need advise, 2nd shop (again)

[OCWI]

Hi All

I have been a business owner for 5 years now. I started my business in a different town and it bearly broke even. 2 years ago we moved our business to a town with no competition and have been doing much better.

I have several questions, and I know most of them have been asked here before so I certainly apologize for repeat questions. I have been an avid reader of Technibble since I started my business.

I am currently in the process of deciding (its kind of been decided) weather or not to open a 2nd location. I have enough $ to fund it for about 2 months or less, and have it budgeted out. This is nerve racking however the last 5 years ive never had funding past next month (is this normal???). I do write myself a slightly below average paycheck, much of the funding will come from this said paycheck. Currently we have a team of four people including myself. We have a web developer, a tech, and a sales guy. The sales guy is new. He is not producing enough sales to justify his cost - but has a lot of potential. My plan is opening a new storefront, having the sales guy run it (he is EXCELLENT with people, and I trust him 100%), and training him to do 90% of the techwork. I plan on opening the 2nd location about 15 miles away from my current one, and the town has no competition. It is located in a stripmall with average traffic, Subway is also located in the strip mall, attracting an o.k. amount of people to it. The rent is $700/mo and I have the landlord talked down to a 3 mo lease. My plan is to use EDDM flyers to get the word out and rely on the signage on the storefront to attract customers. I by no means expect a high volume of people. At three months I plan on making a determination - either its working (making $) or its not. If its not then cut it.

My first question is have any of you done this before under similar conditions (particularly the budget condition). And if so is this worth the headache (im not looking for a crystal ball here but any sign that im barking down the right road...)

My second question is despite all the research (here and elsewhere) I have done I cannot find for the life of me if my business is doing well financially or not. I know most of you are uncomfortable sharing numbers, and I don't blame you - but even some ball park numbers like what is considered good for a month - after cost of goods and payroll.

 

[NYJimbo]

I have enough $ to fund it for about 2 months or less, and have it budgeted out. This is nerve racking however the last 5 years ive never had funding past next month (is this normal???).

OCWI: Should I open a new shop ?

 

[Kitten Kong]

+1 for Jim's reply.

If you don't have enough money in the bank to cover at least 6 months worth of overheads (alone), you have no way of funding a 2nd or even a 1st shop.

 

[SilverLeaf]

If the 2nd location is only 15 miles away....and has no competition, I would think a better use of capital would be to bolster your marketing efforts in this area, and attract business to your current location.

 

[OCWI]

..

Not the answer I was hoping for but thanks for the input. I agree with the "bolstering marketing efforts" opinion, however that's kind of how im treating this - the overhead will be bear minimum so it would cost about the same as the "bolstering" strategy, or am I still barking up the wrong tree?

Is there anyone is the yes category?!

 

[OCWI]

+1 for Jim's reply.

If you don't have enough money in the bank to cover at least 6 months worth of overheads (alone), you have no way of funding a 2nd or even a 1st shop.

Is that what is considered normal???? 6 mo? If that were the case I certainly wouldn't be running the first one, as I said we have never had even the next month covered and we seem to be doing ok here, no debt everyone has a decent paycheck....nerve racking yes but we have done it for 2 years.

Actually I started the first one w/ 10k in debt from previous poor college financial choices, back then I couldn't even dream of having one month overhead covered let alone 6 mo worth, how to get to that point AND still write yourself a check??

 

[SilverLeaf]

Take the emotion out of the equation and look at it like an accountant or an outside investor would. If someone came to you and made this presentation and asked you to invest your personal money in this venture, how would you evaluate it?

 

[OCWI]

Take the emotion out of the equation and look at it like an accountant or an outside investor would. If someone came to you and made this presentation and asked you to invest your personal money in this venture, how would you evaluate it?

Good point, poorly is how I would evaluate it. BUT (your rolling your eyes at this point I know) the emotion is there for a reason no? It would be a poor investment but it COULD be a very good one - or am I reaching to much??

 

[Kitten Kong]

Fraid your reaching far far to much here.

Your looking at your proposal through rose tinted spectacles.

Please don't forget we are ALL outsiders. We can think outside the box looking in, whilst your on the inside, thinking isn't this all rosey.

I certainly don't want to put a damper on things, I sincerely do wish you and your business well. But in the current climate, what would you rather have?

A 'new' shop, which will cost you at least $2100 rent, plus overheads, plus fixtures, so your talking at least $2500-3000. The large possibility that the shop will fail, you will feel bad about it yourself, knowing all the hard work you and your team, have put into it. Not to mention the possible bad name, of a recent shop opening, only to close shortly after. Your brand being known to be short lived. Versus the sml possibility that it could take off for you, and you have 2 locations to concern yourself with.

OR, put that hard earned $$ into marketing your own shop now.

I know which one I like many here would choose..

 

[PCX]

I suggest that instead of looking for people to tell you what you want to hear, ask them to convince you to do the opposite. Doing this will give you a "Devils Advocate" perspective and will help you to make a balanced decision.

You do not have enough money to fund a second shop. It also does not sound like you have everything completely setup the way it needs to be in order to be profitable at your current shop. If your current shop is barely profitable, why would you escalate the risk with a second shop? First, make the first shop highly successful and profitable, then take what you have learned and apply it towards a second shop. Also, as mentioned before, if the area is only 15 minutes away, then I suggest marketing in that area instead. Unless you are in a huge city, then it makes no sense in having another location that close.

Anyways, you obviously, have your doubts, but at the same time, you want someone to tell you your making the right decision. If this is what you want, then instead of asking us for advice, ask your mom --Im sure she believes in you for just about anything and will offer nothing more than encouragement (I could be wrong). But if you want real answers, then I suggest that you take head to what everyone here is telling you.

 

[PCX]

Good point, poorly is how I would evaluate it. BUT (your rolling your eyes at this point I know) the emotion is there for a reason no? It would be a poor investment but it COULD be a very good one - or am I reaching to much??

Emotion is there because you are human, not because it is a good indicator of wisdom and smart business decisions. The fact is, in most cases your feelings will get you in trouble if not balanced with logic and reason.

 

[Mindfulness]

15 miles is not that far for a client to drive, especially since they have no professionals closer. I don't see the benefit of a second location(ignoring the cash flow issue). It sounds as if you are thinking of using this second location as a way of advertising. I suspect you might get a better return on advertising doing something else.

Just curious, what is the population of your current location and the population of the location you want to expand to? Assuming your market is small, maybe you could use your extra money(not really any) to market remote assistance to people farther away.

 

[frederick]

Probls I see, as from your posts...

1) you don't have the income to support a second shop for more than just getting it going. 6 months available income is the minimum.
2) you don't have the income to pay yourself. Are you paying yourself less than your employees?
3) you got a tech, and a web developer. Not aaying get out of the web design business, but how much work does your web developer actually have as a web developer? I don't know if you are doing this now, but can they also man the shop? Or perform technical services? If they can handle some of the intake on the benchs when they aren't working as a developer, then you are using them to their full potential. Ignore this if you already do this, or your web developer is working on 10 sites at once and 2 are overdue, and 3 more start next week.
4) salesman, he is costing more than making? Fire him, or give him a 1 month heads up to being fired. Plain and simple, his job his to bring you in most of your new work, or at least a significant amount, above his current making. If he can't do that, then they shouldn't be paid that.
5) you need to take a full inventory of what you got going on now. I wantyou to get that 2nd location, but only if you can do it. That second location is going to cost you more than rent, payroll and utilities. You got to find people for it, train them, and get them working. That will eat your 2 months of saved monies easy. Seriously sit down and take a look at everything.
Employees: can they function without yoy for awhile? Are any of them competant for a management position, and if so, can you pay them to be a manager?
Income vs Outcome: what are you making now vs spending? Where is your revenue coming from mostly. If you open that second location just down the street, will it take away from the current?

 

[codegreen]

With the deep concerns about your funding (which I share: it makes no financial sense for you to open a second shop!), I think this bit may have been overlooked:

My plan is opening a new storefront, having the sales guy run it (he is EXCELLENT with people, and I trust him 100%), and training him to do 90% of the techwork.

If I understand correctly, you currently have a salesperson who is not bringing in the money they need to be. OK, hey, it happens, and you think he has potential. BUT NOW, you're proposing that, in addition to doing sales, he should also be the general manager of your new location, AND be the lead technician? How is he supposed to bring in sales when he also has to run the second shop and at the same time suddenly become a technician?

Here's my advice. It's based solely on what you've posted, so take it for what it's worth:

1. Forget the second location. You have cashflow problems already with one location. A second location will likely sink your whole business. This happened to a friend of mine: different industry, but extremely similar situation.
2. Now that your sales guy can focus on sales, get him to work. He has to start bringing in more money than he costs. Set a reasonable deadline for him to be making some sales targets.
3. Is your on-staff web developer bringing in money? That is, is your web work profitable on its own, or is it being subsidized by the tech work? If it isn't profitable on its own, it's losing you money. In that case, drop the on-staff developer and subcontract out your web projects. That way, you make money on each project.

 

[frederick]

Sound advice CodeGreen.

We have 1099 person who does our web design stuff. She's a college student, we served together, she's great, and it's part time. She gets paid by the job, flat rate kind of thing. Works great cause she doesn't cost me anything really. If she worked for me, she'd be a tech as well, cause we don't have that much web design work.

 

[callthatgirl]

@jimbo....good one.

I agree, don't. Focus on more niche work in your area and build your upsells and services. Keep overhead low. After I did the stupid idea of adding on store after store with NO money to cover crap, I was deep in over my head and had to hustle like a mofo to cover "expenses" that I forgot about, parts, toilet paper, stamps, freaking stupid crap.

I'm a bit still heated up, if you can't tell

But I get it why you want a 2nd location, it's sexy as all get out. Honestly, build your dream in the first location to it's peak and then consider a 2nd location.

Market to that new town via the internet for remote and/or drive to the jobs, it's 15 minutes away! I drive a 1.5 hours away for a good job sometimes.

 

[layoric]

Maybe you like the 2nd location so much you'll consider moving your main business there instead? Judt a thought.

 

[OCWI]

15 miles is not that far for a client to drive, especially since they have no professionals closer. I don't see the benefit of a second location(ignoring the cash flow issue). It sounds as if you are thinking of using this second location as a way of advertising. I suspect you might get a better return on advertising doing something else.

Just curious, what is the population of your current location and the population of the location you want to expand to? Assuming your market is small, maybe you could use your extra money(not really any) to market remote assistance to people farther away.

Agreed on the 15 mi. Population is about the same as where we are at now, how would you suggest marketing? We have had the best luck with flyers, ive been trying with adwords and have had ZERO luck...not sure if im doing it wrong orrr...

 

[OCWI]

Probls I see, as from your posts...

1) you don't have the income to support a second shop for more than just getting it going. 6 months available income is the minimum.
2) you don't have the income to pay yourself. Are you paying yourself less than your employees?
3) you got a tech, and a web developer. Not aaying get out of the web design business, but how much work does your web developer actually have as a web developer? I don't know if you are doing this now, but can they also man the shop? Or perform technical services? If they can handle some of the intake on the benchs when they aren't working as a developer, then you are using them to their full potential. Ignore this if you already do this, or your web developer is working on 10 sites at once and 2 are overdue, and 3 more start next week.
4) salesman, he is costing more than making? Fire him, or give him a 1 month heads up to being fired. Plain and simple, his job his to bring you in most of your new work, or at least a significant amount, above his current making. If he can't do that, then they shouldn't be paid that.
5) you need to take a full inventory of what you got going on now. I wantyou to get that 2nd location, but only if you can do it. That second location is going to cost you more than rent, payroll and utilities. You got to find people for it, train them, and get them working. That will eat your 2 months of saved monies easy. Seriously sit down and take a look at everything.
Employees: can they function without yoy for awhile? Are any of them competant for a management position, and if so, can you pay them to be a manager?
Income vs Outcome: what are you making now vs spending? Where is your revenue coming from mostly. If you open that second location just down the street, will it take away from the current?

ill respond in order

1) im inclined to agree
2) im paying myself much more than my employees, and I have been able to do so for last 2 years ish...im just not sure how it compares to a typical business owner w/ a 4 person team.
3) our web developer is pure gold. We have over $4k/mo just in contracted SEO work so im definitely likeing that! (are we an exception to the rule?)
4) 100% agree, I think that's just what im going to do w/ him barring the obvios 2nd shop decision
5) Thank you, this is the best advise yet and has me leaning towards doing just that...maybe get this shop up to par and save up 3 months so theres atleast something more in the bank

Employees: Yes on all fronts, I got REALLY lucky w/ employees

 

[OCWI]

@jimbo....good one.

I agree, don't. Focus on more niche work in your area and build your upsells and services. Keep overhead low. After I did the stupid idea of adding on store after store with NO money to cover crap, I was deep in over my head and had to hustle like a mofo to cover "expenses" that I forgot about, parts, toilet paper, stamps, freaking stupid crap.

I'm a bit still heated up, if you can't tell

But I get it why you want a 2nd location, it's sexy as all get out. Honestly, build your dream in the first location to it's peak and then consider a 2nd location.

Market to that new town via the internet for remote and/or drive to the jobs, it's 15 minutes away! I drive a 1.5 hours away for a good job sometimes.

I can tell and I certainly don't blame you!

what you are saying makes sense, I agree w/ peaking this one first - let me ask you this would you do a 2nd location again knowing what you know now, assuming the 6mo financing part lines up and the staffing issue lines up?