Tuesday, September 25, 2007

What's the worst possible burn rate for a downtown business.? If one had unlimited funds, the go ahead to create the best space possible, full-time employees, and a great location? With the advantage of much of your original stock donated?

Apparently, about 200k a year.

I'm assuming not a whole lot of money was made.

The Praegitzer Gallery on the face of it would seem to be a bad example for a downtown business, and yet it had many of the same characteristics I see over and over again. Too much money spent up front, not enough money returned. Nice looking businesses that never really have any real hope of making a profit, much less a return on the investment.

The more money you have to spend, the more you have to lose.

You can have a great location, lots of capital, all the knowledge and expertise in the world, enthusiasm, motivation, wonderful displays and full inventory -- and still not make money. Because it all comes down to the math. How many people are customers? How much profit do you make? What's your overhead and your break-even point?

Let's say you create a wonderful business, but without knowing it (and sometimes you can't tell without trying, which is why business is basically a gamble) you need 250k population, and 1 million tourists as a base to turn a profit, and you have 200k population and 800k tourists. Then you're within striking distance -- not utter failure (like a burn rate of 200k per 14 months) but enough to think you can do it. So you slowly bleed money.

You can cut costs, improve your business, gain new regulars. But the math of population won't change. And even if you succeed in reaching a profitable cash flow, I keep going back to the return on the investment. This going to take years and years, if ever, and there is the pesky little problem of having to reinvest all the time to keep your business vital.

So people with lots of money and time tend to burn through the cash at -- what is to me -- a truly astounding and alarming rate.

Went by Northwest Crossing and actually got out of my car and walked around a visited the shops. Saw three customers in the fifteen minutes I was there. Saw one guy walk out of the cafe with a drink with a name tag on his shirt, who crossed the street and walked into the bank. The two women sitting outside at a table, waved at him familiarly, so at a guess all three customers I saw actually work there. Nice stores, though.

No one walking around. The surrounding buildings are husks.

And Riley's Market, which they are apparently hand crafting, since it's been -- what? -- 6 or 8 months since they started? I'm sure it will be magnificent looking.

7 comments:

IHateToBurstYourBubble said...

I've never heard of the "Praegitzer Gallery", but it is apparently affiliated with the High Desert Museum.

The High Desert Museum Praegitzer Gallery


September 7-October 7

The Museum's Praegitzer Gallery presents Andy Warhol's Athlete Series -- paintings featuring famed athletes such as golf pro Jack Nicklaus and world heavyweight boxing champion Muhammad Ali -- September 7 through October 7.

The Natives Are Restless said...

Where's Northwest Crossing?

Anonymous said...

The coffee shop is closed on sunday now, pretty soon closed on saturday, ...

NWXC is so much like the "The Shire", or Juniper Ridge, ... All these dreams all this money.

Once there are more layoffs up there, then there will be nobody.

In the day and I'm think 2+ years ago the little coffee shop was busy -busy with all the contractors buying lattes seven days a week. Then the toys got sold, then the lattes went, and now there are no customers.

There are no people in NWXC, for that matter there are no real people, real children according to Boss Hollern who built NWXC in his own image.

Like all ghost-towns, NWXC will eventually be salvaged for material. Perhaps in a few years folks will be asking "what were they thinking".

For Brooks aka Hollern, it was always the same thing to sell RE, everything the stores, the banks, the coffee shop, ... all to sell RE. Hell the coffee shop is next to the RE store. It was their best customer. SELL RE.

Now that RE doesn't sell, then there is NO reason for any retail up there. NADA. NONE, expect a ghost town very soon.

Duncan McGeary said...

"Where's Northwest Crossing."

You go out toward Shevlin, past College Way, go past Westside Church another half mile or so and turn left. There are bunches of houses, and a retail/office area on the west side.

Anonymous said...

Say, maybe a good comic shop is what's needed to put life back into NWXC. Hmmm ... I wonder who's up to the task?

Anonymous said...

Say, maybe a good comic shop is what's needed to put life back into NWXC
*

Nah, the problem was, and still is the basic marketing myth of Bend.

Build and they will come, a little PR&Marketing and rich calis would descend on remote desert towns in central oregon, like flys on feces.

Trouble is it didn't play out as planned.

Just for the record so you all know, all new construction at NWXC is over. It's done, they have decided to sell what they have, and no longer under-price older units that want to be sold.

NWXC is talked about a lot, buts an excellent example of Bend. Whether it be the Shire or JR. Dumping a lot of money on marketing & PR, can lose you a lot of money. NWXC is proof that they'll not come just because you build.

Carl said...

Anyone want to start a punchboard for the day and month the Rileys Mkt opens in NWX? A Fiver per chance. I want the "Never" selection.

The only business that looks like it makes money is Portellos. Tuesday nites seems to be blond gals night.Some real cutie soccer mom/MILF types among the crowd.