Home' The Channel Magazine : The Channel July 2016 Contents 60 | The Channel
Recently, I had a query from a newsagent client who was
contemplating renewing their lease. They had a number of
other options available to them, including taking a lease for
another shop that was located in a new shopping centre,
renting another strip shop and potentially buying a free
standing building where they could relocate their newsagency.
With so many alternatives, my client wanted help to
determine which way they should go. After spending some
time with my client to properly understand what their long
terms goals were, we eventually worked out the best option
Sometimes in business (and in life) we can often follow a
course of action, but don’t always think about what our long
term objective is. This can result in finding ourselves on a
road that is a long way from our objective or worse, coming
to a dead end.
Knowing where we want to go is important, however we
also need to be aware of what is happening around us
to understand how our newsagency business might be
affected—external influences are wide and varied and
include local government (town planning), competition,
regulatory changes, economic and social factors such as
unemployment, even weather conditions (such as flood and
drought) can have a severe effect on your newsagency.
Of course we are all very busy working in our businesses, so
we often don’t take time out to think about the big picture.
We really should force ourselves to jump into our helicopter,
metaphorically speaking, and take a high level view of our
business and the environment around us. Until you have
taken the step of taking a critical look at your business from
afar, you should not make important decisions about entering
into a new lease, renewing a lease or purchasing a property
to relocate your newsagency.
An example where a newsagent client of mine did not take
the ‘helicopter view’ resulted in a very sad situation. My
clients were close to retirement age and were thinking of
selling their business and going into retirement.
Their newsagency was located on the high street of a
small town and were one of only two newsagents in the
area, so during the resources boom they were trading very
strongly—life seemed pretty good! As the town was booming,
unemployment was very low and people seemed to be
spending without any concern for the future. Most business
owners in town thought the good times would last forever,
but of course the boom did come to an end.
Unfortunately, just after the boom started to take a downturn,
my client’s lease came up for expiry, so they decided to
renew the lease and asked their landlord for a seven year
term and also agreed to a fairly hefty rent increase. At the
time the asking rent looked a little steep, however as their
sales were still holding up, they agreed to the increase and
committed to a new long term lease, even though there
was significant evidence to suggest that the boom might be
They also decided to re-invest in the business by undertaking
a complete upgrade of the shop and borrowed about 70% of
the re-fit cost.
Of course the boom decelerated strongly and so too did the
good fortune of the town. Literally thousands of people left
and that led to many local businesses struggling or closing
down. To make matters worse, many of those people who
remained in town lost their jobs, thereby further impacting
the local economy. Real estate values for both residential
and commercial property plummeted, which caused even
more unemployment due to the knock-on effect to the local
My client was now in a very difficult situation—some 18
months after signing their new lease, their situation had
changed completely. They were locked into a seven year
lease and paying a premium rent. Most of their customers
had left town or were now unemployed, their sales had
dropped by over 50% and on top of this, they had additional
financial commitments due to taking out a large loan to pay
for their shop re-fit.
Needless to say they were in serious financial trouble and
were losing money by the bucket load. By the time they
came to me for assistance, they had put the business on
the market, but of course potential buyers were weary of
committing to a newsagency business in a town that was
reliant on the industry and were especially concerned about
the high rent they were paying.
In this particular case I was able to reduce their rent to some
degree, however to this day my clients are still operating
that marginal newsagency with little hope of selling it in the
near future, so their retirement plans are on hold for the time
being. Unfortunately the town in which they are located is
still suffering from the economic downturn, so the sad reality
is they may have to fold the business and walk away with a
large debt hanging over their head and a possible legal battle
with their landlord.
What could they have done differently? Well hindsight is a
wonderful thing, however I do believe that my clients could
have benefited from climbing into their helicopter and taking
a high level view of what was happening around them.
Having a helicopter view
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