Need to move? Have confidence in your rent budget



All around the UK, unit space is an issue. Garages don’t have enough of it, mobile technicians are looking to move into it, and property developers are forcing businesses to leave it.

In the last four months of strategy discussions with 24 garages all around the country, over 50% are actively moving or planning to move in the next year. This makes for an incredibly challenging day-to-day work environment, knowing that an impending move will cause big disruptions to your business.


Rather than let it hang over your head, be proactive. Make a solid plan for your new unit specifications and budget that will save you time and give you more confidence in your search.

There are four big items to consider when planning to move: size, location, layout, and budget. As rent is typically a garage’s largest expense, it is very important to take planning for your move seriously. It is a complex process, as you can’t consider any of the above items in isolation.

Size

Your size needs depend on your plans for business growth (covered in a future article) and your business model. High-end restoration operations should aim to operate in a smaller space, keeping costs down with a low volume business. Window tinters and restyling garages should look to grow into larger operations over time, as their work is easier to replicate with a larger team.

If you, as the garage owner, are expecting less growth in the coming years due to a less aggressive marketing and hiring strategy, then you can comfortably set your sights towards a smaller unit without fear of growing out of it too quickly.

Location

Think about where in the country you are currently based. Does it matter to your customers? If you have a well-established specialist brand, it likely doesn’t matter much. Customers will travel far to get your specific treatment.

Does it matter to your team? I’ve spoken with some recruitment specialists who have candidates willing to relocate anywhere in the country to work on cars they’re passionate about. It’s possible you’re this lucky, but likely not.

A loyal, skilled team is a very valuable asset. A business is only as strong as the team that runs it – think very carefully before electing to displace your business and risk losing your team.

Does it matter to you? Do you have a family that is rooted in your current location? Do you enjoy a 5 minute commute to work? As the owner, you will have the final say and your opinion matters.

Layout

Do you need six bays in a line with open access to each? Do you need room for lots of machinery? Do you want certain projects to be hidden from customer view? Do you need a reception?

When you search for industrial units in property brokerage websites, there is substantial, but subtle variety in the availability. Number, location, and size of doors, dimensions, mezzanine levels, reception areas, location of bathrooms, and more will significantly affect your workshop efficiency and customer experience.

I have worked in garages where the one door was often blocked by a car jacked up in the middle of the workshop getting side skirts fitted. I have worked in garages where the customer bathroom door didn’t close. I have worked in garages where the owner spent thousands on a mezzanine to be added, only to be told he needed to move out a year later.

Aim to find a space that meets your needs or can be transformed to meet your needs. Compromise will hurt you in the long run.

Budget

Rent can run some garages more than 20% of monthly expenses. When you’re chasing down enough completed work to pay your bills each month, it’s important to be crystal clear the balance of your rent expense and the turnover potential that your new unit provides.

Here is a simple formula to roughly calculate your turnover potential for a given unit. Keep in mind the multitude of other variables that will affect your turnover, such as pricing, number of staff, efficiency, demand, a changing number of machines, and more.

  1. Measure your square footage needs for equipment. Tyre machines, fabrication tools, work benches, toolboxes, spray booths, compressors, a dyno, etc. Do not include ramps. For the sake of this calculation, we’ll assume all equipment goes against a wall.

  2. Measure the space you’re currently using for all your work bays. Capture all of the space that you use to work in, not just the space that the car sits in.

  3. Calculate the average size of a bay. Divide the amount determined in #2 by the number of bays in your current unit.

  4. Take the total square footage of your new unit and subtract the amount determined in #1.

  5. Look at your total remaining space in the new unit and determine what space must be kept free to move cars around. Subtract that from the amount determined in #4.

  6. Ensure the footprint leftover represents sufficient dimensions to contain a bay.

  7. Find the difference between the amount determined in #5 and the amount determined in #2. Divide that difference by the amount determined in #3 and round down to the nearest whole number. This is roughly your change in number of bays.

Now, calculate your average turnover per bay. Annual, quarterly, or monthly basis will work, depending on the frequency or quantification of rent payments for a potential new unit. Take your annual, quarterly, or monthly turnover and divide by your total number of bays.

Multiply your average turnover per bay by your change in number of bays to find an estimated change in potential turnover for your new unit. Multiply that by 20% and you’ll have your maximum increase in rent budget from your current unit.

Of course, you could fit in a new smaller bay, alter your average bay size, save room for more turnover-producing equipment, hire or fire staff, or do any other number of things to affect the accuracy of this estimate. This formula is inherently oversimplified. Change it to fit your needs, figure out what additional information you need to consider when creating your new rent budget.

In Conclusion

My overall message? Be proactive. Make some sort of well-thought out budget, define your required and nice-to-have criteria, and make your search for a new unit as efficient and painless as possible.

Want some help developing your new unit plan? Get in touch: arun@drivenperformanceadvisors.com.

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