Lessons from the Closure of Vancouver’s Waldorf Hotel: How to Anticipate and Overcome External Risks to your BusinessPosted by sabrina
Our Vancouver readers have probably heard about the unfortunate predicament The Waldorf has found itself in, planning for a 15 year lease, being forced into a four month lease last fall, and now being forced to close its doors because the landlord sold the property to a condo-developer. The unfortunate truth is that, unless you are a large company with deep pockets and big connections, starting a new business in Vancouver can be hard and risky. They key is to keep an eye on the business environment and to learn from the past mistakes of other businesses.
So, all you entrepreneurs, take another look at the risk management section of your business plan (you have one, right?). When starting your business, and every time you review your business plan, you should always consider all possible risks that could set you back, or worse, force you to go out of business. Brainstorm ways you can minimize these risks or draft a recovery plan. For example, what if one of your major suppliers goes out of business or refuses to renew their contract? Do you have back-up suppliers ready to go? Can your business stand to weather the transition without serious disruption?
In Vancouver, a common business setback is obtaining licencing from the city. Some of our clients in the restaurant business have faced (and overcome!) huge delays in opening their business because they were waiting approval from the city. You can probably expect a three-week delay at minimum (especially in the restaurant industry), but it is not uncommon to be set back 3 months or even 6 months. Ask yourself, are you capable of holding on for that long?
We can suggest two ways of mitigating these Vancouver-centric risks. First, try to project your cash flow! We can only speculate, but we think the Waldorf had to ask for a break on their rent because of cash flow and not necessarily profitability problems. Just because your business looks profitable on paper, doesn’t mean you will always have the cash on hand to cover immediate expenses. At a loss for where to begin? We cover cash flow projections in our business planning e-book located here (we also have an excellent financial guru on the team that you can meet with!). Another thing to consider is hiring the work of an experienced and well-connected contractor. Someone who understands city codes and has good ties with city officials. When starting a business, the temptation is to look for cheaper services. Although thriftiness is generally a good idea, you will need to weigh the benefits of saving money with the costs of potential set-backs.
I hope you’re now convinced about the importance of anticipating setbacks and planning accordingly. What difficulties have you experienced, or seen others experience, on the path to starting up?