Those of us growing up watching sitcoms like Friends have, at some time or another, had the thought of starting a cozy coffee shop. Running a local gathering spot, hanging out with customers who become friends, toying with decorating ideas and promos, picking the music playlist…it all sounds more like fun than work.
Others have romanticized about boutique clothing stores, cannabis dispensaries, record stores and so on. The dream of opening a sweet little local spot sounds great, assuming everything falls into place. However, so many things have to go right in order for a bricks-and-mortar retail store to succeed.
The problem with physical retail is that you can have a great idea and a viable business but still fail.
==> A great business in a bad location will fail.
==> A great business opened off season or at the wrong time (e.g. when there’s road construction) will fail.
==> A great business not promoted properly will fail.
==> A great business with the wrong merchandise mix or pricing will fail.
==> A great business with weird hours will fail.
You get the point.
There are tons of ways a bricks-and-mortar retail business can fail, despite being a great concept. Of course, many of these problems are fixable over time. Unfortunately, the bills – rent, heat, hydro, staffing, etc. – don’t stop while you figure things out. Once the doors open, the countdown to bankruptcy begins.
Even if you luck out and successfully launch a bricks-and-mortar business, you’re still vulnerable to the changing physical environment. I’ve seen numerous local business collapse due to unexpected traffic changes, construction or criminal activity. The obvious wild card today is the lockdown due to Covid-19. The pandemic simply isn’t survivable for many retail business, many of which existed for years.
Sweep away all the negativity for a minute and let’s say you manage to build a profitable retail business that survives for years. Believe it or not, you’re still probably SOL over the long run. Once a retail business becomes successful, landlords see the opportunity and try to grab a share of the profits by raising rent once the lease is up for renewal. I’ve seen landlords triple rents on successful small business, squeezing every drop from the business. Given this, even the most successful bricks and mortar businesses are fleeting.
The few small retailers that actually last decades often own their physical location. Unless you’re a national chain, there simply isn’t any other way around it.
I love the flavour local retailers bring to a neighbourhood. I enjoy interacting with proprietors and supporting these businesses with my money. However, I warn anyone expressing interest in opening a retail business with a physical location. The chance of building something long term is so slim it just doesn’t seem worth the effort.
Edit (October 8th, 2020): As I was walking today I remembered another major reason I would never start a bricks-and-mortar business. You need to be there ALL THE TIME. Depending on the type of business, opening hours might be 10-12hrs daily. That’s 10-12 hours a day, sometimes 7 days a week you need to be present, regardless of how sick or tired you feel. Have a migraine? Tough. Want to take a vacation? Tough. Bricks-and-mortar retail needs boots on the ground, and if they’re not the owner’s boots it can get prohibitively expensive.
You have a great business idea. Perhaps it’s something unique or something you’re particularly good at. How do you know whether you should invest in it or simply keep it as a hobby?
Adam Grant, Organizational Psychologist at Wharton, created the following graphic to help answer that question.
How to decide whether your idea should become a project: 1. Interest: do you think about it in your free time and bring it up in random conversations? 2. Importance: will it benefit others? 3. Contribution: do you have something novel to add?
James Altucher – serial entrepreneur, author, podcast host – expands on this:
A) always good to have a couple of things going on at a time to see if they fall within the sweet spot of the diagram since so very few things do.
B) learn the skill of “experimenting” so you can take small steps with little downside and great upside to see what things “click”.
C) often something feels like it hits the sweet spot but then it stalls. Don’t be afraid to quit something that’s not quite clicking.
D) I always wait for my heart and mind to agree before I fully engage in a new activity.
Too often I did things for money that I did not love and too often I did things for my heart that had no other benefit to me.
The heart and the brain must be in agreement. Experiments helped me with that.
Example, I’ve spent the past 5 years doing standup comedy up to 20-30 hours a week. It’s not monetizable. But it added to my skills in podcasting, public speaking, ideation, etc.
But, mindlessly playing online chess for hours a day (which I am prone to do) is my heart talking but not my brain.
And starting a hedge fund way back when was my brain talking but not my heart. I hated every minute of it and not a good source of income ultimately.
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With change comes opportunity. Look, I’m not making light of the tragic situation. Over 96,000 Americans are dead because of the current Covid-19 pandemic. Many more will die.
However, we still need to make a living. And now is a good time to consider the opportunities opening up due to the massive upheaval the world has just experienced.
Before I continue, in no way do I suggest taking advantage of shortages or vulnerable people. Quite the opposite – I think there is opportunity for entrepreneurs to genuinely help people and businesses impacted by the changed world.
Consider this a brainstorm session. I won’t get deep into the pros, cons, feasibility of each idea. But I hope to kick start some ideas that you can run with and make your own.
If you have any of your own stories, please share them. I’d love to learn more about what you’re doing.
Here are some quick ideas. I’m just dumping them on the page as I enjoy an adult beverage. No editing. No second-guessing. (So please excuse the mess…hopefully a string of words below sparks something in you.)
I’m not talking about hoarding or flipping medical n95 masks. Those need to go directly to medical staff.
Instead, I think there is a big opportunity to create and sell cloth-based masks for the general public. Suddenly, a new product category exists and is ripe for innovation.
What can be done to add value to the mask, which is generally viewed as a commodity? We’ve already seen the plain black masks, but where are the designs? Where is the branding? The differentiation? Hmmm…
2) Virtual events, entertainment, tourism
Large jam-packed events – like conferences and concerts – aren’t coming back anytime soon. Even smaller in-person events are likely to decline in frequency, as business travel wanes and people remain hesitant to meet in person any more than necessary.
There are many existing companies that got into the virtual events business almost overnight. These companies probably could use help.
There is also an opportunity to build and promote your own virtual events. Because overhead costs (e.g. space rental) have been slashed, virtual events require fewer attendees and can be profitable with smaller audience sizes and fewer sponsorships. This creates the opportunity for smaller highly targeted events. At the same time, the potential audience for a single event has suddenly gone global – anyone with a good internet connection is now a potential attendee.
Finally, the total cost to attend conferences (beyond event tickets) has dramatically fallen, opening up the option to audiences that were previously out of reach.
3) Servicing remote workers
A huge segment of the workforce is now working from home. Many of those people will never return to a normal office again.
After a while, sitting at the kitchen table in your pajamas gets real old. People need a proper physical space with proper ergonomic equipment. But what else will people need when working from home? What are the new problems these folks will need help with? Possibly, time management, segmenting work from home, new home distractions, social isolation, new methods for staying relevant, etc.
Businesses that manage a remote workforce will also need help working through the implications. What are the best practices? Will any intermediaries be needed? What tools are needed? What business challenges arise?
Essentially, new situations create new problems that require new solutions.
Retail?!? Yes…and that’s not the gin talking.
Some big retailers with a lot of cash and access to credit will stay afloat during the Covid-19 economic disaster. Unfortunately, many other retailers will die – either voluntarily or via bankruptcy. As this happens, the bigger, stronger retailers are salivating at the market share they will get to absorb.
The CEO of Macy’s recently said that $10 billion of retail sales will be up for grabs. Why should Amazon and Wal-Mart be the only beneficiaries?
Customers will be in transition. Brands will disappear. Regional competition will fall in areas. Surviving small retailers will need help. Commercial real estate rents might decline in areas. More retailers will need an online presence and delivery options.
You’d think there’d be a few opportunities for new ideas. Amirite?
5) Virtual everything
Every brick-and-mortar business has started providing online services in some way. While most people are familiar with online shopping, until now few would have ever considered online fitness classes, therapy sessions or doctor visits. Yet, that’s what we’ve all been doing for months now.
I think many will continue to use virtual services in the future for the convenience. Who wants to waste 2 hours going to the doctor’s office (and paying for parking) just to get a prescription refill?
So businesses that previously required an expensive physical presence can now be created in a basement. Suddenly, the barriers to starting many types of small businesses have fallen.
6) Online learning
This one’s simple. Do you have something to teach? Then build a brand and teach it using the multiple avenues available online. Videos, subscriptions, online teaching platforms, etc.
People have been warming up to online learning for a while, but I think the lock-downs have only accelerated this trend. The entire public school and college system has gone online, legitimizing what was once considered ‘alternative’.
While traditional brick-and-mortar institutions have the brand value, they also come with an enormous price tag. People have increasingly questioned the ROI of college education. Now, with the realization that most of the glitzy peripherals isn’t core to the college education, the door is open to new 100% virtual educational providers.
Previously, people that bought skids of T.P. and canned soup were called preppers. Today, we’re all preppers, aren’t we?
This all started with the Great Toilet Paper Panic back in March. Now we’re all baking sour dough and starting vegetable gardens. I think people have discovered the comfort in having a few life skills, and many will become lifelong closet homesteaders.
What can you offer those who want to make their own wine or repair a broken fence? How can you help them achieve their objectives? What would you need if you were starting a new hobby?
OK guys. Brainstorm’s over. Take what you want and discard the rest. Ideas are connected, so think about the second and third order effects of some of the problems and opportunities described above.
Perhaps more importantly, start fast and start small. Learn whether you can make $1. Because if you can make $1 you might be able to make $10, $1000, $100,000 and so on. Better to fail fast and find out early.
I am posting this information to show you the devastation facing millions of small business owners right now.
The headlines make it seem like the government is providing tons of support. However, for most small business owners the support is failing them. These people are the lifeblood of the economy, yet are on their own fighting for their lives.
Authorities predict about 50% of small businesses will disappear before the Covid-19 coronavirus economic crisis is over. This is not something the economy can quickly recover from. It will take significant time, effort and risk appetite for entrepreneurs to once again start new businesses and hire staff.
I’m afraid the neighborhood landscape will look very different once this quarantine is over. Local drycleaners, restaurants, yoga studios, pet stores. Half gone.
Here are their stories:
The future is truly uncertain for small business owners.
I own a bar in Downtown Atlanta. It’s not really a residential area and 80% of our business comes from traffic going to nearby stadiums, arenas, hotels, and concert venues.
We are closed right now, and I don’t see how we could survive as a business without international travel opening back up, restrictions being completely lifted, AND people are eager to get close to each other once again without fear. I would say we have *at least* a year before that would happen.
Not to mention, this happened right at the end of the slow season. So we had completely depleted our resources and had acquired a little (~15,000) additional debt to cover us until we got to the busy season again that starts right around the middle of March.
Now bills are stacking up, I have no money, and the PPP loan really won’t help my business until we know when we can open again (so we can use the forgiven portions of the loan to help float payroll cost as we get back on our feet).
This is just a bad, bad situation. I don’t know what to do either. I don’t know if it’s smarter to begin the process of putting the business out of its misery now or “wait and see” while more bills pile up and more debtors coming after me.
I definitely feel abandoned. Like I fell off the ship that is the USA along with many others. Now we’re all stranded in the water flailing, screaming for help while the ship slowly but steadily sails away, leaving us.
The biggest problem for many businesses is the Lease. It no longer makes sense.
Revenues fall? Well, you can always cut some staff to lessen the payroll burden, and figure out other ways to survive until customers return.
But what are you going to do about your crazy lease? You can’t downsize and ask the Landlord, “I’m only getting half the customers vs what I used to… can I change the Lease so that I’m renting only half the store now and pay you half the rent?” The LL will of course say no, especially if you Personally Guaranteed (which is most of the times for small businesses because if they don’t the LL won’t lease the space to you).
Also, if the LLs have a mortgage on their property, even less likely they will adjust your lease since LLs have to pay their bills too. Which is why the commercial real estate market will tank.
If I were you, i’d seriously consider bankruptcy (or closing shop if you have a Good Guy Clause in your lease). Survive the downturn. Meantime, scrounge up whatever you can and launch a new business when the time is right (once the LLs take a beating, new leases/rents will drop significantly and people will be able to find great opportunities).
I qualify for all the loans approved by the government and have applied for the EIDL, PPP past Saturday and Monday respectively, and for the $10K (three day express funding) since March 30th. It has been now nine business days since I applied for $10k express, however, I haven’t heard from anyone. I believe at this point they are not worried about businesses with 10 employees or less. Each day trying to stay afloat makes the debt bigger. SBA classification for small business stand for 100-500 employees which makes me think there is no way they will come to the rescue of a tiny micro business of 10 or less employees. I am losing hope every hour, I am within days of running out of oxygen.
The truth is anywhere from 30 to 50% of the small businesses will not survive this pandemic. A lot of the financial assistance is focused on getting thru the lockdown and the economy shutting down. But little has been focused on what happens afterwards. Do not believe what this administration is selling. The economy is not coming back instantly, nor in a few months or even this year. I have seen articles by economist saying that the US economic will snap back in the 2nd half of the year.
It is the consensus from the medical community that continued social distance is going to be with us for the foreseeable future until a reliable vaccine is available. Which directly contradicts what the government wants.
At this point it is like screaming into the void – somewhat cathartic but ultimately useless.
People in my state are basically 100% against anything opening up before June. There is no help, and no help is coming. No one in the general public gives a fuck about what small business owners are facing right now, or more importantly, the looming economic doom that is on the horizon because of that. Even with agriculture being “essential” we can’t get the required inputs for production because everything is shut down and we can’t get the employees to come in because everyone is paralyzed with fear. No one wants to compromise on measures to ease up on things a bit before May 20th in my state, which in this growing region the window will be missed and the damage will largely be done (although the effects of which won’t be felt until August or September). A friend of mine killed himself the other day because he couldn’t take the burden and the abandonment by everyone, not just the government but mostly the abandonment of support of the public to allow some businesses to reopen with precautions.
At this point I have already given up. I’m doing what I can to provide for myself and my family, and when the bankruptcy comes I’m going to use this as a chance to start over in a state or country that is more hospitable to liberty and more supportive of small business owners.
I’m feeling miserable myself. I’m running a hotel in middle ga and we’re hemorrhaging money. Last year was slower than usual but we got by. This year started slower than normal and turned into the catastrophe we’re in now.
I’ve applied for the EIDL advance (was told it will take a week to get back to us if we’re lucky) and the PPP (I’ve been waiting for BB&T to send us an application for 5 days now). The rules for PPP are such a clusterfuck that I have no doubt that it will take a lot of back and forth before we get approved (i.e. they are using payroll # of employees from January and in my industry we have high turnover so I have to find 3 more employees to hire if I get approved since I’m down 3 housekeepers from Jan and I want to the loan to be forgiven given that we’re barely making any money on hotel rooms right now).
Don’t get me started on getting the mortgage on a hotel paid every month. Thankfully there is enough money in reserves to get by but if this continues then we are totally screwed.
My business is in live events… we have no clarity on when our business will come back. We might have to wait possibly a year or more? Many in the 2.5 trillion dollar live global events business will go under. MSM is promoting this rosy picture of trillions of dollars in assistance, we’ll all get back to work in a month or two… stock market zooming back up. Not true for many of us… I don’t think anyone knows how bad it’s really going to get and the current optimism and stock market is not reflecting what’s really happening on main street.
I own a bakery/cafe in a small town that is almost 100% reliant on tourist money. The main tourist draw is closed until September, at least. The PPP money will be minimal for us- barely covers 2 months rent if that. EIDL seems to be a bust. My partner is optimistic that once things get back to “normal” our local regulars will show up, but I doubt many folks will have disposable income to keep us going until the festival opens. It’s not looking good for us. If it was just me I’d walk away and deal with the consequences of breaking my lease, but it’s not just me.
Woke up with some anxiety this morning. Still no emails from the SBA regarding my EIDL loan. Since it was just my partner and I in our LLC with no employees, we couldn’t apply for the PPL either.
Made myself some coffee and sat outside for a and listened to the birds for a few.
I have a small but beloved massage therapy business here in downtown Jersey City. My business partner voluntarily withdrew from the LLC last week, has taken the couch (good thing I bought everything else) and will not be renewing the lease with me in May.
Technically, I won’t be able to renew the lease either if the EIDL loan doesn’t come through and I’m saddened by all the effort and money I put into our business the past year only for me to have close doors. I wasn’t done yet. We were building the foundation of things still.
I’m still kinda positive about things in my heart but I’ve mostly given up on that EIDL loan. It was kinda nice to come on here and see others share my disheartened feelings as well. Got to be realistic at the end of the day and be able to adapt or cut losses.
Tragic to have read someone took their life last week in the chaos.
Still grateful my family and I have our health and if you’re reading this, I hope you still have that too and will continue to have it until this is over.
I’m in Mexico, which in official terms, has reacted way worse than how the USA has, according to many criticisms.
The President (AMLO, as we call him) textually said “don’t stay inside… I’ll let you know when you really have to stay inside.” I could write several paragraphs describing his reasons and the background, but all you need to know for context is that he divides opinion just like Trump does. And he’s trying to wash his hands from the economic recession. Just days before they acknowledged the pandemic, the US dollar jumped from around 18 Mexican pesos to 24.
The government stance on business is this: There are no governmental aids. You’re expected to pay all taxes as normal, all bills such as electric or water. Businesses are told to close (even though the citizenship is told not to stop going out), but it’s not enforced. However, a worker that contracts coronavirus in whatever circumstances and isn’t being paid in full to stay home, can sue their employers for getting the virus. So they pretend every single business is a massive corporation that can pay full wages indefinitely. To add to this take into account that 90% of Mexicans live day-by-day and can’t afford to go a single day without pay, or else they and their family don’t eat that day.
I have a couple small businesses where I sell flooring and window covers, plus a few other related products like awnings. Traditionally we sell in person, but I had worked a long time on trying to build an eCommerce sales channel, to some success (boomer mentality runs rampant in Mexico, where even Zoomers doubt the legitimacy of eCommerce). However, we install our products and most people aren’t interested in DIY and would rather have the technician perform the installation.
It’s a family business, my dad owns and runs the factory that supplies about 75% of the products I sell. The factory is still operating at a limited capacity, as it has a relatively small team with large space. But mainly, the workers asked my dad to continue working because they can’t survive without steady salary. About 90% of what we call small sales vanished overnight when Mexico announced the first case, which was about three weeks before the government even talked about the pandemic. These small sales provide most of the cash flow and account for about 60% of revenue on an average month.
My own sales dried up by about 85%. Only wealthy clients are buying, since they can survive their entire lifetime without working again (or thereabouts) and are now getting bored of looking at the same decor in their homes.
I’m trying to complement my earnings with Appen (have waited two weeks for project validation, still waiting) and I recently opened another business thanks to my cousin. We are selling construction materials remotely (again, normally done in person) as construction hasn’t halted yet.
AMLO is trying to pit business-owners (whom he has referred to as the cancer that’s killing Mexico even long before he was elected; he makes no distinction between tiny stores and cafés than multimillionaire CEOs) against the workforce and vice versa.
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