Can You Afford to Be in Business?

Years ago I was involved in an interesting business opportunity. I was asked to participate in a retail venture similar to an antique mall; a small space was rented from the owner and this became your shop. We paid a monthly fee which included booth rent and whatever they deemed appropriate for selling our good for us. Then if someone made a purchase with a credit card, we also had to give them a small percentage to cover the credit card fee. This shop was actually pretty cute and was occupied by about eight merchants who had products ranging from antiques to handmade goods to items purchased for resale. My contribution was oil paintings and miscellaneous other items to populate my space. Each merchant was responsible for the layout and design of their area, for pricing their own goods, and keeping it stocked. The only regulation was our space and our goods needed to fit in with the Victorian theme of the place.

It didn’t take long for me to realize things were not going well. The building we were located in was in a small rural town with no downtown, but it was located right on the main highway, which was good. You would think everyone would see it and want to check it out, but business was slow. The only time we really got any business at all was when the owner would advertise, and though she had originally said she planned to advertise on a regular basis, she didn’t do it often because of the cost.

Within six months, the owner realized she had a problem, but she wasn’t sure what it was. She called a meeting of all the merchants hoping if we put our heads together we could figure it out. Having been self-employed for many years I didn’t have to listen for long to realize her problem was she wasn’t making enough money to cover her expenses. The only money she was taking in each month came from the merchants rent and profits from whatever she sold. The total of what she charged the merchants for rent only covered about half of her monthly rent and she still had expenses for utilities, etc. on top of that amount. I told her my advise to her was either raise the rent she charged the merchants to cover her expenses, or to go out of business. Everyone looked at me like I was nuts, but it really was the only solution. I also suggested she charge the merchants a monthly advertising fee. Once again I received strange looks from the group. Everyone was against my suggestions, yet the only thing I could say from there was: “You get what you pay for.” Within a month, she was out of business.

The biggest problem most people have when they go into business is not having enough capitol to subsidize the business for about three years. And, most people haven’t done their home work to figure out how much it really costs to run a successful business. I personally believe the most important one thing in having a successful business is your ability to promote the business; if you can’t afford to market yourself, you can’t afford to be in business. Luckily today there are many ways to promote your business that do not require a large outlay of money, but they do require the time it takes to do it. More on the subject of promotion later.