Monday, October 6, 2014

Operating costs do rise

 I'm fairly sure I've mentioned before that as I dump/bleed/unload my thoughts here on this blog, that some posts may be relevant to certain people and others may not connect with that particular bit of info at all. I'm not doing separate blogs for those who may care like I do about being loyal to local businesses, or those who are small shop owners, or for those who may simply be curious. Most of my entries are about a specific topic or issue and this one may be more geared towards other independent owners or those considering a storefront. Think carefully before you get into something that you may not have added up all the costs for.

People ask me often - too often, perhaps - for specific reasons I'm closing the store. It's far to complicated to put into words honestly, as there are a number of reason, factors and causes for this decision. Many folks seem to enjoy speculating for possible causes and reasons, and tied for first place in how many times I've heard them, the two top guesses are A, the rent was raised or B, I'm retiring. At 43 option B is not in the cards....or perhaps that's meant to inform me I look far older than 43. Option A is not quite correct either because it wasn't specifically the rent; it was the "other fees" that have been adding up. And by adding up I mean increasing as well as new costs that have appeared out of thin air, sometimes creeping up subtly until one day you sit down and really look at what it's costing to have a storefront. Of course, if you own the building where you operate you are far ahead of the game as each mortgage payment is an investment rather than a drain.

Rent is spelled out in a lease which lasts a year, two or more. Mine has crept up a little over the 19 years but not much, so it's the other costs that have started to take a bite out of profits. Most owners have a "CAM" (common area maintenance) fee which covers trash and upkeep around the shopping center or complex. Mine at one time was $300 and it's safe to say that as of 2014 it's increased somewhere around 12 times that amount. Things cost more and many increases are understandable but a few years ago, due to expenses, our trash cans were removed from the facility - the ones that customers would use for a coffee cup, etc. We were told it was no longer affordable to have individual receptacles and without them - well, people drop their trash in potted plants, corners, just about anywhere. Of course visitors are not going to hike to the end of the parking lot to find the dumpster so it seemed unfortunate that this happened. And our fees didn't decrease; they continued to rise. I think something so basic annoyed a number of merchants because suddenly we seemed like evil little people expecting garbage cans to be available for our customers.

In our vacation town, a charge termed the Gross Receipts tax had been in place for those who rented out homes to summer visitors. I can see how that fee was charged to those who collected the money, i.e., the homeowners, but it wasn't levied against vacationers. Yet about five years ago when the town felt that all rental arrangements should pay this, including businesses who rented a storefront, the fee came directly to us, the merchants. It still doesn't seem quite right to me since I'm not the one profiting from rental of a space, but the motion passed and an additional $360 per year was tacked on to the bill upon renewal of a yearly license.

Business license for the state is $75.00 and for the town is $196. Insurance rises every single year whether or not a claim is filed. And workman's comp has it's own separate blog post a few weeks back that you can read to see how that went for me and why I ultimately lost it. A few years ago when the decision was made for the shopping center to convert from it's well to town water we were all assessed an additional fee. And yet with a rental property that our family owned, when the property was improved those costs weren't passed on to the tenant; it was our investment.

There are so many things to consider when operating a business and expenses are perhaps the biggest issue. But it's important to think about how much of the additional expenses you can legitimately pass on to your customers - and I'm at the point where I don't want to keep raising prices. Fixed costs are one thing, but those which keep rising because they are outside of the lease - that is starting to irk me a bit.

How much is too much? Well, for some retail stores, such as the jewelry shop or upper-right clothing, they may not feel that increases are a big deal. Compare that to the smaller overall sale-per- customer that a candy shop may have and I'm feeling a bit uneasy. A $750 water bill to improve a property that isn't mine - well, that's a lot of candy to sell. I can't say that my business model is wrong because for so many years it worked. But lately more factors are coming up that make me realize why so many small shops are ultimately closing here. Perhaps we ARE the small potatoes that can't cut it after all.

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