I'd love to hear from those who've done similar things. What went right and wrong and what would you do differently.
Thanks
He wanted to start a new hobby store but could only get half of the bank loan he needed to get started. I asked him if he'd ever considered equity financing and said I'd be interested in investing. The next day he asked me if I was serious, I told him yes, but I could only invest a few thousand dollars and he'd have to find other investors to do the rest.
So we got it started and the store ran for about ten years with ups and down until it went out of business. I certainly got more rent out of those tenants (who I particularly liked) than I invested in the store. Got plenty of things on store discount too. Roo's TBI problems did cause problems for the business because he did not keep up with the paperwork which led us into a near death experience which we were able to get out of because of the loyalty of our consumers.
Today in our area we have a few stores who sell some of the stuff we were selling but not all of it. I don't think there is a model train store in town but there are a few places that have a back room where you can play D&D so we were pioneering in some sense.
FYI, some owner-run stores in Japan have been in the family for generations, so the overhead is lower. And lots of those owners work 7 days a weeks, all day.
If they don't fall into the above category, some little shops here in Japan don't last very long at all. They're passion projects with naive entrepreneurs who just want to break out of typical society role they've been given.
Others are family funded businesses that lose money, but save face as it gives the otherwise-not-working "business owner" something to do.
Others still are part-time hobbies. Like a coffee stand or tepanyaki place that is open once or twice a week. Either funded by their full time job or elsewhere. Not money-makers.
Japan also has a lot of support for small businesses; your local municipality can help you out with money, marketing, and more.
My brother opened a bakery a few years ago.
It's more work than expected: You have to get up early and manage providers and employee(s) and regulations.
It cost more than expected: They didn't buy flour but premade unbaked bread and cooked them. They had to buy a special racks with wheels for the trays with the dought pieces.
You may enjoy the new challenges, but don't expect it to be a walk in the park.
Do you have a friend that owns a similar shop? Perhaps you can share your idea and "intern" there for a month as "Owner Assistant (TM)" to understand better the problems and advantages.
Figure out how much money you're comfortable losing first. That is, assume it's a complete failure after a year or two, how much of your retirement savings or income are you willing to set on fire?
Use that number to figure out a realistic budget for starting up a retail space.
If you don't want the monthly burn rate of a leased storefront, maybe start with a stall at some shared selling space.
The family member started by building up a reputation for their work out of a shared studio and after many years finally broke out and rented their own space. They were initially swamped by licensing regulations and restrictions placed on the business by the landlord after they'd signed the lease (like, the landlord wanted to restrict the number of people in the space because he'd "heard things" about tattoo parlors). Lesson: get a sense of all of the regulations and laws and jurisdictions that are going to intersect with the business ahead of time. In this case they family member was surprised that the city, county, and state had conflicting regulations that they were expected to abide by.
With the restaurants the two biggest lessons were: everyone always underestimates how much it will cost to build out the space. Everyone. Four restaurants (two still active) and every single one blew out their budgets for the initial renovations, requiring either new capital contributions or debt or both. To a lesser extent my relative encountered the same thing. And it's easy to observe from the side and say "well, duh, that's how all projects are" but if you've never done it there's no reason to doubt the contractor saying it'll take $100k and ninety days to do the work you've laid out.
Second: there's no safety net except what you set aside. Generally true for all businesses but larger businesses can usually get lines of credit or other debt instruments. Covid was a remarkable black swan that the restaurants only survived (in some form) with government intervention. At best each had 30-60 days' cash (one of the first things their banks did was freeze any outstanding debt/financing lines once the impact of Covid started to take shape).
I'm semi-retired and keep toying with an electronics store front ala Heath Kit or Radio Shack classic. Thing is, every time I run the numbers it barely breaks even, and this is in NYC where it's easier in many ways to run highly targeted retail store fronts. And I just can't run the risk of burning a couple of years of retirement funds on a lark that at best breaks even.
