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Featured The Rising (Part 26) - RESET!!! - No Storefront - Contingency Plan

Discussion in 'Planning Your Business' started by Edvin, Apr 6, 2018.

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  1. Edvin

    Edvin MVP Member Top Contributor

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    Phoenix.png
    Rising from the ashes...
    Start: The Rising (Part 1) - Introduction
    Previous: The Rising (Part 25) - Business Space Planning & Concurrent activity
    Current: The Rising (Part 26) - RESET!!! - No Storefront - Contingency Plan
    Next: The Rising (Part 27) - Coming Soon...
    badplan.jpg
    As most things in life, things don't go as planned and we have to decide to either push-through or re-adjust our course. Due to reasons below, I've decided to explore an alternative business model and attempt a soft launch without a storefront. This does pose logistical challenges as well as increase in expense and lower revenue; but, it does allow me to test the waters in my entrepreneurship journey.

    Let me start by telling you that my original plan was to start a storefront during summer of 2018. The rational for this is based on competitive intelligence research, which is depicted in below receipts graph for my target industry:
    receipts.jpg
    The local school district calendar summer begins on June 1st, which is inline with above chart. That is, I need to be ready before June to capitalize on seasonal traffic.

    From previous posts you may have seen the Letter-Of-Intent (LOI) as part of my lease negotiation with the landlord. The landlord agreed to terms that I would get 90 day free rent if he was unable to provide the facility to me by May 7th; however, I would get 60 day free rent if he indeed provided the lease by May 7th.

    cityarchitect.jpg
    I meet with the local city and shared my detailed plans. I was informed that due to zoning regulations I would have to submit occupancy constraints, architectural plans, among numerous other assets by April 10th in order to meet in front of city "commission planning" for approval of education services in retail zone on June 7th. Though I would likely get conditional permit, the official permit is contingent on June 7th ruling. If I missed the April 10th deadline, then the next possible date is July 19th (so much for summer launch)! As part of my application, I need to pay $4,230 application fee for submitting for the permit. The city informed me that engineering plans must be submitted electronically to the city by the architect.

    My previous architectural drawing from Fiverr.com was great; but, it is useless when it comes to local ordnance. I contacted a local commercial architectural firm (Googled city name commercial architect), as advised by local city planner, to ask for some help. The architect provided the following service price schedule:
    Code:
    Schematic Design ------------------------------   $500
    Planning & Entitlements -----------------------  $1500
    Architectural Design & Detailing --------------  $2000
    Mechanical Design & Engineering Services ------   $500
    Plumbing Design & Engineering Services --------   $500
    Electrical Design & Engineering Services ------  $1000
    Title 24 Energy Calculations & Documentation --   $350
                                                    ======
                                                    $6,350
    
    In my previous space-planning I decided not to modify the bathroom to keep the costs down. However, during cursory review of my plan, the architect noted that the current bathroom is in violation of American-Disability-Act (ADA), and would have to be brought up-to-date as part of my construction costs ($$$).

    The architect will naturally need time to work on more engineering plans. Speaking with the architect we decided that she would need to start working on plans by April 4th (couple days ago) if we were to have any chance of meeting the April 10th target date.

    The city fire-chief also informed me that I need C16 licensed contractor to evaluate the sprinkler system. Additionally, if walls erected all the way to the ceiling (t-bar) then the room would also need to get ventilation ducts.

    I had my commercial broker contacted the landlord and express my sense of urgency as I was still waiting for them to respond; they were exploring contingency of an existing tenant for first-option-to-lease. However, the landlord not only did not expedite the agreement but made it less favorable by the following:
    • Making me responsible for American-Disability-Act (ADA) compliance
    • Requiring a deposit (typically standard)
    • Offering 60 day free rent
    • No commitment to my time constraints
    By the way, compliance with ADA is serious business and failure to comply will costs upwards of $25,000 in repairs and legal fees.

    evaluation.jpeg
    Okay, lets review:
    1. Landlord lease term are less favorable
    2. The property will not be available before June
    3. I will miss on seasonal traffic
    4. I will pay in excess of $10,580 (architect fee and zoning permit) before I even visit the facility
    5. I need to pay additional construction fees

    fish.jpg
    While the landlord is negotiating favorable terms for himself with me it seems that I have to swim uphill while I miss on seasonal traffic. As my wife pointed out, all my eggs are in one basket with regards to the location; but, I'm not sure if it made sense for me to entertain less favorable locations either.

    options.jpg
    Given different circumstance it might make sense to move forward.
    For me, delaying storefront launch reduces entry costs while I explore alternative strategies.


    planabc.jpg
    My journey for business venture began by wanting to make STEM boot-camp education available to the youth; however, I explored into a franchise model and then back to independent business model when I found STEM boot-camp to be not a viable business model. But now, I am going to re-evaluate boot-camp model once more and take a closer look at silicon-valley and bay-area businesses that are offering robotics and coding courses throughout the year.

    Though I won't have a storefront, I can still rent classrooms from local school district (or even other businesses) in an effort to at-least start the business and get my feet wet. I call this "soft launch" since I will minimize my upfront cost. Some of my previous acquisitions (e.g. furniture) will have to stay in my garage while I can leverage others (e.g. laptops and chromebooks).

    The re-alignment leads to numerous considerations. For example, should I dissolve my original "Gradupath Corp." in an effort to save on first year franchise tax and move forward with sole-proprietary business model? There is certainly more work to do and questions to answer...
     
    Last edited: Apr 6, 2018

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