Justin Nichols ran an electronics repair shop in a trendy, metropolitan neighborhood whose rebirth was the talk of the town.
His storefront was one of 25 or so “mom-and-pop shops” that languished for years before an infusion of young, college-educated people ignited that end of town. The business district around him went from forgotten to unforgettable overnight. The bonus for Nichols was that the newcomers loved electronics.
They brought him TVs, stereos, cell phones, computers, many of which were classics from the 1960s and ‘70s. He fixed them and they passed his card as a referral to friends all over the city. He was only open three years and his client list had 4,000 names on it. He had to work seven-days-a-week just to keep up with the demands.
That’s when Nichols stepped back, took a look at where things were headed … and decided to close the store.
“I had more work than I could handle and I still couldn’t make ends meet,” Nichols said. “There were just a lot of things involved with running a small business that I didn’t anticipate. I really liked what I was doing, but I couldn’t keep up. That’s when I knew it was time to close the shop.”
Don’t Wait Too Long
Nichols’ tale is an unusual twist on a familiar story. The Small Business Administration says that 50 percent of small businesses crash-and-burn by the fourth year. Twenty-five percent don’t make it past the first year. Most of the time, lack of customers, cash flow and mounting debt are the reasons.
That was not the case for Nichols. He had customers, some cash flow and was debt free, but there were two major obstacles he didn’t anticipate and couldn’t do anything to overcome.
“I mis-read the market (for electronics repair),” Nichols said. “If I had opened the store 15 years ago, I would have been raking it in, but I was too chicken. I waited and when I finally did open, the technology, parts supplies and prices changed too fast, and I lost.”
Finding a reliable supplier for parts was a huge problem. This year’s TV or computer model is obsolete in three or four years so manufacturers aren’t keen on making a supply of spare parts. Nichols spent a lot of time searching for used parts to make repairs, and even if he found them, there was no guarantee the part would work.
“And when it didn’t, which happened more often than anybody wanted, I’d be stuck paying the bill,” Nichols said.
Price Not Right
He had even less control over the second problem. Dramatic price reductions happen every few months on electronics. The cost to buy a new TV or computer was often only slightly more than repairing the old one. Guess which way the customers went?
“It’s hard to convince someone to pay $250 to repair a TV they bought for $399,” Nichols said, “especially when they can get the same one, or something better, brand new for $299 today.”
Those battles got old in a hurry and there wasn’t enough reward to keep fighting them. Nichols started the business with modest goals, short-term and long-term, but never met either one.
“I didn’t expect to become a millionaire, but I was hoping I could earn enough to pay my bills and have a stable life,” Nichols said. “My long-term goal was to start a retirement account or least have some savings. I never got to the point where I could even think about either one.
“I felt guilty even thinking about taking my wife out to dinner … not once a week, once a month! That’s how close I had to watch my pennies.”
Next Step: A College Degree
So he closed the store. He is enrolled at a local college to start a degree in computer science. He’ll pay for it with part-time repair work, but student loans could fill gaps, if needed. He’s been closed for two months now and doesn’t think he’ll try again when he finishes his degree.
“I had plenty of offers from people wanting to loan me money and keep the business going, but for what?” Nichols said. “I’d end up in debt and still not have solved the problems that held me back to begin with.
“If you’re going to start your own business, you need to have a lot of capital, make sure the market isn’t already saturated and make sure there is a business there before you start.”
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].