4 Ways Small Business Owners Can Save Money: Part 3 – Location

Location, location, location! We have all heard just HOW important that is if you are in the retail space but with the rise of most people shopping from their couch, this is truer than ever if you are going to brave having an actual physical storefront.


Today, in part three of our cost-cutting blog series — {In case you missed it, here is Part 1 and Part 2.} — we are going to ask how you might be able to cut some cost or better utilize your location. As I mentioned in the first post, there is no one size fits all solution. The best way to uncover weaknesses is to let a good set of questions do the digging.


To lay a quick foundation for reviewing this area, I want to discuss KPIs. Key Performance Indicators or KPIs may seem like a fancy abbreviation and waste of time. But most likely you are already inadvertently interacting with this data. When you talk to your buddy across town who is in a similar industry and compare vendor costs or when you compare rent prices with the business next door, you are doing the work of a diligent business owner. Take a minute to research what is normal for your industry. You will majorly improve your ability to read the story your numbers are telling you!


So let’s jump in to a set of questions that can help you navigate the next of the highest expenses your business faces month to month.




Rent to Sales Ratio


    • Rent to sales ratio simply means understanding the profit you will make in a location compared to the cost of occupying the site. This is where knowing your industry standard is vital! A normal percentage might be anywhere from 2-20% depending on your industry. Take a minute to look this up to see if you fall within normal limits.
    • If you have a prime location that you pay top dollar for, do your sales justify this? (i.e. prime location=higher rent=higher revenue from foot traffic) If you aren’t seeing this benefit, are there things you could be doing to better capture the attention of the foot traffic or busy location to increase sales? → Maybe more attractive signage; collaboration with nearby businesses; etc.
    • If you have chosen a lower rent location, set some of the money you are saving on rent to invest in smart marketing. You need to compensate for the less-than-ideal location or you will still find yourself out of balance in your rent to sales ratio. The only way this is an advantage for your business is if you do the extra legwork to get people in your doors!
    • TIP: If your sales fluctuate throughout the year, rather than putting stress on yourself in slower months, calculate to set money aside in busier months to help even out this fixed expense.


Landlord Negotiation


    • Are you a long time loyal tenant? Is your business increasing the value of the property for the landlord? If this is the case, it is likely that your landlord is appreciative of your occupancy. There is a good chance that they may be willing to reduce rent or schedule for rent reductions over a number of years.
    • TIP: Time to sign or renew your lease? Perfect time to bring your value and building improvement up with the landlord! These are key opportunities to reduce overhead cost and boost your bottom line.




    • If you are a boutique or a niche store-front, chances are you have spent a lot of time thinking about the atmosphere. Now more than ever, this has to be part of what every physical store offers. Part of what people are investing in when the make the choice to get off the couch and venture to your business is the experience!
    • With this in mind, have you thought through the comfort and the visual journey your customer will go on when they come in your shop?
      • Are the restrooms clean and comfortable?
      • Does your decor look haphazard or are you using it to represent your unique business culture, further enhancing your customers encounter with your business?
      • Are you taking advantage of seasonal and holiday decor to further draw foot traffic?
    • If you are not in the physical retail space and use your facility mainly for office space or workshop space, you may want to consider forgoing the cool, yet more expensive downtown locations, as your sales don’t depend as highly on your physical aesthetic.

When considering this area of your businesses operating expense, think through these questions from both sides of the coin. Is there something you can do to better utilize your location? AND Are there things that you can cut, change or scale down to better match your current sales trends.


As always, it all comes down to knowing your numbers.


Rather than just checking to see if last week’s sales will cover your rent this week, you need to know what your monthly sales trends are. You need to know what your industry standards are. You need to know if your sales trends justify your current set up. Or if making a move may be the best thing for your budget and net profits. If you want to actively participate in the increase of your sales and the decreasing of your expenses related to your sales, you have to know your numbers!


Interested in learning more? Click here or call (865) 212-0063 to schedule a free consultation today!



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