When getting into business, franchised or not, your expenses are certainly something you need to be aware of BEFORE you make the leap to start a business.
I speak to many people about starting a business and one of the things that I think many business owners forget to consider or don’t give it the consideration it deserves is rent or the leasing of a commercial premises.
Lots of people tell me they dream of owning a coffee shop. Firstly, I think they are thinking it will be a nice little ‘latte lifestyle’…. You know, own the café, but sit out the front, sipping on lattes and watching the business magically work by itself (which isn’t the case – you will most likely be working 7 days a week to get it up and running) – but the thing they forget to consider is how many coffees they need to sell, just to pay the rent!
When you are in a business that requires a physical presence, your rent expenses can vary greatly.
Let’s use the coffee shop example….
For a coffee shop you want a lot of ‘walk by traffic’ but this means you will have much higher rent to be in such a ‘visible’ location. Sure you could find a little side street with a much lower rent, but this will significantly impact your sales. Finding a balance can be hard, plus no matter where you are, you still have to sell lots of coffee to cover the lease expenses.
Now add to this, and sorry to burst the dream bubble, but leasing costs have been significantly increased across the board in the last year or two. I’ve been told by some franchisors that they have been experiencing rent increases of 50% plus in a year! Imagine that one of your biggest expenses in your business increased by 50%! Well that is certainly a lot of cups of coffee. It could actually mean the difference between making profit or not!
Little did I realise the impact that leasing costs would have on businesses when we started Gutter-Vac over 20 years ago. Little did I realise just how much of an impact this would have on franchisees and for our franchisees, a positive impact!
With a mobile business, such as Gutter-Vac, you can run it from a home office. A home based business is really such an effective business model if we just consider the expense of leasing a commercial space. Imagine just taking that whole expense line out of your P&L.
The service industry in Australia is booming and when people are considering starting a business, buying a franchise, becoming their own boss, I always recommend that people seriously consider a business that can be home based in the service industry sector.
Knowing your expenses are significantly lower means that it is all that much easier to reach profitability in your business, and in the end, that is what the business game is all about right… making profit for you and your family.