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Advisory Column: Rent a shop or operate from home? A start-up dilemma

Published:Sunday | May 31, 2015 | 12:00 AM

QUESTION: I'm a big fan of yours. Anyway, I just wanted your expert advice in starting a salon on my veranda versus renting a booth? My clientele is limited, but Miss Page I'm certified and unemployed and want something to do! Please help me.

- Tiffany

BUSINESSWISE: Congratulations on choosing to become certified in your field and for taking the initiative to seek professional advice before starting your business. You are already off to a good start.

Deciding whether to start your business from home or rent a booth may seem like a simple matter, but it is actually significant and can have a major impact on the outcome of your salon.

Naturally, your primary concern is revenues, expenses and potential profit. Your main goal is to create employment for yourself. As such, you want to ensure that you keep your expenses as low as possible while you try to grow your customer base so that the business can cover your fixed costs, including salary, in the short term.

In all likelihood, the lowest cost option would be starting your salon on your veranda. However, estimated expenses tell you nothing without corresponding revenue estimates.

Therefore, while it may cost more to rent a booth, you may generate far more from that space than from home, or you may not.

To come to the best decision and increase the likelihood of achieving your goal, I suggest you take a comprehensive view of the situation and then do an assessment.

First, write down your vision for the salon and determine whether you want to pursue this as a serious business or if it will be a filler until you find a job. If you are just trying to fill a gap then you may start small, from home, using a very basic set up, once you've secured the requisite licence from your parish council.

Let me warn you though that complying with the legal requirements will be costly and time-consuming, and it's possible you may be turned down. You can view the requirements for St Catherine here: http://stcatherinepc.gov.jm/services/barbers-hairdressers.

If you choose to pursue this as a serious enterprise then you should reflect on whether you are cut out for running a business. Are you positive, passionate, tenacious, self-motivated, confident, risk-taking, resourceful, hardworking, etc?

If you have entrepreneurial mettle then the next step is to do a course in business start-up. It's a small investment of your time and money but will be invaluable to your development as a professional and along your entrepreneurial journey.

Thereafter you should create a list of pros and cons for operating on your veranda vis-‡-vis a rented booth. You should note that some salons allow for shared booth spaces, where you share a styling chair with someone reducing the rental costs by 50 per cent, until you build a clientele that can justify renting a booth exclusively.

To get you started on the analysis I've outlined some of the pros and cons for both alternatives:

OPERATING FROM VERANDA

Pros:-

n Low overhead costs;

n Easy commute - fewer hours/dollars spent travelling;

n Not having to deal with a landlord/other tenants;

n Intimate setting for customers;

n Lower monthly overhead/fixed costs.

Cons:-

n High set up costs - purchase of tools, equipment, basin, styling chair, etc;

n No signage allowed in residential neighbourhood;

n Location inconvenient to customers;

n Requires additional/new electrical wiring;

n Limited parking;

n Nuisance to neighbours;

n Inability to satisfy legal requirements;

n Loss of privacy - customers visit at odd hours.

OPERATING FROM

RENTED BOOTH

Pros:-

n Low set-up costs - no need to buy dryers, chairs, air conditioning units, etc;

n Faster set-up time;

n Access to foot traffic;

n Ability to erect signage;

n Good location and facilities for customers;

n Easily satisfies the legal requirements.

Cons:-

n Higher monthly overhead/fixed costs;

n Increased competition from other booth operators;

n Noisy surroundings impacting customer experience;

n Potential conflicts with landlord or other tenants;

n Longer commute.

You should also prepare some financial projections for each option to allow for further comparison, this would include projected set up costs, projected cash flow and estimated profit and loss.

Only after analysing the financials alongside the pros and cons will you be in a position to make the best decision about the location from which you should operate.

I've given you many factors to consider and much data to gather but this is the nature of smart & effective decision making in business. In fact, established businesses tend to use more complex tools, such as decision matrices, cost-benefit analysis and decision trees.

Note that the real work will begin after you have made the choice. Thereafter, you will need to think through and document a plan with detailed actions you must undertake to make the business viable.

You will want to outline your value proposition, services, marketing strategy, innovation strategy, operational procedures, human resource requirements, financial plan and more. If this sounds too complex or laborious then you should reconsider operating the business and put more effort into finding a job.

If you've been following this column you will know that I don't encourage starting a business just to create a job. That's usually a recipe for disaster. You should only start a business when you've identified an opportunity to fill a need, solve a problem, service an identifiable and viable market, and so on. I wish you the best of luck.

One love!

n Yaneek Page is an entrepreneur and trainer in entrepreneurship and workforce innovation. Email: yaneek.page@gmail.com. Twitter: @yaneekpage

Website: yaneekpage.com.