Why business owners are starting to share
The cost of getting into the game, and then maintaining a bricks-and-mortar presence, are going up and up – so canny businesses are starting to team up.
These days we’re seeing collabs like pop-up makeup stands in fashion outlets, cafés inside hair salons or laser-tag taking up residence in a bowling alley.
These are all real-world example of how two separately owned, but complementary businesses are teaming up to diversify revenue and avoid higher inner-city commercial rents.
Having two complementary businesses inside the one space means the risks and rents associated with a bricks-and-mortar space can be shared while providing a better experience for customers.
Melbourne-based Soap Bar Laundrette (www.soap-bar.com.au) has been exploring the model, teaming up with other businesses in its three (soon to be four) locations.
Co-founder Ben Shaw told The Pulse that the original idea to create something a bit different came after living a few doors away from the most run-down, neglected launderette he’d ever seen.
When that laundrette came up for rent about five years ago, he and partner Constance Bernard decided to try offering a different laundromat experience.
“[We wanted to create] the kind of place where we could all hang out and play Jenga,” said Shaw.
The idea for a diversified business within the laundromat space was something Shaw and Bernard had always looked at – Shaw was the one originally “slinging coffee” at the Carlton laundrette.
But when the time came for expansion they realised there was potential to involve a third-party business in the model.
“After a year we had the opportunity to open a second location in Brunswick, so we had a friend come in and run the cafe for a while I took care of the new fit-out,” said Shaw.
“It was then that we realised if we were to make this a scalable model the best course of action was to invite a complementary business to space-share and free up our time to pursue further projects.”
Of course, it wasn’t just about freeing up time.
Dealing with high rents
While Shaw said the idea of opening up space within each laundromat for a complementary business was about offering a great service, the diversification of risk wasn’t a bad side-effect.
With laundromats in suburbs like Melbourne’s Carlton, Brunswick and Richmond, the rent had the potential to be astronomical – especially when higher-than-usual energy costs are factored into overhead.
“The current climate for commercial rents makes it difficult to get a spacious enough premise,” Shaw said.
“The alternative might be a smaller unattractive store, which we feel might turn customers away.”
In fact, Shaw said despite the shared model adding revenue to the business, it was still struggling to find a viable space closer to the CBD.
He said being able to demonstrate that the premises would have a complementary business running in it also went down well with landlords too.
“Landlords aren’t always welcome to a launderette either, because of the stigma, but when we explain our shared business concept, they tend to get a little more excited about leasing to us,” said Shaw.
Avoiding start-up costs
For the business applying for space within the laundrette, the model means that the business can avoid a lot of the start-up costs associated with kitting out a new space.
“The applicants we have interviewed to date for our spaces wouldn’t have had the capital to open a shop of their own in these areas,” said Shaw.
“This arrangement has given them the opportunity to forego a lot of the upfront costs and concentrate on fit-out, product and staff.
“So we’ve provided a leg up, and they provide us with more customers, social media and another set of hands to provide a nice environment for our customers.”
Shaw said the key to choosing which business would be able to sub-let space within the laundromat had less to do with balance sheet and more to do with personality fit.
“It’s important that we all get along on a personal level, so we take our time to find the right fit,” he said.
“We must be able to complement each other’s fit-out, have the same level of cleanliness and the same ambition.
“It’s just like being flatmates – we’re in this together! People will see us as the same business so it’s important that we both have our A-Game on.”