper, run. If the business person doesn't have a plan and know all of this information in advance, it will not work. Be very aware of the level of knowledge of these people. Also, what is the benefit to the friend? People don't do this for free. The friend could walk out of the situation leaving the two with no experience succeptible to loss.
HI, Lisa! I have heard that a new business is not usually profitable in its first year, therefore if you are considering this proposition you should at least have in savings for your own personal expenses 10 months wages (11,000.00 pounds) because usually at the beginning you are not even able to draw a salary. I have also heard this recommendation, do not ever leave a secure job,( if you leave your job , who is going to cover your living expenses, and how are you going to get there????) this does not mean to forget about opening a business just do not start it on a shoe string because it will be too stressful and your artistic side will suffer. You do beautiful work in your cakes! This is my humble opinion. I wish you luck either way
CIAO
another thing to think about is the fact that you would have to drive everyday over an hour to get to work and then an hour to get back home. This costs money for gas so that will be an added expense that you are not paying out right now. I too would not leave a secure job with out any sure money that you can live on. You now require 1000 pounds to make ends meet each month. What happens if the shop doesn't make that much after all the expenses (rent, utilites, supplies etc) are paid for? Who will be responsible for your salary? In this economy I would not leave a secure job for anything. JMO...
I asked my Dad what he thought last night as I've never been to the area. He said if I were to do this I would need to move closer to the area, it is not feasible to commute to there from where I live. It would cost too much. So I need to mention this to them and see if they are willing to look at other locations.
I don't have any business advice but would it be possible to get a 12 month leave of absence from your job if you decide to go for it? I know some government type jobs allow them. It would give you a bit of time to see if it was likely it was going to work out long term. You probably wouldn't be turning a huge turnover after a year but it should give you an indication of how well it might work and see how you feel baking etc full time. Even 6 months would be a start.
On the place and moving, would the proposed building happen to have accommodation upstairs that you could live in rent free (to you) for at least a year or two?
What happens if the shop doesn't make that much after all the expenses (rent, utilites, supplies etc) are paid for? Who will be responsible for your salary?
That's what the financial backer of the business is for -- if he can't come up with enough money to both start the business and pay a living wage for the OP until the business is self-sustaining then the idea is a non-starter. Alternatively OP might be able to keep her job and take on more of a consulting role while hiring someone else to run the shop.
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