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Setting up a retail outlet...risks??

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  • 01-05-2012 10:09pm
    #1
    Zipppy
    Registered Users Posts: 2,054 ✭✭✭


    OK so you decide to open a retail outlet having done your home work, estimated your customer base, eyed the competition and reckon you can be a success.

    Suitable premises become available...time to move...

    So you take out a lease (how long for?) pay rent, rates, insurance, renovate and stock your shop..and start to trade..

    XXX months later things haven't worked out and you need to close....

    WHat do you stand to lose???

    Every month I see retail outlets opening and closing again after a certain length of time....are they all losing a fortune??

    OK so you put your own money up front for lease (can any of thsi be recovered)

    You borrowed to pay for renovations and stock etc...I assume you are stuck with thsi loan??

    Any advice heer would be great :)


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    #2
    TheCostumeShop.ie: Ronan
    Company Representative Posts: 1,740 ✭✭✭TheCostumeShop.ie: Ronan


    This is way too vague for advice here, could you be more specific? Periods of rent can be from a month or two (pop up shops) to 20 years, the last retail lease i did was for 10 years, with a break in year five.

    Depending on the strength of the company you may need to loan funds, if your a start up or have little track record you most likely will be asked to sign personal gaurantees. Landlords can also be desperate in some regions and may be willing to share some risk on the lease length risk just to get someone in the doors.

    A rent free period to get the business up and running is common place nowadays.


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    #3
    DubTony
    Registered Users Posts: 3,269 ✭✭✭DubTony


    With retail sales (at least bricks and mortar retail) having, if you believe Retail Excellence Ireland, effectively fallen for 40+ consecutive months, any retail outlet is a risky proposition. So you need to protect yourself from the risk as much as you can.

    If you've got money to invest, that's good. You should be prepared to accept that you may lose it. You won't be able to borrow anything without a personal guarantee, which will put you on the hook personally should the business fail.

    Up to a couple of years ago, landlords would expect a personal guarantee as well, so if you broke the lease, you were on the hook for the rent for the term of the lease. Its somewhat different today as Ronan outlined.

    My personal opinion is that you should not sign personal guarantees under any circumstances. If your business goes under, the stress is bad enough without having the potential of judgements against you for debts you possibly cannot hope to ever repay.

    It obviously depends on the retail sector you're looking at. If it's an accessories shop e.g. Claire's, you're investment is in a few hooks and some slat wall. If it's a convenience store your investment will be in the tens, if not hundreds of thousands for shelving, EPOS, and refrigeration.

    Simply put, what you have to lose depends on how you set it up.


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