GoHuman Blog

“It’s habit probably. People like to stick to the places they know,” I said, not wanting to put pressure on him.

“It’s a shame really,” he continued. “We all go to that overpriced deli down the road, instead of trying nice wee places like this – and then the wee places just disappear!”

Ah – some insight into what new business owners are up against, I thought. I launched The Flavour Co almost exactly two years ago, and it’s only in the last few months that groups of kids in from the local secondary school have started coming in for their lunch – the younger ones, who have just come up from the primary school nearby.

It’s a reflection of adult behaviour – we’ve had regular customers since day one, yet I feel we’re only just beginning to become an established fixture in the area. And I’m still not sure if the shop will survive!

Although my shop is regularly full of customers, it’s hard to make the books balance. We need a more consistent flow of customers. Passing trade often just passes us by because the shop is so small.

In addition, people are spending less due to the recession – we’ve had to delist some of our more premium lines. Our margins are good, but you need to make a lot each day to cover the overheads.

I often wonder whether things would be easier if I’d managed to lease a bigger shop. But that can bring its problems too. This is obvious from the number of larger cafes that are closing down. One day they’re full of customers; the next day their windows are pasted up.

Here’s an example that might explain why so many apparently successful retail businesses are having difficulties.

I recently read an interview with the owner of a coffee bar that had been launched around the same time I launched The Flavour Co, but in a different town. It’s much bigger than mine and according to the owner it has an annual sales turnover of £320,000 a year, which seems like a dream to me.

It’s situated quite close to the city centre, unlike my café/juice bar which is in the west end of Glasgow, close to the university but not right in the centre of town.

The owner of this café has 12 staff working various shifts, and they will be needed as the café serves food as well as several hundred coffees each day.

500 coffees over 10 hours would mean you have to make coffees at a rate of roughly one a minute.

According to the owner, the money doesn’t go far enough to pay his key staff what he thinks they are worth, or to give him a decent salary. I found this surprising, so I decided to do a rough breakdown of estimated costs.

Coffee sold in coffee bars is known to have a very high margin, but this particular coffee bar specialises in high quality coffee and also offers food. There will be some wastage. I would estimate the cost of the stock at 25%, or £80,000 for the year.

That would leave £240,000.

VAT (value-added tax) is chargeable on restaurant and takeaway hot food at a current rate of 20%. This would take £48,000 away from the turnover, leaving £192,000.

Given the central location and size of the café, and the advertised rent of a retail unit on the same street, I would be very surprised if the rent and rates combined came to less than £50,000 a year.

That would bring the annual takings down to £142,000.

The minimum wage in Britain is currently £6.08 per hour for an adult over the age of 21.

The establishment in question has 12 staff. Assuming that some of them are part-time, while there will probably be a couple of full-time managers, let’s estimate that on average they are all on minimum wage and working four days a week, eight hours a day, and that they get holiday pay.

That’s £6.08 x 8 hours x 4 days x 52 weeks, which gives them an average salary of £10,117 each – not including National Insurance, holiday cover and other benefits such as maternity or paternity cover.

£10,117 x 12 = £121,405. Subtract that from the total and you’re left with just £20,595 per year to pay the fuel bills, water bills, licensing, maintenance, bank interest charges – and the owner’s salary.

These figures are based on my own estimates based on the owner’s claimed turnover, but my guess is that his actual costs will be higher than I’ve estimated, not lower.

The owner has never run a café before; he is clearly full of passion and enthusiasm, and he may well make a success of it in the end. But it shows what café owners are up against these days. Coffee bar prices really need to rise if these businesses are to be sustained – but that’s not going to happen in a recession.

The alternative solution when people are reining in their spending, is to attract a huge number of customers. It’s easy to think you’ll be able to do this, but actually making it happen is more difficult. And if you’re planning to open a new café, it’s very difficult to establish how many customers you’re likely to get. Few café owners want to share this kind of information.

Before I launched The Flavour Co I searched for market research on this but could find nothing. Instead I sat in various cafes and counted the number of customers coming in at various times. This gave a very inaccurate picture, because there are so many different factors involved.

A much better idea for anyone thinking of starting a café is to look at websites like Company Check in the UK, which gives data on limited (incorporated) companies. Also websites advertising businesses for sale sometimes include details of turnover.

Bear in mind that the figures in adverts might be slightly exaggerated.

Rents can be found by looking at commercial property websites, and remember that they can vary sharply in streets that might be close together, depending on foot traffic.

Business rates in Scotland are shown on the Scottish Assessors website.

Also remember that unless you’re very lucky or conditions are exceptional, it takes time, years in fact, to really establish a good customer base.

When we eat, shop and work in establishments who don’t invest locally, it creates a downward spiral in local economies. We enable those large corporations to wring success and profit out of our communities until they become identical strip-malls of interchangeable shops and restaurants.

The problem of competing with the “big boys” is nothing new. Back in the Wild West (as opposed to the Wild Web), many felt powerless to stand up for themselves, which is why “The Great Equalizer,” aka the Colt 45 handgun, was so successful. To quote the manufacturer, Samuel Colt, “God made them all, Colt made them equal.”

Fast forward to today, where debates still rage on as to the handgun’s place in American society. Wisconsin governor Scott Walker recently signed into law the right of Wisconsin residents to carry concealed firearms, leaving Illinois as the only U.S. State which does not allow this. We are not extolling the virtues of violence; remember that the Colt .45 was also called “The Peacemaker.” In the right hands, it was a defense against violence, greed and murder.

What set this trusty six-shooter apart from other guns wasn’t actually the gun – it was the bullets. Or better said, cartridges. With a .45 in reach anyone could load and shoot quickly, in all kinds of weather. A man on his own could be armed and defending himself in seconds, giving rise to the slogan: “Fear no man regardless of his size . . . pull me, and I will equalize.”

So, what can be your Great Equalizer, helping you to compete against your big competitors with even bigger marketing budgets?

One answer is staring you in the face right now (hint, it’s not the gun).

David can have the edge on Goliath. The small local business can offer something people are hungering for – a reliable service, from someone they can trust, because other local customers recommend them and use them again and again. A service from someone who cares about reputation in the local community, and who doesn’t have to charge more just to throw untold amounts of money at huge advertising costs.

GoHuman provides you with a showcase to post the abilities of your business, and the recommendations of your customers. That lets you get on with doing what you do best. Looking after your business, looking after your customers, looking after your community.

Even just the free subscription level offered by GoHuman goes a long way towards levelling the playing field. You can post 5 free postings, each one targeted at a specific zip code, or perhaps focusing on a specific area of your offerings.

Which brings me to one more piece of trivia about the Colt 45. Most users never loaded it with its full complement of 6 bullets. Just 5, and for safety sake, one empty chamber to rest the hammer on. 5 shots.

Get your free 5 shots now – and get your friends and neighbours to recommend your services. Get the new Great Equalizer — and help GoHuman to build your local community, and your business.

Starting a business may be a necessary path for a lot more people going forward, as the economy is not consistently creating enough jobs to keep up with population growth. Those who have lost jobs in the recent economic turmoil may be faced with the cold, hard reality that when unemployment benefits run out they will have to take matters into their own hands.

This does not have to be a daunting task requiring herculean efforts. Simply put, a business satisfies a need for which a fellow human is willing to pay money. Look around. If you don’t see something in your community that people need done and are willing to pay good money for, you are not in touch with reality.

In my case, I started with the simple idea that people who start businesses will always need access to money. If I could find sources of money and connect those sources with the many business owners that needed capital, I would have a steady stream of business. Little did I know at the time that the whole banking system would seize up and make applying for a simple business loan a pain-staking process… one in which people would gladly pay a guide handsomely in order to get them to the other side. It’s been a 12 year journey, but today I have a thriving business that supports my family of six with one currently in college and two having completed college recently!

At GoHuman, we understand what it is like because we are in the trenches every day, fighting the fight of the entrepreneur. It’s our business to help you succeed. Here’s how we can help you on your path to success, at no cost to you. Start out by posting your business, for free, on GoHuman. Then build your reputation and online presence by directing friends, customers, or prospects to your online presence. And follow our blog to learning the basics of how to market your new business. These simple steps will continue to pay dividends long into the future.

But what about the little guys, the small business owners, the kind of folks who make up the heart of the GoHuman community? Is it okay for them to be greedy, because their greed may not cause quite as much harm? Or because they are only greedy for thousands — rather than for millions or billions?

It’s helpful to consider these kinds of questions, because the motives which drive us to become entrepreneurs have a strong influence on how we conduct our businesses. Many people take pride in what they do and in our culture that is seen as positive. I must admit that pride motivates a lot of people to do good things. But pride can also motivate people to do bad things because pride – at its core – is a selfish motive, just as greed is a selfish motive. I believe that greed is actually based on pride. Pride leads people to want to be number one, just for the sake of being number one. Whom does that serve? It serves the self, and our own ego.

If we are motivated by pride, it can have several negative consequences on our business. Pride tends to rob us of our objectivity. For example: When customers complain about our service, we become defensive instead of realistically looking at what we could improve. This kind of pride is focused on superficial concerns, and it does not create loyal customers, but rather hurts the bottom line.

Alternately, when the motive is a genuine desire to serve the customer, we strive to do our best for them. We put pride aside and and avoid cutting corners or cheating in any way, even when the customer does not realize it. This kind of give-rather-than-get approach, when done in a smart and thoughtful way, will pay dividends for both our business and our customers. By de-emphasizing pride and greed at the local level, we can build a better community than what the big shots in the financial centers and capitals of this world have created.

Unfortunately for the rest of us who own a small business, we are not too big to fail, and are allowed to do so on a daily basis.  Bigger is not better and oftentimes the backlash against big institutions and the government are played out in the news ad nausea.  But nothing ever seems to change and the big continue to get even bigger, often times with the help of politicians in Washington (case in point, Solyndra).

GoHuman.com is a small player in the internet world with a big message.  We believe that change starts with one person who makes a decision not to go along with the status quo and actually do something.  That “something” can be as simple as moving your bank accounts and loans from Big Brother Bank to a local credit union or community bank.

Let’s not be participants in the next great bank bailout. Let’s also do our part so that it can be said that 64% of the assets in the country controlled by the big banks does not include our assets.  Hopefully, the next chart that comes out will show this percentage has peaked, and is on its way back down.  Then we will know that one person, deciding to make a change, can impact the world…….Go Human!