Business Continuity and Dependencies

When the landlord announced a significant increase in the monthly rent, one small business began to get concerned. Running a fitness facilty has significant overhead, and budgets had been carefully calculated to allow for a certain number of classes to run, for the upkeep of the equipment, and for staff to stay on site. The change in rent meant that a move was in order – but to where?

Unfortunately, this story is not unique. Many businesses, especially in the early stages, are running between paycheques, balancing their bills against the upcoming revenue, and squeezing out the dollars wherever they can. The rainy day fund doesn’t exist – because it’s been raining since the business began.

Some will say that it takes money to earn money, while others may dispute that. Certainly having a small reserve can’t hurt, and if your business depends on some factor outside its control in order to survive, that can create difficulties. Whatever is outside your control is a risk, and risks must be managed.

If it’s rent, as in the case of the fitness center, then make sure you understand the terms of your lease, and how much your rent could increase by should the landlord exert their right to a maximal increase (assuming some form of rent control). Ensure that you have enough of a buffer that from the day of being given notice of the increase, you could continue to operate while searching for new facilities for a reasonable amount of time.

As a rule of thumb, any factor outside your control should be assumed to be about to go downhill, and fast. Your planning should deal with that scenario. While it’s rare for all facets of a business to face such difficulties all at once, being prepared can change events from difficulties to following a script.

  • Jeremy

    Not just about to go downhill. Already gone downhill, and now digging holes under street level somewhere.

  • http://blog.optimalupgrades.ca Elie

    If it’s true, then yes. But if not, that can be a bit too depressing.