Leaving Home Embroidery Project

As your embroidery business grows and become more successful and profitable, you may eventually reach a point where it’s no longer practical to work out your home. Neighbors may balk at the constant flow of traffic to your house, your family may complain that the embroidery equipment is taking up too much space, or you may be impeding your company’s success by not giving it room to grow.

“One indicator it’s time to move is when you have enough business to support the monthly cost of a commercial location,” says Tina Broes, vice president of sales, Itza Doodle, St. Petersburg, Fla. “We calculated what we were making from our home business, and when we were able to meet the cost of rent, utilities and everything else, we moved into a store.”

Besides getting all the embroidery equipment and supplies out of your home, other benefits of moving into a commercial location include greater exposure, walk-in traffic and increased word-of-mouth, Broes says. “When we moved, we got lots of customers who didn’t know about us before,” she recalls. “The first year after we moved from our home, our growth was about 40%.”

Other advantages include higher visibility, the possibility of having a showroom area and a sense of escape when you leave work, says Phil Morris, vice president sales and marketing Free Embroidery Stuff, Northbrook, Ill. “You don’t want customers coming to your house. It’s inconvenient for you and your family, and it might not be legal,” he says. “When you move into a commercial location, you can work longer hours, have additional shifts, and have a much larger space. Space is the No. 1 advantage.”

When you decide it’s time for your business to move, you’ll have a number of issues to consider, including choosing the right location type and size, and uncovering all the costs involved. Get ready for lots of planning, veteran embroiderers say. “There’s a lot to do, so figure at least three months to do all planning,” says Connie Smith, production manager, Holloway, Sidney, Ohio, and a former home-to-commercial embroiderer.

Broes figures she spent about six to eight months planning her move. “We did all the research and figured out what it would take to do it, and looked for a location,” she says. “Expect to spend six months to a year.”

Business Location A big decision to make when moving from your home is what kind of location do you want? If you choose to open a retail store, be prepared to keep retail hours, and you’ll want to choose a high traffic spot. “Retail is all about location and traffic,” Phil Morris, vice president, marketing and sales, Free Embroidery Stuff, says. “And the higher traffic and the more visibility you have, the higher the rent.” Your business focus determines the type of location you’ll need, experts say. A contract decorator might need more space and employees, so an industrial location would work, but a custom embroiderer might want a retail location for walk-in traffic. “Retail is all about location and traffic,” Morris says. “But the higher traffic and the more visibility you have, the higher the rent.”

Higher Overhead

	Hand in hand with moving to a commercial location is hiring employees. You must ask yourself if your sales will support another salary. “You’re probably going to have to hire somebody, and that’s a big expense,” says Deborah Jones, vice president marketing and education, Great Notions, Dallas. Photo courtesy of The Stitch Palette, Burlington, N.C.

Part of the planning involved in moving to a commercial location consists of calculating the higher operating costs. “A commercial location expands your ability to increase your revenue,” says Deborah Jones, vice president marketing and education, Great Notions, Dallas. “But you have to keep it in perspective because there are associated costs. You’re probably going to have to hire somebody, and that’s a big expense.”

Broes adds, “Overhead costs really go up. You have the store lease, utilities, additional help working longer hours, new products.” You’ll also need enough money saved to cover the first three or four months of operation at the commercial location, she says.

Home embroiderers should already be pricing their work as if they had the overhead of a commercial location, veterans say. Then when they make the move out of their home, they don’t have to suddenly raise prices to allow for their higher overhead.

“If rent wasn’t figured into your pricing, then you’re going to have a really hard time telling your customer, ‘Last week it was $20, but now it’s $35,’ ” Morris says. “And the time you move isn’t the time you want to start losing customers. From day one, you have to [figure overhead into your pricing].”

Helen Momsen, owner, Helen Hart Momsen Enterprises, Winchester, Va., and author of “Professional Embroidery Business By Design,” agrees that if you haven’t been charging enough from home, “The minute you move into a retail location, you’ll have to raise your prices to make up for all the new overhead you have.”

Before you can choose a commercial location, you must know your business definition, or focus. Are you a retail embroiderer, a contract embroiderer or a custom embroiderer? “You have to know what you’re going to do,” Smith says. “What’s your niche?”

A light industrial location usually charges lower rent, Morris says, and you don’t have to keep retail hours. “If you have a retail location, you’ll probably want a weekend presence. Do you have a big enough staff to do that?”

Examine your company’s growth throughout its history to determine how much space you’ll need in your new location in the long run. “If you move into a space that’s too small and you continue growing, you’ll have to move again in a few years,” Smith says. “Sometimes it’s better to have a bigger space so you have room for growth.”

“Interest rates are so low that you might buy a place that’s bigger than you need so you can grow,” Momsen suggests. “In the meantime, you can rent out the additional space to someone."

Find out if the location is part of a mall or area that will undergo a major renovation, Momsen cautions. “We have a walking mall that was made into an outdoor mall, and the street was torn up and full of equipment during the Christmas holidays,” she says. “You also need to know the location’s traffic patterns. Do customers have to drive up a block and turn around because the location doesn’t have a crossover?”

Broes chose her commercial location by surveying the area for other, compatible businesses. “If you’re opening a sports-focused store, you’d get a location near schools and teams,” she says.

“We chose our space because it was close to other businesses that had a similar demographic,” Jones says. “It was next to a ladies’ clothing store and a craft center, and we felt people interested in those stores would be interested in embroidery, too.”

Many cities have retail merchant associations that can help you find a location, veteran embroiderers say. Also, it’s helpful to find a location near a bus line so that employees can easily get to work, they advise.

Leases

Leases have so many issues to cover that you should have them reviewed by an attorney before signing. “Ask how long the lease runs. Will rent go up, and if so, how much? Can you sublet? Can you renew? Who buys the insurance? What services are included in the rent? Who pays for improvements?” Momsen says. “Remember that everything in a contract is negotiable.”

Make sure you fully understand the lease before signing it, Smith advises. “It might be a lease where the landlord takes care of everything, like plumbing problems, or a lease where you’re responsible for everything.”

“Find out what you’re responsible for and what the landlord is responsible for,” Jones says. “If your water heater or air conditioning goes out, who pays for that? It’s different from lease to lease.”

It’s also a good idea to have the building inspected before signing the lease. And if you’re having the location renovated, spend lots of time monitoring the process, veterans advise. “You have to be there every day and really stay on them,” Smith says. “Make sure they don’t mess it up.”

“Some places will remodel to suit the tenant, but make sure you know exactly what that includes,” Momsen says.

Finally, ask the landlord about signage. Some may not allow certain types of signage or they may restrict the areas where it can be placed.

Other Costs

Security. Smith says your new business location must have a security system, which may cost from $1,200 to $2,000 for installation and $30 a month for monitoring. It’s a small price to pay when you consider the expensive machinery and supplies inside your business, she says.

“I know from experience that you need a security system because my business was broken into,” Smith says. “Within three minutes, they stole leather jackets and other expensive things. I had a security system, and without it, they would’ve cleaned me out, but they heard the alarm go off.”

“It’s a good idea to have security because it’s inexpensive, and you have lots of products,” Broes says. “They won’t steal your machine, they’ll take your computer system, and that could cost you several thousand dollars.”

Retail display fixtures will be a cost consideration if you move into a retail location or if your wholesale location has a showroom. “We put in wall units at a cost of about $3,500,” says Tina Broes, vice president, sales, Itza Doodle, St. Petersburg, Fla. “We put in cabinets and clothing racks, too.” Photo courtesy of Alphabet Soup, Columbia, S.C.   Fixtures. If your new location is a retail environment, you’ll also have expenses in decorating the shop. “We put in wall units at a cost of about $3,500,” Broes says. “We put in cabinets and clothing racks, too.”

One cost consideration of moving to a commercial location is how will you transport your machine? It’s best to use a commercial mover because then you are insured, however, you might check with your leasing company to see if they have insured the machine if it gets damaged in transit. Photo courtesy of Classic Creations, Florrissant, Mo. Moving. You should factor in the costs of moving your machines and supplies. Also, you must decide if you’re going to hire a moving company or do the job yourself. “It pays to have someone move it for you so that it’s insured,” Jones says. “Don’t scrimp by doing that yourself and then dropping the machine, and you’re out of commission for a month or more. It’s not a good place economize.” “The best way to move multihead machines is a tilt-back tow truck,” Smith says. “When I moved my six head, we rolled it out, strapped it on, and backed it into the new location. I was up and running that afternoon.”

Broes suggests checking with your movers to see if their insurance covers any damage that might occur. “If you have insurance through your own leasing company, see if they cover it,” she says. “Tell them, ‘I’m moving my equipment with a U-Haul. If it gets damaged, do you cover it?’ ”

Misc. Other costs include lease deposits, business licenses, additional stock, administrative supplies and insurance. Many home embroiderers carry their equipment on their homeowner’s policy, Jones says, so moving to a commercial location may cost you more. “It’s a whole different ballgame,” she says. “There’s coverage for your equipment and inventory, and you need liability insurance, so check out those costs.”

When your business is ready for a commercial location, following these suggestions and knowing these costs can help make the transition go much smoother. But if all of this planning seems like a little more than you’re ready to tackle, don’t feel like you have to make the move.

“Some embroiderers want to work part-time and keep an eye on the kids, and that’s fine, as long you understand your goal,” Morris says.

“But if you want to realize additional income,” he continues, “or if you ever want to grow your business to the point where you can sell it, you need a commercial location.”