If you live near a sewage treatment plant, you may initially find the stench unbearable. Over time, however, you get used to it. You’ll hardly even notice it. That’s why no one finds his own farts offensive.
Over the years, many entrepreneurs who are new to retail have asked what is considered a healthy or acceptable rent-to-sales ratio. And many retailers, like me, who have been living in a sewer over a long period of time and who have gotten used to the stench, respond by saying that rent should be about 20% of sales. Hell no! If rent is 20% of sales, that shop stinks. You are, at best, breaking even.
Why is this important? While the Code of Conduct for Leasing of Retail Premises in Singapore boosts retailers’ outlook and confidence, we will be naive to believe that the Code can reverse the fate of an unviable business.
What a retailer needs to confront is whether she’s confident of generating an average monthly sales of $100,000 if the shop’s monthly rental is $10,000. If she’s not, is it worth assuming the risks of opening a new shop in the midst of a pandemic to generate the reward of barely breaking even?