Yaneek Page, Contributor
QUESTION: I am writing to seek your advice as it relates to starting a business of my own. My interest is to venture into clothing or a wholesale. Presently, I'm in debt and I'm not coping well financially. I am the owner of two vehicles and I usually rent one for additional income. However, unfortunately, the car was in an accident and since then the business has become dormant.
I'm thinking about selling one of the vehicles to offset some of my debts and I am also interested in embarking upon business. I recently checked out a space in the downtown area that is renting. The rent is $94,000 monthly and I believe that a wholesale would be convenient at that location although there are many in the downtown area. I need you to help me make a decision. Do you believe the rent is too expensive? Could a business there be viable?
BUSINESSWISE: The advice I'm about to give may not be too pleasant for you to swallow, but I promise it will save you considerable stress and unnecessary financial losses.
Your case is a classic study in 'how to set yourself up for start-up failure'.
Thankfully, it's not too late to turn things around but first I need you to understand what you're doing wrong and how to remedy it.
Some of the major mistakes you're making are:
1. Venturing into a highly competitive business with no industry knowledge or experience;
2. Identifying shop space before you have outlined a basic plan of action — to make matters worse you're considering a volatile area, with significant security risks and an unorthodox retail business environment, to put it mildly;
3. Embarking on a business without any evidence you can make profits and without knowing the start-up and operational costs;
4. Selecting a business without any evidence of a viable market;
5. Starting a business you're not passionate about — because of column space constraints I couldn't publish your entire email, but you noted that you desperately needed to start earning to get out of the debt rather than having identified a good opportunity and fit for you;
6. Entering a cash intensive business with limited cash on hand and no financial plan; and
7. Underestimating your competition, that is, attempting to open a wholesale on a shoe-string budget which will compete directly and in close proximity to large, established competitors.
HOW TO TURN THINGS AROUND
The first thing you need is a good understanding of the business start-up process. You can read my article titled "7 Essential Steps to Business Start-up" which can be found at http://jamaica-gleaner.com/gleaner/20130127/business/business6.html.
The next things you need are financial forecasts which will help you determine whether/when the business will be profitable, how much money you need to start-up and keep it going.
These forecasts are profit and loss, start-up costs, and cash flows. There are software programmes and websites that you can use to prepare this information such as Microsoft Office 2013 and http://www.score.org.
However, because this is a technical process that requires reliable data and strong business/accounting expertise, I recommend getting external help.
If the financials are favourable and you have adequate funding, then you must take the time to learn as much as possible about the wholesale business. In particular what you need to do to be successful and what are the main risks involved.
I can tell you that this is a very capital intensive business that requires vigilant and consistent hands-on management. Security, pilferage, inventory management, human resources, competition, supplier & supply chain management are challenges you will need to plan for.
The next steps should be researching and understanding your market, studying your competition and creating a unique selling proposition (USP).
The USP is what makes you stand out from the competition and why your customers will want to buy from you.
After this you can determine the ideal location for the wholesale - if that happens to be downtown Kingston, then assess the options and compare rental rates. It may well be worth it to pay premium price for the ideal location which provides the necessary 'foot traffic'. Carefully assess the risks of your location and identify strategies to manage the most hazardous.
I have given you a lot to chew on already but the other key actions are assessing your own skills and passion for this venture and detailing a plan of action for the business.
There's a common saying that if you fail to plan, you're surely planning to fail. This is definitely true for business. Good luck.
Yaneek Page is a trainer in entrepreneurship and workforce innovation. Email: email@example.com; Twitter: @yaneekpage; www.theinnovatorsbootcamp.com.