My Family Owns a BusinessGrowing up in a region of India where everyone including my family owns a business, my wife and I were always dreaming of owning our own business. We always talked about someday having enough money to open a coffee shop with ice cream or may be own multiple gas stations with a convenience store. This dream came true in the form of a dollar store in 2003. My wife and I decided to open a dollar store in partnership with one of my colleague from Accenture. There were many things that needed to be done (i.e. create a partnership agreement, create a name for our company and store and hire a vendor to help us open the store). We made all the decisions together and hired a company out of Las Vegas to help us open the dollar store. This company’s job was to help us find a location, build a store and link us into their suppliers. The company organized many meetings with me and my partner to discuss the location. Each time they met with us, they emphasized how important it was to find a location that was low in rent due to a low profit margin in the dollar store.
After researching many different locations, we settled on Harmar Mall in Roseville, MN because it was the cheapest in rent. This was the worst decision of our life. Because of the location we selected, my wife and I lost $150,000 dollars in our dollar store over the three years that we owned and we ended up closing the store. The selection of Harmar Mall as the location for our store was an example of “The Anchoring Trap”¹ because there were many other locations that were more attractive than Harmar Mall but were expensive. As we were looking for a location, our minds were made up that we need to find a cheaper location because the vendor we hired had convinced us that cheaper is better. There were many signs that should have been “white flags”² for us that this was not the right location. For one, when we visited the location, we noticed that there were a lot of stores that were empty. The second sign was that the space we were getting was in the back of the mall and in a corner where it would be hard for people to find us. We ignored these signs because we had fallen into the “Anchoring Trap”¹.
Because of our decision to select a cheaper location, we fell into “The Status-Quo Trap”¹ because instead of selling the store or closing it in the first year, we kept it open for another three years, thinking sales would improve. Furthermore, as we kept the store open, we kept justifying our decision by adding additional money to the business for advertising, adding more expensive merchandise like cell phone accessories and I went as far as buying my partner out. Even though deep inside, my wife and I knew that this store was a lost cause, we still fell into “The Sunk-Cost Trap”¹ because we had already started talking of opening multiple store and me quitting my consulting job before we even opened the first store, for we did not want to
We opened a new location in the middle of the year after we had made our plans to purchase the franchise. We felt that we had come a long way from our previous decision to stay in my office because of a combination of factors:
• An existing owner for a new franchise location that we sold to a private entity, at which time we had no experience.
• A large portion of our existing franchise group, which had sold to us over their first 10 years of ownership, failed to return our share of the franchise money when the franchise owner failed to secure a buyer, which led us to the Sunk-Cost Trap”¹
At our old location, we used up all of the equity we spent and the amount we were earning. We also ended up paying in full, which was significantly more than what we’d been paying, so we thought our decision to stay close to my existing location in a new location would be more prudent now, since it makes sense to me now as a business to do business where you’re operating a place, not just as a business; we’d still be able to profit from the parking revenue that were being lost, since we were able to get our business back so fast.
We would now realize there were some risks with our choice, since the location where we initially opened was on a large property that needed to be developed for use of the new franchise. While it was not the best location, we realized that the building layout was easier to work on because we had the right tenants at the right time, and it also made a huge impact on our business: we’d be able to grow our business with fewer workers and fewer inventory.
In addition, because of us hiring two new people in 2012, we had added more people than we had since the mid-2010s. However, our existing locations were still far from successful in 2013, even though they were the only new franchises we had in place in the beginning. The location that we are building is not sustainable and will never be sustainable in the future.
The location was so convenient for our partners that when things got bad, we would walk back to the old location and try again, and we felt that we were finally getting a location that was going to help us and would be able to stay focused in our business. The company’s growth accelerated in 2014 after we moved out of the original location, and it still is. We thought we had a great year at our new location with some great experiences, but the reality was that we were stuck in a situation where one of our competitors, the Internet, didn’t recognize us and decided to shut down our business.
There are now several things that we felt we needed to do to try again.
• Create a timeline for when our existing businesses will be able to do business within the new