To start up or not to start up...

[Rosie Blckburn]

I've wanted to start up a retail business for a few years. Now I have a great opportunity - a small (300sq ft) unit in a good location in a wealthy rural market town an hour out of London is available. The rent is very reasonable (£800 pcm) and it qualifies for rate relief. The landlords are happy to offer me a 5 year lease with a 2 year break. I want to sell a combination of hig quality, ethically produced (or locally made) children's clothes, toys, gifts, ceramics etc - appealing to parents aged 30+ and ladies 50-65+, of whom there are many in the area!

I have savings to put in to get it off the ground (£25k in total but I'm reckoning on putting in £15-18k - fully aware these things easily escalate given half a chance). I've researched the market and think the business could succeed there - assuming of course I do everything right (and yes, I know that's one big assumption!).

I'm currently unemployed (spent last 20 years as a project and event manager, made redundant a year ago) and can't find a job in this part of the world - all the jobs in my specialist field are in London, but it's just that bit too far for me to commute (I live further away from London than where the shop is), and, basically, I really really want to be my own boss. I do though have a flat and currently live of the rent from that so that's a big help.

But, I've done my cash flow forecast for years one and two and it's not looking that great. Outgoings will be £80k or close to and I can't really imagine income will be much more. I admit I'm part guessing /part basing that on an average 50% margin - I can only afford about £10-12k worth of stock at the start. Therefore, in year one I might, if all goes well, break even. In year two, I might profit by about £2-5k. I admit I've not done yr 3 but I can't imagine a sudden huge hike - the shop won't get bigger and the stock / overheads won't get cheaper. I know it's not a very entreprenerial question to ask - and it's one I'm really asking myself - but is all the hard work (shop open 6 days, no employees for at least a year, finding / buying stock, stress) and financial risk going to be worth it for that?? Is that normal? I've looked at similar businesses in similar towns that are for sale and my predicted turnover is typical of those (that's why they're for sale do I hear you cry!?). Because everything I sell will be ethically produced / British / fair trade I'm not going to be able to shift to cheaper stock / squeeze my suppliers if it all goes a bit wrong.

A big part of me knows wanting to own a shop is a very big itch I really want to scratch, and hey, it's not like I'm doing anything else! but am I mad? I might be slightly but not enough to want to blow £15k+.... Your thoughts, experiences much appreciated. I'm off to do more maths, research, stressing...

 

[Richard Moore]

Hi Rosie, highstreet retail is very tough at the moment. Margins are constantly being squeezed, staff overheads are on the rise (minimum wage and pensions) and business rates don't ever seem to go down. So straight away you'd be entering into a very difficult business market.

I don't know your chosen sector very well, but 50% margin sounds like a high figure. And if you're expecting to barely make it on a 50% margin that should ring alarm bells.

Look at it this way, your rent is £800 PCM so that means you need to *make* £800 to pay the rent. On a 50% margin you'd need to turnover £1600 to pay the rent before you have any money for anything else. If your margins end up actually being 25% you'd need to turnover £3200 per month to pay the rent. So margin is king.

Also look into the structure on the business rate relief, is there an initial free period before rates kick in? How much will the rates be if/when you do have to start paying them.

I don't know the area where you're looking to setup, but can you look at a pop-up style shop? Get an easy-in easy-out short term rental on a vacant property so you can keep your overheads to a bare minimum while you sound out the business? If it works you can relocate to a more permanent base.

My focus would be to keep overheads to a bare minimum, not to commit to anything long term either financially or lease-wise (leases can really cramp your style if your circumstances change), and keep your initial outlay low. I've seen many new businesses that spend top dollar on fittings and fixtures and lease cars only to be left wondering where the money went.

Having said all that, go into it with your eyes wide open and if you want to blow the £15k - go for it! It will probably be the most interesting and exciting £15k you ever spend and if you get it right it could lead to great things. All the best with your new venture

 

[Deleted member 226268]

Don't do it !
It will turn into a disaster !
All the money will be gone before you have even sold the first item.

Hitch up with me and we can go live in Rural central France.
Start a smallholding.
Get away from the rat race...and idiots.
There you can have a shop .... selling Chickens and eggs and Goat's milk !.

 

[LoansGram]

I would wait as with Brexit hanging over us, it can easily become a dead project.

Just look for another job at this moment.

 

[Scott@KarmaContent]

I want to sell a combination of hig quality, ethically produced (or locally made) children's clothes, toys, gifts, ceramics etc - appealing to parents aged 30+ and ladies 50-65+, of whom there are many in the area!

I've seen a few shops like these open and they nearly all follow the same pattern. They open, everybody says what lovely things they sell, they may even buy something. Three months down the line, the novelty wears off and there's simply not enough people who want to buy these sort of things every day, day in, day out for the shop to stay afloat.

 

[Mark T Jones]

I think you've pretty much answered your own question.

About 99.9% of projections are on the optimistic side - often wildly so - go back and challenge the assumptions you have made - particularly with regards to footfall and average spend. Better still, trial it at dedicated markets.

You are selling conscience goods, and experience tells me that conscience always holds a budget!

 

[Nochexman]

...I've wanted to start up a retail business for a few years... ...and, basically, I really really want to be my own boss...

If you think the underlying business idea is a good one, find a different, lower cost, route to market. Consider selling at markets, car boot sales, in peoples' front rooms. If you can prove the concept then think about getting retail premises of your own. Good luck to you!

 

[tony84]

People I have seen on here tend to over estimate their turnover/profit when starting up. You seem like you have been looking at it from a sensible point of view and working full time (which it will be) will take you 2 years to earn £2-5k?

Theres not really much of a margin there before you are losing money.

You could go and do 5 hours a week in Mcdonalds or a supermarket and earn £2k a year. I know which I would rather do. 5 hours, no headache, discount on food...

 

[MOIC]

I want to sell a combination of hig quality, ethically produced (or locally made) children's clothes, toys, gifts, ceramics etc

How easy is it to source all these products?

That's your first hurdle, even before you think about opening a business selling these products.

As others have said, it will be very difficult to make this business (retail shop) work.

Given the amount of cash you want to invest, find ONE product to start with and sell on Etsy, NOTHS and other similar sites.

Online is the way to go.

A big part of me knows wanting to own a shop is a very big itch I really want to scratch

Put cream on that "Itch"!

 

[Stuartb3502]

How about starting it as a party-style (a la Tupperware etc) business initially? It would:-

• Minimise overheads and start-up capital (shop-fitting etc)
• Require less working capital for stock - you need one sample and fast ordering from suppliers. Suppliers may even loan some samples.
• Help you do market research to confirm whether your intended customer base does exist/will pay and how you can reach them.
• Build a customer base which you can transfer to a retail shop if there's a benefit to that later.

If you decide to go the shop route, I think you'd do well to factor in how many of your browsers will go and buy online after researching with you. That will depend of course on availability of your range online, but has to be a consideration for any retailer now (particularly one with no online plans themselves?)

Good luck!

 

[Rosie Blckburn]

Thank you all for your time and thoughts... I should have said, I have been to a few markets and fairs with mixed success (weather too hot / too cold, iffy footfall, wrong people, wrong product). I've learnt a great deal though so let's say it's been a very sharp learning curve! But they're too irregular to make an income from and the best charity fairs etc are booked up years in advance.

My Office in China - finding product isn't hard - it's going to be selling it at the margin that's worrying me as Richard Moore points out. I've had another, more considered look and actually I can get a 60% margin on lots of stock, which is something (but that is gross).

I should be put off by your comments, and I am, quite a lot (!), but I still think, how come, if it's soo bad, there are lots of shopkeepers out there making an apparent living? affluent high streets still exist after all....

 

[Deleted member 226268]

I should be put off by your comments, and I am, quite a lot (!), but I still think, how come, if it's soo bad, there are lots of shopkeepers out there making an apparent living? affluent high streets still exist after all....

.

Are they actually making a living ?

I think this is a bit of a dangerous illusion.

I suspect that most of these small craft type shops, or in fact a lot of shops, in the high street are just "toughing-it-out" until the end of their lease.
They cannot afford to end their lease early, with the penalties, but they are not making any money either.

They may have the occasional impulse-buy customers come in, during the summer months,
but now that everything is for sale on the internet, and cheaper too, any type of high street shops are soon going to be history.

"Affluent" town high streets, have affluent high street rent, rates and taxes for shops to pay to their local council.

Where council ignorance and greed, in addition to high car park charges, in turn is destroying the whole concept of high street shopping.

Even well funded charity shops are closing down, they cannot afford the rates.

You should forget about a high street shop, and all the associated never-ending costs and aggravation,
and start selling online, just like everyone else.

Ebay, Etsy, etc.
Make your own website.

.