How often have you seen something that you know will help you in your business only to decide that you simply cannot afford to buy it?
If you can clearly see how the purchase will add value to your business going without should not be an option. The smart thing to do is to weigh up the advantages and disadvantages between renting or buying.
For example 95% of salons are rented, not owned. Some have done the calculation that the amount you pay on rent could easily repay a mortgage so they buy a property, relocate their salon business and wait to get rich on the asset value of their premises. Financially this makes perfectly good sense. But it also assumes that your team will remain with you indefinitely and that the amount of walk-in business from where you were was not a big contributor to turnover.
Also, if one day you decide to sell your business it should be easier to sell if you renting and are in a good location. The wild card of course is the rent cost. We will be covering rent negotiations in a future blog.
I have seen arguments for and against owning your own house. There is no doubt that owning property is a good investment however any profit you make in the increase in the property’s value is often lost due to either high estate agent fees or high transfer costs. The unknown variable of course is in the maintenance of your own property. For example a few years ago I had to re-do the damp-proof on my house at a cost of R35,000.00. If I was a tenant that cost would be for my landlord. There are countries, France for example, where only about 5% of the population actually own their own houses. The rest just rent and, as the argument goes, have more disposable income for spending on their daily quality of life.
And so it is with software. If you buy software it becomes an immediate asset in your business which can be written off at the time of purchase. Owning your own salon software will normally add 20% to the value of the business simply because it is an on-going business with a full operating history.
However if yours is a new business or you suffer from low cash flow choose a rental option. This means no large investment up-front and manageable monthly repayments. In this way your financial exposure is no more that 30 days and from an accounting point of view rentals are fully tax deductible.
Either way, if you are serious about your business invest in a good business system. My Salon Software has affordable options on both rental or purchase – going without should not be an option.