Even before the pandemic, more small businesses were closing than opening. Now that a return to a ‘more normal economy’ seems to be on the horizon – fingers crossed – it might be a good time for small workshop owners, entrepreneurs and managers to think about the business reasons your shop might fail, and how you can avoid them.
1) Starting a workshop without enough capital
The world is hard on start-ups, and in many ways small businesses like workshops will all be starting over this year. On the simplest level, you need to have the money already in the bank to keep spending at full capacity until your customer base becomes self-sustaining again.
Unless you’re one of the lucky few who have remained profitable without grants, furloughs and the like, you’ll need to make sure you have the cash in hand to support all of your workers and keep ordering materials and parts until your customers start paying their bills. It might not be fair, but that burden is going to be on you.
If you’ve taken a loan to get started again – as many have – you’ll also have to keep enough in the bank to make those payments.
2) Not having a realistic –or sufficiently updated – business model for your workshop
If you are just starting a new workshop, you need to be sure that your vision of a profitable business is a realistic one. Again, this means looking at the money situation. If you’ve gotten past number 1 above, you’ll still need to turn a profit before you run out of capital – ideally, long before. So do the maths.
- How many customers can you really serve in a month?
- How much are they likely to spend?
- How much of that spend will actually be profit?
- Have you considered those who just won’t pay?
- Is what’s left enough to pay both your own salary and any debts?
If you’re re-starting a workshop that was doing well before the lockdown, or trying to ramp up business on one that stayed open, you still need to make these assessments. The economy 2 years from now won’t look much like the economy 2 years ago. If you don’t update your business plan, you could regret it.
3) Jumping in without a market – or restarting a workshop when the market has moved on
If you’re opening a new workshop or getting back into the game after a pause, know that it is a cut-throat world out there. There will be new people entering the market for workshop services but there won’t be a lot of them, at least not straight away. That means you’ll have to actively lure business away from someone else, and they might be a much larger operation. That can be good and bad for you. Play to your strengths, but be prepared for your competition to play to theirs.