im seeking the advice of my fellow repair people
My shop is located in the back of a music store. i rent my space for 200.00 per mo.
ive been hear for about 2 years ,,like the store owner ,the shop space is my own business
my arrangement with the store owner is that i pay 25 % of my repairs to him
this has felt ,high to me .. so im reaching out to you all of you for your opinions on the matter
advice would be must appreciated
You're asking a hard question because it involves the market rental rate for the shop space, your desired hourly fee, and the value of his referrals combined with a lot of speculation.
First, Talk to a realtor to get an estimate of the rental rate for that amount of square feet with the amenities provided (bathroom, utilities, sink, exterior door, wireless, etc).
Next, check to see if your combined payment of $200 plus 25% is more than the rental value of the shop space. If it is, then consider the value of his referrals.
Next, consider whether he is keeping you busy and if the percentage allows you to make the minimum hourly fee you need and cover operating expenses.
Once you understand this you will know whether you need to negotiate an upward limit on payments. For example, once you hit $2k any additional revenue with go to you.
I used to contract myself to a big store , they'd take 20% of labour charge and give me $100 per day , working in their space . I worked out well for me but they didnt like writing the big cheques and canned it after a few years.
I think Robbie Collins' approach is a sound one. The use of "comparison" rates for rental (or purchase) of commercial space is common in industry and usually goes by the dollar cost of a square meter or square yard and means you can compare your current space with that of adjacent space to judge the value. A real estate check in your current area will likely reveal a figure for this.
Location location location: something that you will need to put in the equation: how much extra business do you get from the particular location you are paying for compared to when of if you worked from home or from another location which has less exposure to customers. You can put a dollar cost on this if you have worked in other less favorable locations.
The next item in assessing your costs is "outgoings" which takes into account all fixed cost with doing business from that space and includes utilities (power, water etc) , insurance, maintenance, any body corporate or council levies, land rates, security services etc. If the owner covers some or all of these things you need to factor this into assessing the value of that benefit into your current quest to work out how good or bad your deal is.
Overall, if you know how much it cost to do business, and you know how much you make, you can then work out how much you a really making per hour in the current location which will then allow you to compare the alternatives such working from home, working from other locations etc.
Typically, when we do contract repairs for retail music shops we give them 25% trade discount on labor costs. We keep our margins on parts we supply unless the shop supplies them with the job. This figure acknowledges the value of them supplying the additional business to us and the value of that business over time.
These are a few of the things that spring to mind immediately which may help your own evaluation of your present arrangement.
Not going to pretend that I know much about it but a question that popped up in my mind is; Is the store a good location? Do they have a good rep and do they have good traffic? Is there a lot of competition to their business? Don't know where you are located but you might keep in mind the idea that their reputation will effect your's.
i don't have much time to properly reply to all your responses right now ,,, but am appreciating your different points of view and finding them most helpful if there are more, i welcome them as the info maybe helpful to not only me but others as well
thanks so far
What's missing is does the store owner believe that he is providing you with a reduced or subsidized rental rate in return for you doing his repairs sending him 25% of that.
More specifically are the percentages that he/she received tied directly into what you pay for rent? Is it a package deal?
Beyond that the only other missing elements are location, reputation, annual sales of the store, what kind of store is it, competition, your chops and reputation, co-marketing, years in business for either or both of you, as Russell said comparable rental rates in the area, area economy, unemployment rate, population, etc.
Our business pays over $30K annually in expenses including our lease. But.... there are MANY other factors besides what things costs us and the largest part of this should be what you do and what you wish to pay yourself as well.
It's complicated.... :) I will say though sometimes you have to spend money to make money AND that old adage location, location, location has something to it....
Besides working at various music stores around town and my own home based shop, I worked at a GC as a third party/sub contract for over 7 years…I was not a GC employee, and we signed a contract yearly.
First on weekends, then after GC started their "GC Garage" thing I went full time.
I'd set up on a rickety roll around cart kinda thing back in a corner doing mostly bread & butter work…setups,elect's,tuners, etc…things I could do on site with that "bench", then bring back to my home shop what I couldn't do there, and bring it back when ready.
Initially, I had to give them 10%, which changed to 20% when I went 5 days.
It went great for me…constant work coming in, and almost no overhead for me, I essentially rented a spot for 10-20% of the work that I did, plus some store "deal assist" quickies gratis.
I brought in many of my own customers, and things escolated as word got around and the repair load increased.
It was a win-win situation for both of us.
Tho eventually, as the Evil Empire is known to screw over their workers, I got tossed to the curb…they decided not to renew contract, and hired in a kid so they could pay less & make more $$$ from the repair service.
I do not miss the noise or corporate crap tho…and have maintained many of the new customers that I got there, tho it's not nearly as steady back at my home shop…people constantly coming into that place getting something done while they shopped for retail items guaranteed steady work pretty much.
So I guess you've got to weigh in all the pros & cons working at your current situation…is what you're giving them worth what you're getting out of being at a high visibility retail store situation…without the headaches of rent, utilities, ect…?