Return on Investment is something Ellie Sanderson feels is key to any business scenario. She’s spent years working with start-up businesses ensuring that before they spend one pound they have fully considered what its return will be
“I have written about ROI in the past and referenced it to stock but in this article I want to reference it to renovations and shop openings. Having recently opened a new boutique in Woodstock, Oxfordshire, this subject is still buzzing in my head. At the end of the day, it all comes down to pound notes and common sense. Crunch your numbers, create a budget and determine what you can afford to spend on your renovation with a return time in mind.
Even if the bank will lend you £45,000 to renovate or open up a shop, that is not a financial indicator for what you should spend. Remember, every financial investment has to have a financial return.
It is also vital to consider what needs to be renovated or upgraded: be clear and unemotional about the plan, learn when to draw the line between what’s desirable and what’s essential. Almost any renovation will add value, or at least protect the value of your brand.
New start-ups have to establish a brand profile and, at the same time, goodwill value of the business. So getting your money’s worth is vital.
Renovating your current space
You may be renovating and rebranding at the same time which is a good way to do it. I always say be careful not to throw the baby out with the bath water at this stage. Up-cycling current fixtures and various pieces is a great way to save money and adding some new statement fittings can be just as refreshing. I always think It’s about evolution not revolution. Don’t let the desirables take over. If you plan to move within a few years, you must question whether the renovation is worth it. Will it pay to have expensive new fixed items when your business may need to re-locate and they won’t be making the move?
Starting up a new business – think long-term
It’s best to take a long-term view when you’re starting up because your needs are bound to change as time goes by. What your business needs in year one will NOT be what it needs by year three. Trust me, I learned the hard way; I burst out of my space after 18 months and had to re-lay and re-furbish. Try to build the most flexibility and long-term usefulness into your plans. Factor in your sales being double in year two compared to year one and then look at what you are about to do to the space – does it work for you?
Evaluating your return
I always think retail space needs to be modernised every 30-36 months…more if your space has high traffic.
So how much should you spend? This is not as easy as it seems. I suggest between £5-£8 per square foot. That includes, walls, ceilings, upgraded lighting, flooring, curtains and soft furnishings. It doesn’t include re-building space or adding new loos etc. If your shop is 750sq feet then expect to spend between £4k and £6k. If your shop is 1,000sq feet then expect to spend £5k to £8k.
How soon should you expect it to pay for itself?
No longer than 24 months, otherwise you will be paying for the next modernisation before you’ve paid off the last one. ROI is a simple case of evaluating how much additional sales you have taken as a result of the upgrade, minus what have you spent. Or it can also be a case of evaluating what you would have lost if you hadn’t upgraded your premises.
Establish your plan and visual ideas: Do a layout sketch, consider what your clients will see when they enter the premises and how they will feel. Do a pinterest board of all the things that excite and inspire you; test them out on others.
Know what’s possible. Talk to lots of builders and professionals; check out their ideas, get three quotes for everything. Decide what you can do yourself, what others can help you to do.
Do the maths. Most skilled labour charge £250 a day plus materials. Create a plan that has labour costs and material costs. You may not be able to change much about the labour costs but you will be able to shop smart for materials.
Once you have the numbers, do your financial plan and project your ROI. This is the point where it is essential to make sure you are not spending more than you should.
Pick your suppliers. Work with those who understand your needs, who you feel you can trust, who were speedy with quotes. It may not always be the cheapest, but solid people who will work Sundays and late nights are worth their weight in gold. Have all work certified, if they can’t do that – don’t use them.
Get it in writing. Simple really – get it all in writing and check on costs as you go. You will no doubt ask for extra things to be done so make sure you get a quote for those too. Don’t be surprised when asked to pay some money up front but don’t pay it all.
Agree the time lines. Build in time for ‘builders’ slippage’ – you know what I mean, it’s when they juggle two jobs and your project slips. Agree a date for your opening/re-opening. Make this a non-negotiable part of the deal, consider offering an incentive to the team to finish on time.
Inspect as you go. Don’t wait until the end to say you don’t like it. Keep a close eye on the finish etc and put in an appearance at the end of every day to check out that day’s achievements.
Give the final thumbs-up. Make sure you snag the project before you hand over the final monies or you will never see them again.
I honestly believe that getting it right is all about being canny with your cash, I am proud to say that my gorgeous new shop in Woodstock which is 1,000sq feet cost me £3.8k and I am totally delighted with it.
- £800 flooring – purchased from B and M (includes fitting)
- £200 new window.
- £1,000 wallpaper, paint – purchased in B and M and Amazon
- £300 Lighting – Amazon (my one indulgence)
- £450 spot lights – electrician’s bill and fittings
Total fixed items £2,750
- £400 signage
- £450 Soft furnisings, TKMaxx, Sue Ryder on Amazon
- £100 new mannequin covers
- £100 shelves and frames- Ikea
Total transferable items £1,050
That will be paid for within the year. So, before you borrow money from the bank, or stick it all on a credit card, first evaluate what your vision is, how much you should spend using the rough calculator and don’t blow the budget.
I will be honest and say mine was £3500 but I just had to buy the most amazing lights; always build in ten per cent for those little items that you just gotta have.”