- For small online retailers, it´s best to spend the first two years at a private location before moving into commercial or warehouse space
- Competition and demographics are the core determinants of the moneymaking potential of a new retail location
- Your business is not your ´child.´ Know when things are not working out before you accrue business expenses as personal debt
HJ Ventures International is a consulting firm that specializes in toy store startups. Howard Schwartz, the company´s managing director, has useful advice for entrepreneurs ready to take the risk of expansion.
TDmonthly: Tell us a little about your background.
Howard Schwartz: I spent seven years in the video game industry (Sega, Acclaim, ASC Games), and I have always been interested in the toy industry as a collector, number one, and number two, for licensing opportunities into the video game market.
TDM: What services do you provide?
HS: Our team develops business plans for companies starting up and then seeking capital. Our business plans are typically used by small business owners to approach venture capital and angel investors or bank loans.
TDM: Applied to Internet stores, at what point is warehouse space a warranted expense?
HS: For most of the small businesses that we work with, they do not have warehouse space and operate out of their homes to start – for the first one to two years. At that point they can look towards additional space. The companies that we work with that already have retail space typically run their online business out of the retail warehouse.
TDM: Applied to traditional stores, when is it time to move into a larger space?
HS: In this market I think it is critical for small companies to watch their expenses and growth plans. The market is still challenging.
TDM: Applied to multiple store chains, how does an owner determine what is a potential moneymaking site?
HS: This is based on two items: competition and demographics. One, if there are three other small "Mom and Pop" stores in the same town and a large mall complex with the "giants" all within twenty miles, this is a difficult place to look to opening a new location. Two, I would not want to be selling transformers and baseball cards in a retirement community in Boca Raton, Florida. You want to make sure that your target customers can easily reach the store. Is it close to a high school? Is it close to a pizza shop or movie theater where families are already visiting?
TDM: If a store´s sales are questionably low, how long do you allow the figures to remain low before closing?
HS: Don´t stay on a sinking ship! Your business is not your "child." What this means is most small business owners do not know when to quit. They hold on for dear life while their personal assets dwindle, since they wind up funding payroll and rent personally. It is very difficult to look in the mirror and honestly say things are not working out and it is time to move out. Too often, small business owners wind up in debt and then are forced to close the store. So they lose the business and then are personally responsible for the debts for years, sometimes decades after.