I want to open a shop but business rates worry me – what should I do? DAVE FISHWICK replies

During the pandemic, I started a business selling handmade treats online.

Sales have gone from strength-to-strength to the point that I’m close to running out of space at home to keep up with demand.

Ideally, I’d open a shop with room out back to scale-up. However, given how I’ve grown the business online, costs of having a physical shop – namely, business rates – worry me.

It would be great to give it a go for a year to find out if it’s viable, but am struggling to see if there are any grants, help or support for such a venture. What should I do?

Scale up: I want to open a shop but I’m worried about the costs involved, what should I do?

Dave Fishwick, This is Money’s business doctor, replies: The pandemic was brutal, and many businesses had to work extra hard and needed to adapt, adjust and overcome to survive. 

It also proved to be an excellent time to start some companies, particularly those providing goods and services online, as social distancing and home working accelerated the trend towards online retail.

Your idea found enough customers, and no wonder during lockdowns –  who wouldn’t want the occasional treat when stuck inside for so long?

It’s great to hear that your business thrives and sales haven’t slowed as people return to normality.

It’s a natural progression to grow a young business. However, you’re right to be cautious about increasing your fixed overheads. 

You don’t want to go from a small but profitable enterprise to a bigger one which struggles to break even and working longer hours to earn less than you do now. 

You must be confident that taking on the extra overheads will generate more than enough profit to cover the extra costs. Remember: turnover is vanity and profit is sanity.

Smaller business premises with a rateable value of under £12,000 qualify for 100 per cent business rates relief, with tapered relief up to a rateable value of £15,000. 

With larger premises though, your business rates increase significantly, contributing to the increasing number of empty shops in towns and cities nationwide.

Unlike residential properties, most commercial leases are at least 3 to 5 years and usually require you to maintain the property at your own expense, so trying it out for one year may not be possible. 

However, if a premises has been empty for some time, you may be able to persuade the landlord to offer you a tenancy at will, where you’re not tied into the property for a long term.

As well as rent and rates, there are also a lot of other additional costs when you open business premises. 

For example, insurance, staff costs and utilities, to name but a few. You’ll need to adapt and equip the building to your specifications before you open, which can be very expensive for a catering business.

If you have space to expand your business while still working from home, you may be able to remain more profitable than with commercial premises. 

If you or a family member has a garage that isn’t used much, you could consider converting that instead. Perhaps also consider an intermediate step before taking the plunge into fixed premises, like selling your products at food fairs and markets.

All that said, I wouldn’t discourage you from opening a shop. It works for many businesses, just make sure you’re fully aware of all the costs involved.

I recommend you contact your local council and ask for the Business Growth Hub department – there are thirty-seven across the country. 

Ask to speak to their economic growth officer who will help you with everything from business planning to finding finance, help with your accounts, and marketing and most importantly in your particular case, help with expansion plans! 

Boost Growth Hubs can help you achieve your goals at whatever stage of your business journey. There are grants available to small and new businesses. 

However, you do need to satisfy specific criteria or be based in a particular area to qualify. 

I have just seen a hundred thousand pound grant given to a local manufacturing business in Pendle Lancashire.

I do encourage people to think big. 

However in business, it is better to be roughly right than precisely wrong, and I think that you’re not in a bad position at the moment if you’re struggling to keep up with demand and you’re making a decent profit; many businesses would like to be in that position.

Whichever direction you choose, I wish you and your business all the best for the future.

This post first appeared on Dailymail.co.uk