Took a leap of faith and started a small online clothing boutique in 2020. Six month’s later, opened a physical location. Worked hard to keep cost low, cash flow all expenses, did not take on any debt, and the business did better than we anticipated. Beat our initial year sales goal by about $20,000. Quickly grew a good customer base with lots of returning customers.
In 2021, business grew, hired more employees, carried more inventory. In 2022, business kept growing, and we grew with it. More staff, inventory, and profit. For this year, we were a bit slower, not bad. For 2023, up through the first two quarters, we were only running about 3% behind the same period in 2022.
Started noticing a trend of a growing customer base from a “Town B” about an hour away from my physical location in Town A. Comments such as “I wish there was a store like closer to my house” kept being repeated from people who lived around Town B. We occasionally visited this town, and noticed there wasn’t quite anything like my store in the area. Town B seems to be booming. Neighborhoods and subdivisions being built left and right. Town B has a higher cost of living, more upscale restaurants, and is rapidly growing in population. Average household income around this new location was much higher than our hometown.
Made the decision to start investigating opening a second store in this area. Floated the idea to lots of people, and everyone we talked thought it would be a great idea. By all the research and networking I tried to do, I honestly felt like store #2 would quickly generate more revenue than store #1.
We made a plan, and if sales continued like they had the last two years, would be able to cash flow the expense of opening the second location. A spot opened up just in the area we were looking for, but had a little more risk than was ideal for us. Rent was higher (as expected), but the most uncomfortable part was a 5 year lease with a personal payment guarantee. We tried to negotiate that, but the landlord was unwilling. We discussed this, but eventually decided to sign the lease in the third quarter of this year and proceed with opening. Used some business savings to purchase new inventory, signage, buildouts, etc.
Then…it was like someone kinked the revenue hose. Suddenly it seems, total orders started dropping off, average order value has fallen about 30-40%, less people are walking in the door. Even my best repeat customers are starting to cut way back. Overall, total sales are down 16% YTD from last year in Town A. Town B store has only been opened for a few weeks, but today, we didn’t have a single person walk in the new store and make a purchase. Total sales were $0!
I’m starting to go into panic mode. Last year, November and December were the months we killed it. 90% of our net profit came between Thanksgiving and Christmas. However, Black Friday thru Cyber Monday this year were mediocre at best.
Had we not just made this huge new investment, I feel like we were prepared to weather a bit of an economic downturn. However, because of this, I will have no choice but to borrow some money to settle the bills coming due for the expense of store #2.
I do believe that this slowdown is a result of the economy and not something I have changed to cause this. Talking to other businesses around me, most say they are also seeing slowing sales. The stress I am feeling though is real. My body is telling me to jump ship. Do I close my stores and go back to working for someone else? Do I did my feet in and try to hold out? How far do I let this go before I will know?
I could probably talk about this exact issue for hours but there are so many variables without really knowing your store/location, etc. So I will just tell you my stories…
I opened a vintage clothing shop at 23 in my college town. In a 400 sq ft store in the first year only being open 12-6, 6 days a week, I was able to pay myself $70k. So I scoped out a similar situation - big college, 2 hours away, downtown location, good rent, next to a coffee shop…and I got crickets. That shop essentially broke even. Why? Well, I learned that those people already traveled to another city (AUSTIN) for enough reasons including vintage clothing that my store was never going to be as cool, never going to reverse the flow of traffic, and was always going to be a local spot some people frequent.
Lesson learned I guess. I found someone to take over that lease (gets you out of the personal guarantee. I sold the shop for its contents and they inherited one year of blue sky. It hurt, but it was the right move for sure.
Fast forward a year and I sold the other store and moved to Boston for personal reasons. I found a great spot in Harvard Square at 10x the rent of my Texas stores…and I found out that Bostonians weren’t keen or aware of what vintage clothing was. Shocked me as much as you. I went deep into debt, changed locations, and finally the crowd caught up and I started killing it. Just in time for the housing crisis to hit. Assuming it would all be okay, I took on new debt to ride it out. Ended up working 2 years straight, 7 days a week, with no time off and having to lay off all but one employee. Became suicidal. Barely sold the store for its contents to get out of a $50k lease guarantee. Ended up living in a van for a year. Definitely learned a ton about business the hardest way possible.
So I have been taking a break from small business for about 11 years now. The good news is I know a LOT MORE than the average MBA because I personally learned many lessons on my own dime. In the corporate world, I quickly stood out based on my incessant work ethic and ability to see issues on the horizon and plan for them. Ended up going from a social media specialist to a CMO in a decade. I know I couldn’t have done that without everything I learned but would I tell someone else to follow that path? Hell no. I lost a lot of good years of my life trying to prop a once-successful business up and I spent the next decade paying off high-interest debt at jobs I usually hated.
Being a good business person is knowing when to pivot when to dig in, and when to GTFO. Only you know what to do next. I wish you well my friend.
I did an online seminar with about 300 business people on the West Coast when covid hit and I told my story. I had one person whom I struck a nerve with who took the leap and shut down his operation. He emailed me a year later to thank me and told me it was the best decision he ever made and he was watching his other friends suffer. This might be your way or it might not - I’m sorry I can’t tell you what to do.
Small business, B&M retail is just about the worst business to be in right now. People talk about restaurants being worse; I disagree. B&M retail you’re competing literally globally. Food, you’re competing with people within 10 miles, often less.
At this point unless you have a real advantage; I wouldn’t recommend to anyone to open a B&M retail store.
I wouldn’t go that far…there are certainly niche and there are some pure online stores that are building a B&M presence.
However clothing is a different story when companies like Shein, Temu you can order clothes for a few bucks and follow the latest trends on Tik Tok.
I had a friend who had a successful bakery that she opened with very little business experience. She took a business course offered to existing business owners, and she learned a ton. She learned so much that she went back to her bakery and shut it down, realizing it would never provide her the lifestyle she wanted.
She was tired of putting in 60 hour weeks for not a lot of pay while her other skills got her much better paying jobs with less hours.