Ive done this several times for myself and for others. Im kinda a startup junkie. heres what ive learned.
growing out of the home to commercial has many success/failure points:
- how big is your market geographically
- who are you selling to in that area
- how many of them are there
- where are they located in that area
- why will they buy from you
- what do they buy now
- who competes with that
- whats it going to cost to get marketshare
- how much marketshare do you need to survive
- whats the growth predictions for that geographical region
- can you buy an existing shop
- whats the price difference between your startup and buying your competitors ongoing operation
- can you afford additional competitors entering the market after you open
- is your market subject to economic sensitivities
- is the web going to impact your sales
- what is your supply chain timeline (same day, next day, a week away)
- what do your suppliers stock
- will you hold inventory or order as needed
- do you have an attorney
- do you have standard terms of trade
- do you have an accountant (not just for taxes but for advice)
- do you have a personal relationship with a small local banker
- have you written a business plan - do you have an exit plan?
- have you created pro forma financial studies for success, break even, and failure models
- have you explored both fed and state employment websites for employee rules
- can you outsource things and do you have those connections
- what will your store/shop look like to the customer and to your staff (sales end and production end)
thats just off the top of my head.
its not very daunting, if you take a few weekends you can fix most all of that.
define your IDEAL clientele - what do they buy? why do they buy it? do they get it already? what do they pay (the average purchase is critical data)? what can you do to attract them? then get demographics and map where they are - firms like infoUSA let you do that online for free by yellow page market sector and industrial code.. itll give ya an idea of ahts out there. and if you want to buy a mailing or lead list thats what they sell.
define your business site and market model - industrial shop or retail store - your location will determine your clientele - the average retail shopper only travels 5 miles- so a retail location must have high population, visibility, and traffic to match the shopper patterns. You can get info about this from the SBA's website.. Retail stores like fastsigns are based on high traffic retail, large electric shops are industrial and based on a sales force going to clientele. They dont make the same product.
interview some real estate agents. youre likely looking to lease. Make a friend in the real estate office and ask them to be your agent. the single biggest failure of small businesses is a bad lease or location so you'll want to know whats available in your market and what the property owners are looking to get... You'll be negotiating an ongoing major expense in the form of a legally binding contract for years.. you'll need to learn about NNN, Gross, CAM fees, local taxes / fees that may be your responsibility just to start. a bad lease can kill your small business, a good one can have months of free rent to get your feet planted..
PRO TIP: add a clause for economic downturn or disaster - you need to have 90 days rent free followed with at least 6 months reduced rent to survive a disaster - be it from hurricane or the economy. Even a local issue can kill you - I once lost a $1.5 million per year shop to a contractor digging up the power lines and electrifying our intranet - he was uninsured.
How much space will you need? Retail sign stores are typically around 1500 sq ft and they produce $150-$325 per sq ft sales per year. can you do that volume with the average purchase level you have now? industrial sign shops start out around 2400 sq ft and should perform from $100 to $500psf/yr or better. Theres more flexibility to make more money from larger industrial projects, but you have the cost of outside sales, prospect creation, and a cap on shop space.
Can you expand in years ahead? Imagine you're in year three and busting at the seams in your store, you need room.. can you take over the next door space, or is it leased for ten years? Moving an ongoing sign/printing business will cost you 20% of your clientele permanently, and reduce your sales by 50% for 6 months or better. the only move that ive seen work is a well orchestrated growth move into property you buy.. and then only because the efficiency of the new shop and the lower mortgage vs rent is the offset to the sales damage. Expansion is a viable issue to consider in site selection.
PROTIP: moving a sign shop? concentrate your sales staff to existing customers to build excitement for 6 months prior and to build your cash reserves. make the move well known at both ends - old and new. Establish two shops during transition and crew them both. Get production at speed in the new shop and then keep the old office staffed for 60 days after. Host a new shop party for your clients. Expensive, yes but it'll keep all your clientele.
will you call on prospects to grow business? if so, you need to plan a sales rep salary into your model - if not its going to be all you - do you like selling all day?
do you handle rejection well? Do you do this trade because you like the art side.. if so the sales spot will suck after a while.
For some performance metrics: the ratio for successful retail sign shops to minimum general population is about 1:25,000 where there is a typical commercial center to the community. So in a town of 25,000 you'll likely find one sign shop and not enough business for a second. There is additional room for competition when a community hits the 1:40,000 mark if the town has a booming commercial town center. Conversely - Price wars start as the ratio falls below 1:20,000 and aggressive competition is 1:12,000.
Bedroom communities without the downtown center skew to 1:50,000. Electrical shops 1:125,000.
brain dump over. hope this helps.
i learned theses things from using the Small Business Development Center in my community. Theyre part of the SBA. Google SBDC and your community or state.
demographics and economic studies of your community
American FactFinder - Community Facts
also browse SBA website
Starting & Managing a Business | The U.S. Small Business Administration | SBA.gov
for additional advice seek out the service corp of retired executives - SCORE @
SCORE | Free Small Business Advice
