Renting a Business Premises Before You Are Ready Can Kill Your Business

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As an entrepreneur, the thought of having your own business is a really great feeling, however the thought of having your own physical shop is something else and is associated with a sense of great accomplishment.

Reality knock

It’s all very good and well, until of course the reality of the cost of your business’s rent kicks in. An important point to remember is that rent for your business is indeed fixed, so whether or not you make any sales that month, it still has to be paid.

Rental costs can break a small business. The problem arises when revenue doesn’t cover fixed costs. This can leave an entrepreneur with a cash flow challenge.

Start small

As a startup, it is advisable to use the most affordable trading platform possible when starting out. Trade or operate your business from home and do so for at least the first six to 18 months, or until you can cover this fixed cost.

There are certain businesses of course that may require a physical presence, but even these should be slightly established by the time you rent a space.

It is also advisable to research your market and the viability of your offering. There is nothing more disheartening than seeing a new business close shop after a few months due to their inability to meet their rental expense.

‘Growth not drain’

When starting out as an SME it’s important to focus on the things that will grow your business, not drain your money. As a small business your primary concern should be to sell as much of your product/service as possible and to build a customer base.

If you believe you can reach more customers by having a presence at a store, make sure you find reasonably priced spot and ensure you do thorough research of the area, remembering that foot traffic is key.

While a huge part of entrepreneurship at the end of the day is about taking risks, the risk of opening a brick and mortar shop without doing thorough research will not only be costly, but also deadly to your business.

Please feel free to give feedback on this topic and engage.

About the author:

Salu Yekela is a seasoned advocate of entrepreneurship and is passionate about developing it in South Africa.

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