Opinions please on small business venture. (lease, fees, mortgage, retail business)

[l.wilson]

I am wanting to open a small business and would love to hear any input someone has to offer.

I am a 44 year old female going through a divorce after 24 years of marriage. I have been in real estate for the past 8 years and own rental propery and have done flippers.I bring in around $2500 after all my mortgage payments and bills from my rentals are met. Not a lot but something. Its a college town so its not very difficult to keep rented. I have 0 dept. I have $45000 cash and another $25000 comming in about 3 years. I do have quite a bit of equity in my rentals but with this market who cares. But I am planning on keeping them till the market turns.

One of my rentals is a block and a half from downtown. It is a medium size town that draws a lot of toursist for all of the vineyards (big boom in the last 10 years and still building more). There is a smaller university, 2 colleges, a major prison that is expanding, and a VA hospital that was just awarded $72,000,000 for improvements from the state.

The property I own is a big older two story home that has been made into a 4-plex. There is a community parking lot right across the street with about 75 parking slots, during the day there is propbably only 5 open, but 3:00p.m. on almost vacant( I also have steet parking right in front). My morgage on this property is aroung $1200. The property is zoned commercial/residential. I am planning on keeping my upstair units rented so my payment would only be aound $400 for my business space. I will have 1300sq. ft. on the main level of the house and 1300 sq. ft. in the finished basement.

I plan on putting in a glorified take and bake business. You know like the take and bake pizzas. I would also have family platters already cooked and ready to reheat. Good homemade, quality food.

The statistics on small business failure is so scarey. And the state of the economy is its own horror show.

I have never ran a business before and have some direction but wonder if there are things I am not aware of. Grants for single,divorced women?

Oh yeah one more thing in the variable. I have a guesstimation of of putting in aproximately $15,000 to $20,000 to get the business up and running.

If this business doesn't pan out I am going to school right now and will recieve my degree in about 2 years with a yearly income ranging around $38,000.

I hope this wasn't too wordy just trying to give an overall picture of my situation. Would love to hear some advice from anyone who knows about small business. Thanks in advance!

[chet everett]

Retail businesses are the least likely to succeed. Of retail oriented businesses those involving food tend to have the highest failure rates. Competition is fierce. Costs are high. You might want to do some research of "The Homemade Pizza Company" or "Papa Murphys" to see how your reserves compare the amounts of capital that such operations consume...

[ndfmnlf]

Why not just stick with rentals which is your core competency? You already have positive cash flow. The demographics is also favorable to you (i.e. college town, etc).

My sister who is a nurse owns rental property. She is able to work full time as a nurse because the rental doesn't require her 24 hr attention. So she has 2 sources of income, one of which is somewhat passive in nature.

A pizza store would require much more hands on attention from you, depriving you of the ability to take on a more stable job and income stream.

[8 SNAKE]

Originally Posted by ndfmnlf

Why not just stick with rentals which is your core competency? You already have positive cash flow. The demographics is also favorable to you (i.e. college town, etc).

I completely agree. Unless you are tired of rentals, this seems to be an ideal market to leverage your $45,000 into more rental properties.

[l.wilson]

Thanks for your comments. More rental property would be pretty much impossible at the state of the banks. I need to bring in more monthly income than the $2500 my current rentals bring in now. So my biggest question was since I already own the commercial property and my monthly payment would only be around $400 after the two upper units help pay the morgage, does this seem like a good venture. I know other commercial property with this much sq. ft. would lease for thousand a month, not to mention upkeep fees etc. It seems to me anyway that I do have an advantage in my overhead isn't as high as some of my competitors.

[sunsprit]

OP, the first response that I'd have for your proposed food business venture is "to stick to the things you know".

Here's where a food business will get you in trouble real fast:

1) Do you have any retail food business management experience?

2) Do you have any commercial food prep/buying/commissary experience?

3) Do you have a commercial kitchen for your food prep in this house? Can you get a license and zoning approval from the city/county authorities for your proposed commercial kitchen? Do you know what the local requirements are for a commercial kitchen? Do you know what it will cost to bring your kitchen up to those standards?

4) Do you understand that to make money in this highly competitive business that you'll be needing employees? Do you want the burdens of running the front side of the house as well as the back side, plus doing the marketing, sales, managing, and food prep? Do you really have 100 hours per week to spend on this business? (do you realize that that's the amount of time may restaurant operators need to be successful, especially in a low margin start-up operation?)

5) Do you have room for adequate food storage and appropriate refrigeration up to the needs of the commercial kitchen?

6) What do you think you have that will set your business apart from the other commercial restaurants/franchised take-out places in your area? Do you have a degree or professional training in food prep or managment? Do you have an adequate budget to advertise against the established restaurants?

7) Do you have the space to have a "take-out" counter area away from your actual food prep area that would be dedicated to your food business clientele?

There's a lot more to going into the commercial food prep business than being able to buy a big mixer and your home oven and home kitchen counters ....

Lots of questions and hurdles here. Absent good answers to each and every one of them, and a whole bunch more you'd find out upon contacting the health/food authorities, as well as your accountant .... I'd advise you to stay far far far away from this business concept.

[l.wilson]

Thanks for your comments Sunsprit. I am in the middle of talking with the county right now about zoning which looks like it shouldn't be a problem. I also have an appoint. with the health dept. about regulations (fire ceiling, commercial kithen codes etc.) As far as storage and kitchen space, I have a 1300 sq. ft. finished basement. The floor of the restraunt will also be 1300 sq. ft. Years ago I worked in the restraunt field as a server and a bartender, unfortunately thats about the only experience I have. No real buying or management experience. It seems like a lot of the prep work is already taken care of....shredded cheese, sliced olives, pep. etc.. The only real homemade product would be the crust. As far as marketing the town is small enough that a new business does stand out, don't get me wrong that wouldn't be the only advertisement. I know I must sound naive, however in my situation, and owning commercial property, I would love to make something work in it. Thankyou for taking the time to respond.

[SuSuSushi]

Originally Posted by l.wilson

Thanks for your comments. More rental property would be pretty much impossible at the state of the banks. I need to bring in more monthly income than the $2500 my current rentals bring in now. So my biggest question was since I already own the commercial property and my monthly payment would only be around $400 after the two upper units help pay the morgage, does this seem like a good venture. I know other commercial property with this much sq. ft. would lease for thousand a month, not to mention upkeep fees etc. It seems to me anyway that I do have an advantage in my overhead isn't as high as some of my competitors.

You're in real estate, start a property management business. Go with what you know. The food idea is a real risky stinker, unfortunately.

[Dave1215]

The above comments are all good and this is high risk, but the one thing you do have in your favor is the real estate... since you won't be paying lease payments to someone else you are already starting out ahead... don't discount the value of that in reducing the risk.

[l.wilson]

Dealing with my current tenants is probably the extent I would ever want with property management. Full time propery management company makes me want to shudder lol. But yes, my low morgage is what makes me think I have an advantage as well as the prox. to the cute downtown area and tourists. Not to mention a private univ. 2 miles down the road.