advice on taking on our first premises

[Ra5ax]

Hi all, We are a small business based in peterborough providing bespoke interiors for retail. We have been running since Jan 15 and seem to be doing quite well, I believe we are at a point where we need to look at low cost workshops but im very nervous on the cost of this, I have found a perfect warehouse / workshop that we can rent at £500 pcm but then when i look at business rates etc this is coming up to around £1000 per month. My concern is that although the business has turned over £100k in the first 6months and we have projects looming of circa £170k with profit at around 21% Net as we are (no overheads) I dont want to put the business at risk.

Unfortunately the way are business works means we pay out alot upfront on each project and we aren't able to get all of it back until after the project completion. so our cash flow is very up and down, For instance we are now owed £15k on invoices due however we are at £1k cash at bank with a £15k overdraft available. Being the nervous type I dont want to eat into the overdraft unless its really necessary and im wary that although a building will provide a benefit it wont be used on a daily basis. We are also at a point where I could do with some support in the office (currently its only me working in the business) but again this is a monthly commitment and I dont want to risk the cashflow to be able to do this. Our average payment out per project is around £6.5K.

Has anyone got any thoughts good or bad on this dilema am I just being too nervous or do you think I am right to be wary of doing this.

Many thanks

Andy

 

[jamesbaldock]

There's a large business local to us that does all sorts of building and maintenance work for schools, local council, county council etc. They are quite big and their way of keeping rent cheap was to rent a small piece of land and then buy a couple of old shipping containers. They transformed them (with the men and skills that they had) into a workshop and office.

Not ideal for everyone but perhaps a cheaper way to get going?

 

[Ra5ax]

thats not a bad idea, I would imagine initial outlay was a lot higher but then the monthly rental was dramatically reduced.

Ill take a look into that,

Thank you

 

[MOIC]

For the above you need to rent land as well as buying or renting and delivering the container. You would also need to think about power points, lighting, security etc.


It's evident from your post you need additional room to expand your business as well as additional (part time only) staff to help you with your office duties.

However, it is also evident you do not have the cash to facilitate this expansion.

You need to do either (or both) of the following:

1. Get your customers to pay quicker (offer a very small discount)

2. Get a small loan to facilitate the expansion and not to put you under pressure financially with working capital. (Your turnover seems to justify this)

3. Raise your prices to cover the additional costs you will have, including loan fees as well as staff.

OR

Wait until you have sufficient cash flow to facilitate the expansion yourself.

As your business progresses, so will your expenses, so it's impotant to ensure your profits increase to allow you to facilitate expansion and to keep investing in your growth.

Ensure you find the right premises for say the next two years only, without over committing yourself.

Good luck

 

[Ra5ax]

"my Office in China" Thank you you have hit the nail on the head with what my concerns are, I dont want to get a loan to facilitate this as I really want to keep the lending on the business to an absolute minimum, We do have another option which I forgot to mention in the last post but our current warehouse (paid per sqft used) is willing to give us a dedicated space where we can both store product and test build product, this comes in at £120 per month and is very flexible, the downside is that it really doesn't look professional to the customer as its an old airfield hangar and we would only be occupying a part of it.

I think you may be right that we need to look at Part time help and then maybe the route of this smaller more flexible space until we build the cashflow back up.

I tend to work to the rule if the money isnt in the bank to cover 12months of a contract of any sort then I try not to do it.

 

[MOIC]

Your current premises at the airfield hangar sounds ideal, especially with the flexibility they are offering.

Look no further.

I don't agree that it will look unprofessional.

You are artisans and manufacturing your own products, it will add to the character and can be an exciting place for customers to visit.

Stay put (ensure all your tools & machinery are safe and secure)

 

[KM-Tiger]

I don't agree that it will look unprofessional.

You are artisans and manufacturing your own products, it will add to the character and can be an exciting place for customers to visit.

Agree with that.

The clients you want to have will judge on what you can do, not whether you have flashy premises.

 

[MOIC]

Just to add, I had a wood turning business in London and ALL the customers liked the idea of seeing the machinery, tools, hand turning being done and sawdust all over the place.

It was a factory, felt like a factory and that's what people are happy to see and gives them the knowledge they are buying direct from the manufacturer.