When you are renovating your business, there are a lot of things to consider. The chief concern is your budget. Do you have the sustainable growth to justify the investment in renovations? New tables, new computers, and adding additions onto a business have to pay for themselves quickly. Let’s consider all the factors of when to renovate a business below.
Business Solvency
Businesses should never back themselves into debt because liquidity is more important than the size of a business or the quality of its buildings. Customers will frequently attend any hole in the wall or pay high prices for services or goods that are of a high quality. The form of a business should always follow the function. Retaining solvency and balancing liquidity with debt is critical to a business’s long-term survival.
Is Low Startup Investment Coextensive with Explosive Growth?
Although it takes capital to start a business, a quality business idea requires very little capital. The less capital that your startup needs, the better the chances for explosive growth in the future if customers are demanding the services from the door.
There are many areas in the country where the competition is too fierce. In order to attract any customers, you have to invest a lot into brick-and-mortar business fronts to even be taken seriously. When you have to invest this much capital for location, it usually means that the location, overall, is pretty bad.
A region where you have to invest in high capital for rents is never good. You should always pay the price for expanding your business only when the business profits are flooding in to pay for it. This is why so many companies have strategically outsourced production to third world countries.
The mistake that many business owners make is the “Field of Dreams” mentality. They may think that if they build it, people will come. This is not always the case. And even if it is the case, the market must be pretty tough if you have to invest so much in infrastructure to attract customers.
Comparing a Big Rig to Business Renovations by Analogy
Expanding the capabilities of your big rig is the perfect analogy. In the world of tractor-trailers, the loads that truckers can carry is limited by the axles. The states set limits on the gross weight that can be carried per axle. Tires have similar weight limits that they are rated capable to handle.
In order to deal with this limitation, truckers purchase something called a flip axle trailer. These axles can flip up when truckers aren’t using them to increase fuel economy and flip down to handle heavier loads when required.
When Are Business Renovations Absolutely Necessary?
Business renovations are most needed when the business is in danger of being shut down for safety violations. If the infrastructure is unsafe, this creates a fundamental duty to invest in renovations or to otherwise relocate or scrap the business. In almost every other case, a business renovation should follow record profits before expanding into other stores or areas.
Of course, there are situations where a location has a lot of value and reputation in the community. The owner may choose to expand their workspace to accommodate more workers and handle a higher volume of work. However, this should only be done when the costs make sense and the profit potential greatly outweighs the burden of frozen capital.
Why is Excessive Capital Bad for Business?
The biggest mistake that many entrepreneurs make is taking out a business loan. While a business loan may seem like a good idea, it can curse business owners with the Howard Hughes complex. The mentality of every rich man is that they can solve any problem by simply throwing money at it. “The rich man is wise in his own eyes.” The runaway spending of the Spruce Goose is the perfect example of how foolish this is.
Any viable business will be at your fingertips without much investment. It is knowing how to invest your money smarter that is important. You don’t want to waste money on flooding the market with all sorts of excessive advertising. Targeted advertising to the right demographics is going to provide the best ROI (return on investment).
In the world of business, the ultimate goal is to make money. If you have to spend too much to get your foot in the door, the business strategy, itself, is weak or lacking. And businesses that require excessive capital investments are also problematic because you wind up putting any profits that you generate back into the business.
When you are focused too heavily on fighting to keep your business relevant in a monopolized market, you walk away with nothing. You find yourself throwing ideas at the wall to see what sticks and making marginal gains on each front. In fact, having too many products and expanding your product lines too greatly can confuse customers and make them walk away from an easy sale.
A Business Must Be Considered From All Angles
Having experience in business, knowing what works, and following all the right avenues is what makes a legitimate business. There are so many angles to starting up a successful business that have to be addressed.
It can be hard enough to find the right wholesale suppliers to make a venture profitable. If you don’t have the advantage that other retailers in your industry have for heavily discounted products to stock, you will never make it.
Conclusion
Renovations are one of the last things that any business needs. And when a business invests in renovations, they better have a strong functional value, like a big rig flip axle, if they are tying up excess profits that could be used for other ventures.
