Starting a new business with a bad credit rating.

paulwf

OP don't forget there are alternatives that would put the money to good use. £20K would allow you to get a lot of training and qualifications. You could also use it to relocate to an area where there may be more job opportunities.

Opening a business isn't a fast process as bank managers, solicitors and landlords work on glacial timescales. Some things can't be rushed and it could be easily 6 months before the business opens by which time you will have used up more of your capital. It also isn't a good time to open a business, most small business owners I know are planning to just ride it out for a year or two and see how the economy goes before expanding.

A business should be started because you have a passion for it, you can see a gap in the market and you can see a way to make a profit. So far OP you come across as someone with some money burning a hole in their pocket and you're looking for a sector that doesn't require any skills, you even admit your business model is poor. That may sound harsh but I say it because I don't want you to waste your money. As above you can put it to good use elsewhere. Don't forget once you sign a lease the worst case scenario isn't losing the £20K and being back to where you started, the worst case is being tied into a lease for many years with a rent you can no longer pay and ending up bankrupt.

pitkin2020

paulwf wrote: »

OP don't forget there are alternatives that would put the money to good use. £20K would allow you to get a lot of training and qualifications. You could also use it to relocate to an area where there may be more job opportunities.

Opening a business isn't a fast process as bank managers, solicitors and landlords work on glacial timescales. Some things can't be rushed and it could be easily 6 months before the business opens by which time you will have used up more of your capital. It also isn't a good time to open a business, most small business owners I know are planning to just ride it out for a year or two and see how the economy goes before expanding.

A business should be started because you have a passion for it, you can see a gap in the market and you can see a way to make a profit. So far OP you come across as someone with some money burning a hole in their pocket and you're looking for a sector that doesn't require any skills, you even admit your business model is poor. That may sound harsh but I say it because I don't want you to waste your money. As above you can put it to good use elsewhere. Don't forget once you sign a lease the worst case scenario isn't losing the £20K and being back to where you started, the worst case is being tied into a lease for many years with a rent you can no longer pay and ending up bankrupt.

Kind of reminds me of the story of the old hot dog vendor

There was this elderly man who had a profitable little business selling hot dogs on a busy street corner in a major city. He wasn't particularly well educated, but he sold great hot dogs and his customers loved him.

During the early morning rush hour, he'd wheel his mobile hot dog stand to position it near the exit of the central railway station in town. A year ago he'd added a bacon and egg roll to his range and sold scores of them to this breakfast crowd every day. At lunchtime, he'd move his stand to a popular park where he had lines of regulars.

In the afternoon he'd be back at the station entrance and then later most nights he knew a great spot near a nightclub where patrons rushed him off his feet. He had even installed special lighting and a flashing neon sign. Even people driving by would stop.

He'd worked hard for years and done well enough to put his only son through university who later became a management consultant with a large firm. One day his son warned him that a recession was on the way. The old man asked his son what this meant. Being an educated man his son gave a very detailed explanation of how the recession would severely impact every person in the community, particularly small business people like his father. There would be enormous unemployment; people would not be able to afford to spend money as they did now. He painted a gloomy picture of the future and warned his father that it would be wise to cut back on his expenses and "tighten his belt" financially and prepare for the worst. The old man didn't know much about the economy or interest rates, but he trusted his son. After all, he was an educated man. Recession mentality kicked in.

The old man began to cut back on the quantity of sausages and bread rolls he bought. He didn't want to get caught with stale rolls as business began to drop off. But it was hard to judge and some days he actually ran out of sausages and rolls earlier than he normally would. So he went home early and spent more time worrying about this recession that was coming.

Soon he knew that what his son had said was right. He noticed that his takings were indeed falling. This depressed him more and so he tended to get out of bed later each day. After all, why get to the station so early when obviously more people would be eating at home rather than spending money on breakfast in the city. He decided that his bacon and egg rolls were too expensive for most people now. After all, they were twice the price of a hot dog, so he cut them from his menu and his sales continued to plummet.

Wow, his son was right, this recession was hitting hard!

He decided to save more money and not replace the batteries that powered his neon sign and lights at night. Now because he was in the dark, fewer people bought from him and soon he decided that it wasn't even worth his time setting up at night. Eventually he decided to sell off his equipment and his trolley. He was in luck though because the woman who bought his trolley didn't seem to know how bad business was, or how severe the recession was going to be. He managed to unload the trolley for more than he thought he would get. Now day after day he stayed at home, depressed, and occasionally his son would visit him and they would discuss how bad the recession was, and how lucky the old man had been to have an educated son who had warned him in advance about this terrible recession. So what's the moral of this story?

Recession mentality starts in one's own head. If you believe that a recession is coming and that times will soon be tough, then they will be for you. Like the old man in the story, you'll start to change your successful behavior patterns and replace them with less resourceful habits. You'll sleep in later. You'll take longer lunch breaks, make fewer phone calls, generate less e-mail, and go home earlier.

But it needn't be that way.

Mistral001

Good story and very applicable to many people in business. You always have to keep service at the standard that customers expect or you lose them quickly.

I am not sure if it applies to the OP as he is just starting out in business, but it is worthwhile to note that you always need some spare cash to take you over those bumpy periods and not let the service to customers drop.

Savvy_Sue

I'd say the key things to take out of the hot dog story are to start small, start adaptable, and start with passion! Which could be hard to do with a newsagents ...

pitkin2020

Savvy_Sue wrote: »

I'd say the key things to take out of the hot dog story are to start small, start adaptable, and start with passion! Which could be hard to do with a newsagents ...

I agree with all of that except the last part, whilst a newsagent is never going to blow your socks off with excitement its what you make of it. If you give it all you have got and the attitude to enjoy it you will, its just keeping that momentum of enjoying it when your sick, tired and fed up but that goes with all business ventures even the fun ones!!!.

Savvy_Sue

pitkin2020 wrote: »

I agree with all of that except the last part, whilst a newsagent is never going to blow your socks off with excitement its what you make of it. If you give it all you have got and the attitude to enjoy it you will, its just keeping that momentum of enjoying it when your sick, tired and fed up but that goes with all business ventures even the fun ones!!!.

sorry, was typing in haste therefore slightly abbreviated.

I'm sure one could open a newsagent with passion. I'm not sure one could start small and sufficiently adaptable - to a certain extent I feel that with every corner shop you pass offering a much wider range of goods than used to be the case, it could be hard to be like the hot dog vendor and limit yourself initially then expand gradually.

For example, we used to live within a minute's walk of 3 stores: one had been a greengrocer, one was the Post Office and newsagents, and another had been the butcher. All 3 then sold milk, bread, basic groceries, but if you wanted decent veg you went to the ex greengrocer, and if you wanted decent meat you went to the ex butcher.

There's 2 left now, the greengrocer went a few years ago. Both are now licensed, and I think only one is a newsagent, but apart from that you'd be hard pressed to find something you could buy in one but not the other. The choice of meat is better in the ex butcher's, and the other offers a wider range of chocolate (they've always been famous for it!)

5 and 10 minutes away you'll find two more corner shops. Both are newsagents. One is more 'up-market': if you want olives or home made cakes you'll go there first, for example.

On my drive home from work, I pass several other corner shops, and a couple of garages. If I want milk or bread, I have many choices, including options for organic milk and 'craft' bread.

Now, I fully accept that the OP may have identified somewhere which isn't near any other shops, and it may have enough footfall to make it a good prospect, BUT it's got to compete with all the other shops and garages which people are going to go past on their regular routes. And unless it's in a particularly deprived area where very few people have cars, then their regular routes cover a very wide area. If it is in a particularly deprived area, then that raises a whole heap of other issues!

BTW, one of DS1's friends has just opened a newsagents. I said "I bet that's hard work", and DS1 said it was. They might make a go of it: this lad was always a bit 'obsessive' about things, so I know he'll have researched it to the nth degree. One of BIL's friends also runs several corner shops, but he's done so for years, and can call on an extended family to help run them: even so life's not easy.

paulwf

Sue makes a good point, round here in the last 5 years the number of "express" stores by various supermarkets has gone through the roof and as the shops in the suburbs have closed more and more have reopened as convenience stores. There are a ridiculous number and most seemed staffed by a single person doing very long days.

I think the future is to look for a niche that not many others are doing that that requires a particular skill. Anyone can get an account with Bookers/Costco/Makro and fill the shelves with some groceries and veg, find a business idea that has a barrier to entry (i.e. you need a skill and passion) and then you'll have a lot less competition.

Savvy_Sue

paulwf wrote: »

OP don't forget there are alternatives that would put the money to good use. £20K would allow you to get a lot of training and qualifications. You could also use it to relocate to an area where there may be more job opportunities.

I know if I had a young child (once upon a time I had 3!) I'd give a lot of thought to these suggestions, rather than sinking all my money and - more importantly - ALL MY TIME AND ALL MY DH'S TIME - into a new business, at least a new business like a newsagent or a takeaway which WOULD mean horrendously long and antisocial hours. Especially if I had any thought of having any more children, or there was the least little risk of having any more children. Although frankly I doubt you'd have much sex life.

It's a cliche, but, no-one on their deathbed ever said "I wish I'd spent more time at the office".

clb, I know you say you haven't got any bright ideas, but take a deep breath, and think what you'd really like to do for a living. Initially, don't think about the obstacles: pretend money's no object, that you'd be able to get any qualifications you need, that premises would fall into your lap. Get your DH to do the same. See if you agree on anything. THEN work out what the first step towards that would be.

clb776

Savvy_Sue wrote: »

clb, I know you say you haven't got any bright ideas, but take a deep breath, and think what you'd really like to do for a living. Initially, don't think about the obstacles: pretend money's no object, that you'd be able to get any qualifications you need, that premises would fall into your lap. Get your DH to do the same. See if you agree on anything. THEN work out what the first step towards that would be.

Thanks for this. I really think this is what I need to do. Instead of getting bogged down with the idea of what I can do (I would have support of a friend who runs a newsagents in the area to get me started..ie stock, which lines to sell, suppliers contacts etc. However I do know that the kind of shop I am looking to run would be quite different from theirs. I also do not want to rely on this to much either!). I really need to think what I want to do, and where I want to be in a few years time! A life plan!

I have just started a degree with the open university, and I do volunteer work in a charity shop (keeps my references up to date/my skills refreshed and I get out of the house! Incidentally there is another volunteer there who finished a degree last summer and still cannot find a job (even a little one! so many people apply for the jobs, and they deem a graduate as too over qualified for the roles/only doing it as a stop gap kind of thing!). I also apply for jobs, hand out my CV etc regularly!

I do love retail. I have worked in shops from independant to supermarkets. The putting out stock, making the shop tidy, chatting to customers etc! I'm not sure if I would enjoy all the bad things that would come with it though (and I expect with other businesses!) which would be the possibility of not having a wage at the end of the month, the paperwork, long hours and all the admin bits.

I think my real passion is 'customer service'. I love helping people/chatting to them/problem solving/knowing my job inside out kind of thing!

I also know that if I don't take a risk, I will never know! But then theres a lot to be said for playing it safe!

I would like to thank everyone for their comments. I have definately thought about things in a different way, and am going to seriously sit down and work out what I want to do. I am also looking for somewhere cheaper to live (although already live in pretty cheap accommodation for this area!) because whatever happens, that can only be a good thing!

pitkin2020

I don't really disagree with any of the points raised, the positive and negative. You could start a business, you could gain qualifications and work for someone. Working for someone else is the easier option no doubt but not be as satisfying. 20k could even be invested.

Running any business is hard work, especially the first 2 years atleast. Which hopefully after that time you have built a reputation and you have a decent customer base to continue building on. Your either then not running around like headless chicken doing 80-90 hours a week minimum or you can afford to take on staff. The sky is your limit with a business, your salary working for someone else is set by them!!

Due diligence is always needed of course when starting any business, don't be deterred to starting a business because of all the negatives though. This thread has brought up a few of those negatives which is good as most maybe things you have overlooked but work through each one and work out if they are negatives for you proposed business or not, but be honest. If you can't be honest with yourself now you'll be walking into a venture with the blinkers on spending cash left right and centre.

Going by your original idea my main concern would be, I am thinking of opening a newsagents, and have seen a unit in a heavily populated residential area, with no other shops around and 2 schools nearby. Why is there no shops there already?? Its very easy to see such a gap in the market but miss the real reason as to why that gap may exist. I would strongly investigate this before deciding. It could be anything from the unit rates being very high to planning permission going through for one of the supermarket stores very locally.