Having decided to grab the opportunity to extend my store by taking on the neighbouring leasehold property, I really need to know what it means financially.
Pricing it all up
My projected refit investment cost is £72,000 and the rent is going to be just under £5,000 a year for the first 5 years. This means that I am going to put myself on the hook for over £100,000.
To be comfortable with this I needed to put together a business plan. Because I have negotiated a five-year break clause to the lease, my business plan has helped me look at the likely costs and profit needed for success.
On the costs side I know what the first five years rent will be and have investigated the expected business rates, although this could change based on the Chancellor’s announcement in the Budget. The top-up loan I am taking is on fixed terms so that is a known.
Keeping costs down
Power is a variable cost that I can have an impact with the installation of low energy lighting and refrigeration. Our shop-fitters are helping me understand our expected power usage with the new equipment. I am also investigating solar power as I have a suitable south-facing roof at back of the building.
I am initial taking a cautious approach to staffing and waiting to see what we will need with both numbers and hours. My wife Mandeep and I are planning to fill the ‘gaps’ to begin with as we step up our day to day involvement with the business. I do expect to employ extra people, but after our experience over the past couple of years following the Asda store opening I don’t want to get ahead of reality.
Armed with our potential cost profile for the next five years, Mandeep and I need to create a store layout and product mix that will deliver a level of profitability to not only pay for the new costs we are taking on but also give us a reward for undertaking the investment. I will look at this aspect of the plan in my next article.
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