Brick and Mortar – Should I Or Shouldn’t I?

Jan 27 2010

Brick and Mortar – Should I Or Shouldn’t I?

Posted by Admin in Finance News

Hello again everyone! In the last installment, we briefly discussed the state of the union and how it has affected the average citizen on the street. Not much of what is happening out there is very good for the general populace at this point in time. Then I mentioned the most common alternative for people is to consider some sort of self-employment. That is what I will touch on today and give my observations on several different alternatives in the next few installments.

First, let’s visit the individual who wants to open some sort of store front business, whether it be a book store, restaurant, auto repair, etc. The first decision to be made is do you go it alone, or consider buying into some sort of franchise? Obviously, going solo is cheaper up front, but the lure of a franchise is the name recognition, which, in theory, will result in more activity as people will be familiar with the name and feel more comfortable to visit the establishment. However, that comes with a price. You have the initial up front cost of the franchise, possible monthly payments based on sales volume and will have to abide by their rules and regulations. But, it might payoff to consider that route. Look at McDonalds or any other franchises you’re familiar with. The main problem, as I see it, is the up front cost. If you have lost your job and are living on savings, the last thing you want to do is cough up a couple hundred thousand dollars to purchase the franchise.

Now you have the business. Where do you go from here? First, you have to have a location, a storefront. Now you have to sign a lease and committee yourself to that. Next you have to put in inventory which is a heavy up front cost. Hire some employees, maybe. Of course you have to have workers comp. insurance, salaries, whether you sell anything or not, utilities, etc. Now you’re ready for business! You have a grand opening, anxious for people to come pouring in through the door and clean out your shelves and you’re on the way to the bank! What if nobody comes? Or not enough to make ends meet. Now you have to get out your pocketbook and pay for some advertising and hope more people show up. I don’t mean to sound like a pessimist, but these are things that people have to take into consideration when going this route. I know owning your restaurant, for example, sounds romantic, but there is a lot of work, expenses and potential employee issues. That is why small business failures are so high. I’ve seen estimates that up to 95% of small businesses fail within the first five years.

Okay, what else can I do? Well, you have some other choices and that’s what we are going to discuss in the next installment. Let me leave you with this quote from Henry Ford: “Failure is simply the opportunity to begin again more intelligently!” Think about that until next time.

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