How not to lose all your money on your first business in Thailand.
I recently wrote about how to prepare before buying a bar, I have wrote other stuff about investing/buying also.
Most of what I am about to write applies to most countries and alot of it is obvious, but time and time again I see people making the same mistakes and I have been guilty of it to, but we all learnt one way or other. So I will write what I think anyway.
I see alot of business owners trying to start off big or they start with an expensive refit. Doing that means you are gambling more money than you should, if you are experienced and know what you are doing go ahead. But everything needs to be approached with caution.
I have seen people spend tons on a refit but their rent is just too high to start with, and its impossible to survive with those huge rents. Then with a high rent, they often lose everything or most of it in the end, clinging onto it (because they invested so much) until they are near broke and forced to sell or walk away. Some landlords have venus fly traps out there. (thats what i call them) there rents are too high for anyone to survive, but then someone inexperienced buys it and loses it all and the landlords can sell/rent it again. (very good money) You really need to get this right before you sign anything, there are many ways to do the research on rent rates in various areas. As you get more experienced and successful you can afford to take on some of the dearer rents as your profit per month is likely top end.
If you buy a bar, its going to take you a while to find staff, train them, iron out all the problems, fire some to get better ones, this all takes months to sort out unless you have poached a few hard working service/cashier already. If you have a girly bar it takes a while for the ladies to stick, the retention rate will improve as the bar gets busier. Having said all this you may not make good money until after 6 months, if you did the full refit and you have to walk away or sell cheap, then you have lost money you didn’t need to!
I think when you buy a bar for example, just open the dam thing, let it make money and reinvest profits back into it. At the most the downstairs needs to be done, you can do the upstairs later. This means you wont lose all your money because you started off cheaply, but some guys ego wont allow them to run a run down bar and call it theirs. When we get a new scruffy bar we don’t spend loads of money renovating it, we simply get all the staff sorted out and get some money in to make sure it is working and the business is producing money. Yes those bars embarrass us before they are renovated but customers will understand whats going on if you explain to them.
Start up advertising costs
I see tons of people setting up 1 or more businesses and getting advertising absolutely everywhere, putting money behind every process of the start up so they can accelerate their progress in business growth and customer share. It may work with a few businesses like a bike shop or other sales shops but for bars and restaurants I think its a bad idea to do too much advertising. Just telling people about your business repeatedly wont get them in, habits change slowly. New businesses make very little, the advertising is good but word will get around to start with if you think of a few smart ideas and get the name out there. I see many new businesses start with huge advertising campaigns and they burn out before the profit starts streaming in. I think this is because humans do not change habits easy, they already go to certain restaurants and bars. Many adverts will not drag them all away from their usual places, these guys will slowly start coming in here and there and if they like it their habits will switch over time. The money used for advertising could be used on carrying the business, extra staff and other stuff. Once you have a stream of profit coming in, start using some for effective advertising. My forum for example, I use it to advertise our bars, a few guys come down and they tell friends and friends tell friends. I see the forum as a spark to ignite the word of mouth machine which is possibly more powerful than what your location (traffic footfall) can help you.
Buying too many too fast.
I see some business owners get confident with their first business, but they don’t realise that its the location giving it good luck or another reason why its doing so well. Then they try and expand, replicate there model everywhere and then some of it fails/suffers because it takes a while to get them all running good and getting cash in. And they find out that they aren’t successful elsewhere because they got lucky in the first business. This is why i think its best to grow organically or at least just get 1 more at a time, have it profiting before the next one comes, this reduces the risk of losing all your money. I know we buy bars too fast sometimes but that’s because we are confident that we know what we are doing and we have proven ourselves.
If you are investing all your money into one business please bare in mind 90% of businesses or something stupid like that is gone within a year. And also its your first business so you are likely to fail, just like most fighters lose their first fight. Business is ok in theory but when you start it you realise half of it is a war. The way I see it you should buy smaller businesses and prove yourself, if you lose a business get another and another until you find something you are good at. The way I see it personally, start 10 businesses and only 1 will be good and that will pay you back for the money you lost when failing those businesses. I see too many guys investing all of their money into their first business, when you lose that business, you cannot start again. (well you can but you need to start up a business with nothing, which is the way you should be doing it anyway)
I see so many new business doing little research on how much to pay staff, no point asking drinking friends or local Thais for how much are the salaries you should give. Or even asking places that aren’t very successful. If you go speak to the owners of the busiest and most successful businesses around, (say a restaurant) You will find that they pay more salary than most people. From my experience they seem like they are overpaying and certainly going over the local salary rates. But they are successful because those staff are overpaid so they stay forever as other business are unlikely to get them. If the workers find it hard to beat their salary then they will stay longer. Having staff in your business for many years is worth all the extra cash, every business owner sees the value in the faithful, reliable and long term staff. They all add more value to the business with their specialised knowledge in your business and customers. But I don’t mean start a business and pay everyone more immediately, just bear it in mind when you have a real good one you want to keep, then lock him in with a higher salary, lock them in one by one as you find real talent and hard working guys per role. Your business can afford this extra salary cost as the business grows and grows, so its important to do the payrise once you start making a good profit. (and not before)
There are other ways of losing your businesses, dishonest landlords, no licenses, partners, police, army, crooks, dodgy lawyers, angry wife’s, but I think most guys will need to deal with all that their own way. I have spoken about some of this before.