Rent Arrears

I took on a shop January 2011 for a 5 year lease. I didn't know the area but it is in a good central location and was described by the agent as 'a busy shopping parade' on the spec. I soon learnt that it was going to be hard as the footfall was extremely low. So I have done my best with service, products and prices. The first years trade has been OK and slowly improved and I feel positive it could continue to improve. Unfortunately Christmas trade was not as successful as I had hoped and now (January) has gone completely dead and the bills are flooding in and I can't pay them. I paid half the rent due as I felt this was a priority as well as business rates. But the agent for the landlord has now sent letters now requesting the payment immediately... I just don't have it. I have written to them but they are not interested, they want their money now before they take further action. I'm so worried about it all. This is my only income aswell so before long my rent at home will fall behind too. I know I could consider getting the agents to put the lease on the market but the shop had been empty for a year when I took it (maybe that should've been a clue!) so it may take a while if I chose this route. I am looking to start selling online in the next month or too to bring in extra income but I'm worried its too late. My rent arrears are £1950 and I'm currently taking £50/£100 a day! Any advice would be appreciated.

 

[Banned]

Speak to the landlords and explain that hopefully you will be able to get back on track in February. January is always very slow for most retailers, and this year seems worse than most.

The key is to be honest and not over-optimistic as to how much and when you can pay.

What is it you sell?

 

I have a cook shop... I sell quality bakeware, linens, kitchen knives etc. Unfortunately since we opened a much larger cook shop opened in the center of town which isn't going to help. Other shops around us are struggling too but the ones that are doing well are specialist ones. Therefore we are going to become a specialist in kitchen knives and accessories (sharpeners, boards etc). We already do knife sharpening and other related services. Over the last year, looking at our sales and speaking to customers, there could be a market for a specialist knife shop where people can come for advice when making their choice. Unfortunately we can't always compete with online prices but I think there are enough people out there that appreciate customer service and want to speak to somebody. We need to make people come to our shop as we can't really on people coming to this part of town. Its very sad actually, when you speak to traders that have been here years they all say the street used to be amazing, every shop was occupied by an independent business and there were plenty of shoppers etc.

 

[mhall]

I don't suppose you took the lease in the name of a Limited Company instead of a Sole Trader?

 

I don't suppose you took the lease in the name of a Limited Company instead of a Sole Trader?

Unfortunately not, I had to put it in my own name, they wouldn't let me do it in the company name. I wish I could've done as this would've taken the worry off a little. I would hate to fail. I work really hard and will keep trying but it isn't just closing down you have to worry about it's the fact that I will be my whole life paying for a shop lease!

 

[Banned]

I've not much to add to what I have already said - I know little about kitchenware!

I will say though don't worry about competing with online, and do follow that niche and keep promoting the knife sharpening and related services as it's not something I would imagine is done on the internet, and it gets customers into your shop.

Bar that good luck and let us know how you get on.

 

[mhall]

I am sure Ron will be here in a moment telling you that you should only sharpen knives on the internet !

All you can do is try not to worry- the Landlord (or rather his agent) is flexing his muscles but the bottom line is that he won't have anyone lined up to take over. If he comes down heavy there is not a lot you can do but hope and pray that he thinks chasing you for the outstanding money is a waste of time.

In the meantime do as Banned suggests- be honest with them and try and make a go of it. We all make mistakes and I am sure you certainly won't make them again (including letting them bully you into having a lease in your own name).

Retail is a roller coaster and it's horrid at times (most of the time thinking about it), but at the risk of sounding glib, you will only fail if you give up. I should counter that by saying you should also know when to walk away - or run (thank you Kenny Rogers!)

 

[deniser]

Do you do much social networking such as blogs and Twitter? Twitter is great for getting the word out locally. Have you linked up with local food businesses to supply kitchen items to restaurants etc? Have you considered hire of glasses etc for functions?

 

[AndyBlue]

I would hold firm and be really honest and speak with the landlord himself not the agent. You mention that you rent your home which means that you probably have few assests, and if they force you to close the shop where will your income to pay the lease come from ? Therefore they are better to work with you to keep getting something, than force you to close, get nothing in rent and if you at worst went bankrupt to alleviate yourself from the liability they would also have to pay the rates you are currently paying. So all in all they are better you being there paying a little than not there paying nothing. The agent is just probably flexing his muscles at the minute to see if you are just holding rent back or genuinely can't afford it.

 

[BoBo_184]

The economy is tough, landlords know that... as you say, the shop had been empty for a year before you took it... after you're gone, it is likely to remain empty so you can try to negotiate something with the landlord and try to lower the rent (IF you still want to keep the business)

If they force you out, the shop remains empty, the landlord gets nothing... if they keep you in, even if you can only pay them half the normal rent, it is still an income they wouldn't otherwise have...

 

[Thinehost]

In the meantime, how about trying to get yourself some publicity - with Valentine's Day just around the corner, there must be something creative you could do with a piece about Wedding Knives

You're probably a little too late to get any publicity about cutting the haggis - LOL someone's going to chime in about Alec Salmond, I just know it!

M

Hairdressers, wedding shops and florists in your area might also be struggling and might also look to do some kind of joint venture; in your spare time (strange concept, I know!) why not see if you can exchange customers by offering vouchers for some of their customers who buy in your shop. Getting stock moving is what you really need to do at this point but without giving away too much money.

 

[MOIC]

I took on a shop January 2011 for a 5 year lease. I didn't know the area but it is in a good central location and was described by the agent as 'a busy shopping parade' on the spec. I soon learnt that it was going to be hard as the footfall was extremely low. So I have done my best with service, products and prices. The first years trade has been OK and slowly improved and I feel positive it could continue to improve. Unfortunately Christmas trade was not as successful as I had hoped and now (January) has gone completely dead and the bills are flooding in and I can't pay them. I paid half the rent due as I felt this was a priority as well as business rates. But the agent for the landlord has now sent letters now requesting the payment immediately... I just don't have it. I have written to them but they are not interested, they want their money now before they take further action. I'm so worried about it all. This is my only income aswell so before long my rent at home will fall behind too. I know I could consider getting the agents to put the lease on the market but the shop had been empty for a year when I took it (maybe that should've been a clue!) so it may take a while if I chose this route. I am looking to start selling online in the next month or too to bring in extra income but I'm worried its too late. My rent arrears are £1950 and I'm currently taking £50/£100 a day! Any advice would be appreciated.

Speak to your accountant and get his advice.

Landlords, generally, are not sympathetic to lessees problems.

The landlord will pursue you for the outstanding rent, if you have assets.

If you feel the business is worth negotiating on the rent arrears on an installment basis, whilst continuing paying your current rent, then this is only for you to decide.

Take into account you have a further 4 years left on the lease.

It's not an easy decision and should be taken with legal advice.

Ron
MYOFFICEINCHINA

 

[Eliza_J]

People who attend cook shops are usually cooking enthusiasts, any chance you could start doing some demonstrations or even classes if you have room? People are still going nuts for cupcake decorating classes and you can sell the various accompaniements afterwards.. I did one before and people were queuing up after to buy all the tools used.

Good luck!

 

[BobbyBoy]

Have you any stock that you could try selling on Ebay?

This may help you to raise some cash quickly.

Best of luck
Bobby

 

[tony84]

the one thing to not do is put your head in the sand which it sounds like your not doing.

Presumably the lease is in your name but not secured against anything?
I know you have said theyre not interested but i think you need to just say to the agent, you either need to work with me to sort something out otherwise ill be handing the keys in and then it will be ont he market for however long again. You cant pay it, your not trying to pull a fast one but you were lead to believe it would have more people walking past than it does have (this is partly your fault really though, you should have done more research, but hey ho whats done is done).

Are the other bills in a ltd company name? Water, gas, electric etc?

 

[TreatGarden]

I agree with some of the posters here.
Get equally tough with your landlord/agent - it's amazing how many of them or all about the bluff and bluster and like to bully. Just tell him that you're doing the best you can and you'll catch up when you can. And if he continues to bully you, you'll go to the papers / go to his boss (that shut my old landlord up!). If you have the details of the landlord (not the agent), don't be afraid to contact him/her over the agent's head - in my experience they were completely unaware that their agent had such a horrific reputation on their behalf and came down on him quite hard

I also agree re diversifying. Remember, there is a much higher margin in services, so see if you can offer cupcake decorating classes, cooking / nutrition classes, anything that entertains kids and their mums/nannies for an hour such as biscuit decorating, knife skills courses (Jamie Oliver's shops do this and make a mint! Think he charges £50 per person per hour / course in his shops!), anything like that will bump both your profits and your profile.

See if you can tie in with local schools and clubs and offer cooking / preparation courses. You might even be eligible for local grants if you get involved in anything to do with helping kids / being a social enterprise etc.

Hope that all helps! It's stressful, but your landlord really can't do much apart from bully at this point. If it was empty for a year, he's not going to risk turfing you out on the street and it being empty again for ages, especially as it sounds like you're doing well. The first couple of years while you settle in and get everything going are the hardest - stick with it and keep fighting!

 

[yourcreditmanager]

Hi

My own view on this one is to try to make phone call with the landlord (is it a private individual or company - if it's the later should be easier to deal with)... and I have a frank, cordial discussion with them direct about your situation but offer a short term payment plan, even if it's a just token amount for the next three months in order to start making some inroads into the arrears whilst you build up your cash reserves. This will at least show willing on your part - most creditors would rather get something this way than get nothing at all. If possible get them to agree in writing that a moratorium on eviction or recovery action will be place for the timescale of the interim payment arrangement as long as you stick to your side of the bargain, so you can least wave this at the Agents if they start hassling you.

Good luck!

Michael

 

[UptownFashions]

Im so sorry to hear you are struggling. I too opened up a clothing shop in November last year and whilst I managed to cover the rent and bills in Nov and Dec (didnt make enough for me to take a salary) I was happy with that. However like everyone its gone dead in January, I spoke to my landlord who kindly knocked off £100 off the rent for the next 3 months to which I am grateful but Im still going to have to porn my aunts ring to pay this months rent as I only took just over £100 for the whole of January!!!! I havent been able to pay electricity or phone so going to have to make some grovelling calls. I do hope things pick up for everyone.

 

[thegascupboard]

£100 for the whole month?

 

[Doodle-Noodle]

Im so sorry to hear you are struggling. I too opened up a clothing shop in November last year and whilst I managed to cover the rent and bills in Nov and Dec (didnt make enough for me to take a salary) I was happy with that. However like everyone its gone dead in January, I spoke to my landlord who kindly knocked off £100 off the rent for the next 3 months to which I am grateful but Im still going to have to porn my aunts ring to pay this months rent as I only took just over £100 for the whole of January!!!! I havent been able to pay electricity or phone so going to have to make some grovelling calls. I do hope things pick up for everyone.

Oh my goodness - that's really dreadful! What on earth are you trying to sell? Are you open for business everyday? Do you have any footfall at all?
That is really poor in terms of takings - I really think you need to take a long hard look at what you are offering your customers in terms of goods and ask yourself whether you really are doing everything you can to get people through the door and spending: something somewhere is really not right here.
Sorry if that sounds harsh, I'm hardly Richard Branson here I know; I spend half my waking hours worrying myself sick about overheads and takings, I know it's tough - but you'd take more than your January takings if you just flogged your old kecks at a carboot sale a couple of times a month.

 

[UptownFashions]

Whoops sorry I meant £500 for January (which is still really bad). Footfall in the town I live in has really dropped in January and Im not the only retail shop to find that but the other shops here has been trading for a lot longer so have managed to put funds aside for the bad months like January, I only opened in November so have not had time to build up a resource. Im a small clothes shop mainly selling womens clothes. A new internet cafe has just opened up last week two doors up from me so we are all hoping its going to create footfall up this street as we are located just up from the town centre.

 

[chalkie99]

A new internet cafe has just opened

Blimey! That sounds a bit retro these days. I thought they were pretty much a thing of the past.

 

[Doodle-Noodle]

Whoops sorry I meant £500 for January (which is still really bad). Footfall in the town I live in has really dropped in January and Im not the only retail shop to find that but the other shops here has been trading for a lot longer so have managed to put funds aside for the bad months like January, I only opened in November so have not had time to build up a resource. Im a small clothes shop mainly selling womens clothes. A new internet cafe has just opened up last week two doors up from me so we are all hoping its going to create footfall up this street as we are located just up from the town centre.

Phew, that's a bit better (though not much to be honest)! Hope the internet cafe helps boost your trade - make sure your window always looks great to entice passers by, change it regularly so they always stop and look.
Good luck!

 

[UptownFashions]

Thank you Doodle Noodle. I am new to all this so maybe I have not done things properly. From advice I have read on here I now realise I should have not tried to cover everyones expectations within the town I live in. I tried to cater for the local mums who dont have much to spend so brought in all my stock from the main wholesalers who just stock ex chain store stuff which hasnt really been selling very well. I should have done what someone advised on her and not tried to compete with the high streets but got slightly more expensive stock in which is not available within the high streets. I want to try and address that but have no available funds to buy in the more unique items. Have been talking to a company called Yumi who have some lovely items but unfortunately they dont sell small quantites and want a minimum order of £600. If I knew their stock would sell well in my shop then I would try and raise the money somehow but I would like to have just ordered in about 4 different packs to see how they sell but they wont go for that. I have put up a post to see if there are any other clothing retailers who have the same sort of problem with minimum orders then we could all put our orders together to meet minimum orders etc

 

[Doodle-Noodle]

Obviously you need to shift what you have, so using what you already have in stock would it be possible to put things together to give them a different look?
Celebrity fashion is a BIG thing - do you have ANYTHING on your hangers that looks even little bit like something Kate Middleton/Cheryl Cole/Victoria Beckham etc has been seen in recently?
It doesn't have to exact, but if you can put a picture in your window of a celeb wearing an outfit that is just a BIT like something you have it will help it to sell. You could do a "Get the Look" type of thing if you have reasonable looking mannequin/stand to put in your window. You will need to be a bit adventurous.
Once you've got rid of some stock think carefully about putting a nicer collection together - after all if the big chain stores with all their marketing power couldn't sell what you are now stocking, why would anyone buy it from you?
Good idea about getting together with other clothing retailer to buy, but negotiate with the suppliers before you go along this route - business in business and everybody wants to sell something so they may well be prepared to sell you smaller quantities in the beginning whilst you get your business going well enough to buy bigger from them in the future.

 

[Doodle-Noodle]

Oh, and if you haven't already done it, get your business on FaceBook and start networking with the people who actually might walk into your shop. It's free, easy and can be very effective if you do it well.

 

[UptownFashions]

Thank you Doodle Noodle very good ideas/points. I do have a facebook page for the shop and was in the process of a web site but run out of funds so its on hold at the moment. I have just spoken to a sales rep at Yumi who is looking at cracking a deal with me for smaller quantities but I dont have any spare money at the moment so will see if I can bulk sell on ebay some of the stuff that isnt shifting in my shop.

 

[Thinehost]

Look around for funky window display ideas from other shops - we once saw a shop window dressed in funky sculptures made out of wellington boots. I know that you probably don't stock wellies, but do you have accessories which could be transformed into a sculpture of some kind??

Also, accessories would probably sell well on either amazon or ebay which would allow you to get some of your money back.

M

 

[savvyshopper]

Wow

I really feel for you kinda in a similar situation but been in business for 10 years now so no how to deal with certain issues a little better.

With regards to the rent, write to the landlords, explain your turnover isn't meeting the rent, don't be apologetic in the letter. If you can see a way forward for the business then tell them this. Explain however there is not the money to meet the current back rent. Explain that you will keep up to date with current payments and will have to pay what is owed over the next year. This is the best your able to offer and want the chance to continue trading.

I have a friend who has a Kitchenware store /Gift. I think specialising to just do knives could be a mistake. It is only the catering trade that buy knives on a regular basis and they will buy from trade magazines at trade prices. Your average household will buy a new set of knives once every 6/7 years.

My Friend used to do just Kitchenware then incoperated some gift style items into teh mix, his business is now doing a lot better. Go down to the Spring Fair / Autumn fair in Birmingham to have a look at what is available.

Also online is tricky unless you know what your doing with regards to SEO you can plow thousands into it and get nothing back. Have you thought about contacting Amazon to see if they will accept you as a professional seller on their site. For instance if you have 400 products online with them you should see a return of approx £2,000 per month. As long as your products are right.

I hope this has helped and if you need to ask anythign else then don't hesitate to get in touch