Originally Posted by Ankesh
Consider rent as advertising expense. And the calculations will fit.
I have a friend who gets an average of 10-12 people to visit his shop per day. Thats less than 2 people per hour he remains open. His shop is in one of the posher locations in Mumbai - very high rent. And yet he makes money. (I think it was 50% of all who enters his shop ends up buying from him.)
The store itself does not make his enterprise wildly profitable. But the store gives him an avenue to create a mailing list of buyers. And he makes a lot of money on repeat sales - via specialty exhibitions and sales. Many of these sales transactions don't happen in his shop - but they happen because of his shop.
Its the same direct marketing model.
You need to have all 5 in place.
No idea about cheese shops. But I had heard that the Jaguar showroom that opened recently near my home needs to sell less than 2 cars a month to remain profitable.
With the right product-pricing mix, you can remain profitable even with very very low foot fall.
I like what you wrote with one exception. Rent is an item, at least for tax purposes, that has its own line on the tax form. A person can consider rent an advertising expense but has to, again tax wise, report it as such. To me, thinking of it as advertising could make sense but the reality of it says not to juggle the mind w/exotic thinking especially with a fixed expense. Used your creative thinking talents for ways to build a mailing list or increasing foot traffic, etc.
Just my 2¢