Before I began my journey of actively pursuing acquiring a warehouse, I researched for a year. In fact, I searched for countless articles, books, interviews and never really found what I was looking for. I wanted someone to break down what the emotional aspect was & how it affected their business, but no one ever did in detail.
Every blog, article, or book I read was lackluster regarding what I actually needed to know - the processes, the emotional experience, and the actual transition from a home-based business into a facility. Even more, no one was writing about doing so during a global pandemic. Easy is not a word I’d use to describe this process so far. Instead, I’d call it fulfilling, challenging, & reaffirming yet nerve-wracking.
Let me explain more below.
How to know you need a warehouse
So, let’s address the #1 question every home-based business has; “How do you know when it’s time to transition from a home-based business into a warehouse?”
For us, the decision was easy in a sense because we needed the space. My current home office space is so tiny (200 sqft), I’ve maximized the area in its entirety & I don’t fit comfortably in it anymore, but I made do as long as possible. However, when 3 people are working in the space, it gets very crowded & I begin to feel overwhelmed & frustrated with the lack of space.
The second reason I knew was that orders, materials, machines, and supplies had taken over my home. I was constantly stepping over something business-related, and it no longer felt like I had a separation between work and home. This started taking a toll on my mental health and my ability to run the business.
On the other hand, this was such a hard decision to commit to because of the upfront cost, long-term cost & this being the most significant risk I’ve taken thus far in business. If these aren’t enough of a sigh for you, here are a few more:
- You’ve started using additional rooms for work (living room, dining room, spare bedrooms, even your bedroom).
- You no longer have a separation between home and business
- Your brand needs to expand but is being constrained
- You need a full-time office team
- You need larger industrial type equipment
- Your bills are sky high, and you now understand that commercial bills are cheaper than residential
Setbacks I’ve faced
However, after having a warehouse for 4 months, here are some things I did not consider that I wish I did.
- The cost of a building remodel - I want to remodel the floors, the walls and install central air and heat since the facility does not have any. This adds an additional $12,000 in cost that I did not put into my initial budget for the building. I could've gotten a more expensive building with everything, but that did not seem like the most logical thing to do for my first warehouse space. And now that I'm in the lease and can't afford the full remodel just yet, I'm only using the warehouse in the Spring, Fall, and Winter months because it is unbearable in the summer with the heat. I bought heaters for the winter, and they work great. So now there are 3 months of my lease where I'm working from home. I do not view this as a setback 100%, though, because it just gives me the freedom to travel and work from anywhere during the summer. So I guess it just depends on your ability to see the positive in everything. Also, because I can only use it for 9 months instead of 12, there are 3 months in between where I need some equipment and supplies at my house to work from home until we go back to the warehouse full time. So I no longer have the separation between work and home for the summer, which is a real bummer.
- Pest Control Cost - I have never seen so many cockroaches in my life. The cost of exterminating the building came out to about $300, which was not my budget. But I refuse to work with roaches, and I refuse to have my equipment or supplies invaded by them, so unlike the remodel - this was not optional.
- Taxes, Insurance, Employees - While I did budget taxes and insurance and somewhat budgeted for in-house staff, I could've mapped this out significantly more. For example, I need insurance for unemployment, accidents, equipment, and the building. I never learned until recently that as a Black-owned business, I also need hate crime insurance because regular vandalism insurance will not cover me for an accident. Then I have to pay monthly taxes, quarterly taxes, employment tax, and then a tax expert to help me make sure everything is correct. Uncle Sam touches my money 6 times before I get the chance to.
The positive things
Now, to me, the opposing sides do not outweigh the positives. Although I've faced setbacks, this has been an invaluable learning experience, and I've grown significantly as a business owner these past 4 months than I ever imagined.
So, here's some positive things that have happened:
- My sense of community has grown significantly.
- The City has reached out to me and acknowledged me as a business owner.
- I've gotten significantly more referrals.
- The respect I've received has skyrocketed.
- I've received more compliments as a businesswoman than ever before
- People respect my time more.
- Even though I work from home for 3 months, most of the equipment and supplies stay at the warehouse.
- I can expand and try as many new things as I like
- I am no longer limited to my home for business operations.
- There are fewer things to move when I do move homes.
- My partner and I now run our own business full time together, which means we're officially building our dream.
- I realize I am exactly where I wanted to be 5 years ago, and every day I wake up excited and grateful to be right here, right now.
- We've found a fantastic new team member who's helped increase order volume, quality and meet more deadlines than ever before.
I could write a list a mile long of all the positive things since securing a warehouse. Even though I've faced setbacks and challenges, I wouldn't change a thing. It has been an incredible journey and learning experience, which I am happy to share as I learn.
Going from 200 sqft to 1500+ sqft has been a massive adjustment for me and an accomplishment for my business. I am happy I took the leap, even though I was terrified to make this investment.
If you've made it this far, I'm sure you're wondering about the cost. To keep it short, it cost $4,000 to secure the warehouse + $5,000 to furnish it, get supplies and hire a new team member. After this $9,000 upfront cost the first month, the annual cost is $15,000 with the bills, rent, and insurance.
Then the additional tax cost is $5,000. All together, annually, I'm spending about $30,000, 100% out of pocket. I am always trying to minimize my debt, which is why I haven't taken out a loan for $12,000 to do the remodel. I would just instead save up for it over time, truthfully.
Now, you do not need $30K to launch a warehouse, but it will definitely help. At a minimum, I suggest having all the start-up costs (10K) + 3 months of rent saved to give yourself some wiggle room and avoid unnecessary stress.
I will provide an update in another 3+ months or so regarding my experience with this new step in business. But as for now, I am thrilled with my decision, my growth and the direction my business is headed in.
5 years ago I only dreamed of this moment and to be here is so surreal.
If you’d like an opportunity to learn how I've built my business, online following and more check out the resources below.
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