After the success of my flower-selling stand, I decided it was time to run with the big boys. "I'm going to rent a store downtown," I told my friend. "How would you like to work for me?"
For a week, I was euphoric with expectations. My best friend was earning more than she did before while helping me establish the next big step for my small business. But one month after the store opened, I realized I made a big mistake.
Location, Location, Location
My original flower-selling stand stood outside my neighborhood supermarket. The clientele were used to buying fresh, locally grown produce. Buying fresh flowers was an extension of that mentality. In addition, traffic was high and business was good.
My new, glamorous downtown location was not on a main street. Next to me was a bank and a restaurant that opened at 5 p.m. Few people passed on the street outside the store, and no one came inside.
The Sunk Cost Fallacy
I kept investing in the new business. I bought advertising in a local newspaper totaling $500. I paid a company to deliver flyers to nearby neighborhoods at a cost of $600. And I paid $1,500 a month in rent (versus $200 a month in my other location).
"I've invested so much, I can't quit now," I said to my friend.
"That's just the Sunk Cost Fallacy," she answered. "And if you keep paying me to stand around in an empty store, I'll go nuts."
Knowing When to Quit
I terminated my downtown lease despite the penalty, and I returned to my highly successful flower selling stand. But I decided to tap into the potential of the location even more than before. I wasn't giving up on the idea of growing my business; I was just going to do it smartly (if less glamorously).
Growing My Base
I came to a new agreement with the supermarket owner: "Why not let me brighten up the two outside corners of your supermarket?" Instead of paying more rent, I agreed to invest in two new beautiful flower stands, complete with colorful shelving, an umbrella, and large display carts.
I set up the two flower booths to look identical and arranged them one on either side of the supermarket entrance. I divided my flowers by colors and sold the cool shades (purple, white, pink) on the right and the warm shades (red, orange, yellow) on the left.
What I Learned
I heard an experienced businessman say once that companies often fail when they try to grow too fast. That's what I did. I wanted the glamour of a downtown store, and that blinded me to the great business location I already had at my fingertips.
Investing in growing my existing business really paid off. For one thing, I was able to keep my friend on the payroll. Secondly, my revenue gradually increased. Within six months, I doubled my revenue, and after a year, I tripled it. People who weren't planning to shop for food were coming to my flower stands especially.
I started taking orders in advance, offering delivery for orders over $100. Eventually, I made more money from flower deliveries than I did from selling at my flower stands. And in time, this became another branch of my small business.
More from Tal:
Turning Our Hobbies Into a Small Business
How I Started a Dry-Flower Decorating Business With No Money
How I Started My Flower Business With $150
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