When do you upgrade from the garage to commercial space?

on the verge of getting larger (expanding). almost enough business to get a place of my own (commercial rental), but definitely too big for my garage anymore.
I keep thinking of the "build it and they will come" phrase. looking for thoughts. do I limit the amount of work to take on because of limited space (my garage), or take the chance and get a small commerical rental to allow my business to expand?
I know this is my decision, but looking for input as to when some of you had taken that leap from your garage.
Thanks.
Scott

 

The stuff will expand to fill the available space. Whether or not you can work on that much stuff....that's for you to decide. If you get to where you're hiring people, you enter a whole new world of fun. Are you a manager or a worker?

 

Be sure that you take all of the costs, hidden fees and BS jump up stuff like removing snow. Add the stuff all up on a sheet of paper. Total the amount of money you make now and deduct the amount. I still operate out of a 3 car garage 900 SQ ft for a plumbing operation, last time I checked it would cost me not less than $1600 per month to move to a space that was 1500 Sq ft.. Nearly 20,000 per year for 600 sq ft. I opted to rent a 2 car garage from a little old lady neighbor for 150 per month, she never pays for plumbing work, I put all my seldom used stuff in her garage and we take care of her snow, her garage is 800 sq ft and costs me 1800 per year. I think I come out good.

 

when you can afford and justify the rent, utilities, business license, insurance, state and county fees, etc.... then i think its time to move.

 

I think appearance plays a big roll in business, meaning that if you look professional people will take you more seriously. I'm not saying your current operation looks amateurish but many people do judge you by appearance and if you're working out of your house or some residential property with kids toys around and wife and kid activity many people aren't comfortable with that. Plus I find it is easier to get work done away from family. When you're working out of your home the family tends to take it for granted you have the time to fix the leaky bathroom faucet or some other stupid repair.

I started my business in a run down feed mill with cheap rent and quickly found a better building after hearing a few snide remarks from my customers about the condition of the place. I recently bought into a business condo complex consisting of six stand alone buildings and I know it gives a good impression because I have heard it from my customers.

You may say "If they don't like it too bad" but these are the people whose money you want.

Just my thoughts.

 

Another thing that you might want to consider is the problem of having your home being a public place. I'd want a separate place so I could "leave work" and go home. Plus you won't have all those creepy strangers hanging around the place you live.

 

"Appearance" is one of the issues I am running into and why I started pursuing a rental.
thanks for the feedback. This just re-confirms my direction.

 

I agree with bobj49F2, you only get one chance to make a good first impression, however, it can be a double edged knife, if you build it over the top and make it look like you are doing great some people will see that as if you are charging to much or that you don't need the money. I remember when my oldest sone needed braces for his teeth and we went to the local pediatric orthodontist, we pulled into the office parking lot and there was a Caddy Barritz with gold package and a personalized lic. plate that said " BRACES ". We drove out and went somewher else. All I'm saying is you can go to far. For me that dentist did not leave a good first impression.

 

In the '90s I outgrew my garage. I was working full time but had enough side work to warrent getting out of my garage into a space where I could actually get something done.

I rented a 20x40 garage in an industrial park month to month cheap (like about 400 a month). I worked in there for about a year built my own car in there also and when things got too slow (and I was too tired) to warrent having the space I packed up and went home.

If you indeed are out of your space this is something you may try. If it flys then you may consider looking for a more permanent place with a store front.

This will give you a chance to expand your clientel list and keep you fluid enough that if things go to **** you are not out much.

 

sounds familiar...I lasted 3 years....although my excuse for closing was different, having to do with new kids, moving to the edge of town, and wife making enough money to support us.

 

One more thought on the subject; what are your shop fees compared to the other shops in the area that are operating out of an actual business type building? There's been a few posts on the HAMB from guys doing side work out of their garages wanting to start their own businesses because they knew they could do it cheaper than the other guys. What I read in their posts is they figured they could do it for almost half the price because that's what they're getting now. The major factors most didn't take into consideration is the actual cost of doing business outside of their garages. Like more rent, shop supplies, taxes and if the business does grow, help and equipment upgrades. Also, what kind of work do you do now, minor fender benders and particle paint jobs. Do you follow all the tax and environmental requirements? You didn't say but do you do mostly cash deals? If you're operating under the radar your expenses are going to grow once you become legit and are out there for the government to see.

I started my own business over ten years ago with the thought I could do it better than the places I worked for but I didn't undersell my services. I knew what my previous employers charged and went under them just a bit but I found out fairly quick I was going to sink if I didn't raise my rates. I know that I will never become wealthy doing what I'm doing but I'm keeping my head above water.

 

I haven't heard anyone chime in on this idea yet... We are at very similar places in our businesses. I keep thinking about getting a small off sight place to be away from my home business, but then think about all the costs ***ociated with doing so. It is almost always in matters of real estate a better deal to own than rent, so is it possible or feasable to expand and improve your current space? As soon as money becomes less of a down fall for me, I intend to take down my little, beat, carriage house and replace it with a multiple garage two story structure. I say this because I watch a good friend of mine struggle with paying his bills, and more importantly, keeping quality help in his shop to justify the amount of space he has. I need more space, but never, never, never, want to expand to a point where I have to have employees to make my business run. Been there, done that. As far as the first impressions go, I consider myself some what immune. I have learned over the years that quality work can be done in any situation. The only thing that matters is the safety of my project. With that out of the equation, I am much happier with the guy working from his home shop at a better price.

 

When your paying work you are taking in exceeds the space you have to work in, v.s. how much work you can reasonably do yourself.

 

You need to sit down and have a real business plan.
The plan should be at least for the next 5 years.
Have a very good look at the compe***ion in the area.
Look at all costs involved and how many people you have to
employ to reach any financial goals.
How big of a shop would you want to have down the road ?
Do you want to remain hands on or hire a manager ?
How much financial risk can you really afford ?
In order to grow you will have to be able to invest profits
into the business for a few years at least.

 

it also gives you a place to hang at when thd wife pissy, (about once a month) RD

 

I'm self employed. I started out in an old run down area that I was embarr***ed to give directions to...but folk who knew my work or were referred by existing clients didn't seem to mind too much.
Because of health issues I decided to limit my overheads and so I built an 1100sqft workshop at my home...Its only just big enough but I see that as good really cos it means I HAVE to finish a car in order to get the next one in. I'm booked out for most of this year and I charge the same as the bigger shops in the main.
sure theres lots of distractions workin at home...so you need to decide whats important to you..money? family? lifestyle? Overall I'm happy working from home..If I wana go work for couple hours after dinner no problem.(so long as I keep noise down a bit lol )
with the economy the way it is over here its a reallllly good idea to keep overheads as low as poss. Four big paintshops I used to use have gone ***s up in the last 8-12months alone!! Sometimes things aren't as they may seem with your big flashy opposition guy down the road (you know the one -with all the toys!!)I guess
just my.02

 

I did find a rental locally that is month to month. works perfect for me. low cost and I do all the work myself. I do not plan on getting employees, but keeping it as a night/weekend job. most of my work right now is building prototype parts and low run production for machines, structures and odds-n-ends stuff that you can't get from the other local "big" shops. so there is a lot of work around the area to be had.
best part about it, it will now give me room to work on cars and all the other stuff. currently I have put my vehicles in storage to allow me to do this type of work.
I am doing a lot of work in stainless steel. mostly because a lot of shops around here are afraid of it.
basically, by getting this rental unit I will be filling up really fast with work. now that I have a better apperance (a serious one vs. customers seeing my kids toys in the garage), more people are taking me serious and are more willing to give me the work.

thanks for all the input. this has helped me and hopefully help someone else too.
Scott

 

Then double it.

Bob

 

If you are operating in the underground economy, this type of move will "out" you. Get ready for the US Govt to start ****ing with your life.

 

X2, and have about 6-months or rent left in savings, in case anything goes wrong.

This business is fickle market, you could get sick or hurt, and, if you don't own your property, your landlord could do something really stupid (ask me how I know).

 

The best mechanic I ever went to worked out of a dinky two car garage next to his uncles house. He was always busy, had plenty of work, and didn't have much overhead. It didn't look like much, but when you develop a reputation of being honest and good at what you do, it doesn't really matter where you work. I wish I was closer, I'd still be taking my cars to Kenny.

 

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No one has yet mentioned how long it may take to get up and running efficiently. You lease it, but the county doesn't give you a permit immediately, the electrician takes 2 weeks to finally get everything wired, then the inspector takes awhile, moving in takes a week, etc. and not so suddenly a month has gone by with almost no income.

 

Unless you are buying an existing shop, I'd think long and hard about the move and have a pretty big back log of work waiting. That rent payment can look awfully big if there is nothing in your shop. You might start making the projected rent payments to yourself for 6 months before you sign the papers. With that in the bank you'll have a better chance. Good luck I hope you become a millionaire.

 

Making a million dollars in the custom car business is easy, you just have to start out with two million.

 

OP, are you losing work because no one wants to wait? If you can get customers to commit to a waiting list it might improve flow and lessen the space constraints.

+1 on the business plan. Ask yourself what the net profit is from your average job, what's the turnaround time, and if its the kind of work you want to keep doing, and on what scale.

you should have at least 10-25k tucked away before getting really serious about hiring employees, buying equipment, etc. Once a business runs short of capital it starts making stupid decisions.

 

This is sound advice here. Though the exact amount needed per business will vary.

 

Speaking hypothetically, if the business decision is to either stay or move to a commercial location, the first decision is to make the current location the business location. Start working the administrative side of the business from the current location, at least on paper. Figure what expenses will run as far as tooling and consumables, stock, overhead, heating/cooling/lights/water, and if you decide that it's worth running the business from the current location, then look at the difference between staying and moving. Unless it's a really full time business, you have to ask yourself if you want your hobby to become your livelihood.

 

Make the shop at home as buisness looking as possible. NO kids toys, lawnmowers or X-mas decorations on the topshelf. Keep it clean and organized. Finish the projects in the shop before taking on more work, they can keep it in there garage until you are about ready to work on it. No use having it take up space. In and out, They will wait for there turn knowing it will get done Quickly when it gets to your shop. A 4 month backlog is a good thing to have! How many projects do you know about are sitting in shops with nothing being done to them.

 

most of the projects I have to p*** up on is metal parts for machines. unfortunately, there is not back log. if I don't have the time, they go on to the next quote that can fit it in.
right now I have no room in the garage. I need to buy more equipment and have no room to put it. once I get this space, I have customers waiting to give me work.
just so i am clear, this is my side job. I am a design engineer by day and fabricator by night/weekend.
so my side business can easily grow into an "early retirement" from my day job. between the cars, machine parts, one-off prototypes and the like, I can get plenty of work. just needed the space.
i don't plan on ever getting big enough to hire people. though if that happens, it happens. my goal is to grow this business so i can stop doing my day job and have something to p*** on to one of my kids.

this advice is great from everyone. keep this thread going. hopefully it will help others as it is helping me. lots of good advice here from everone chiming in.

 

Overhead kills successful business ... you shouldnt move into commercial property without a sound business plan ... If you are the only one working your business you should really consider staying in your current no rent space ... If you outgrow the space, rent storage or expand your current shop ... most commercial leases are net leases and you will be responsible for everything even roof leaks ... proceed with caution.