Editor’s note: This article was first published in October 2010. The property prices and rent it cites (30,000 euros, 70,000 euros and 650 euros a month) are 2010 figures, and the description of the reader’s unnamed home country as an emerging economy with great opportunities reflects that time.
Here is the example of a woman entrepreneur who has started several businesses and now feels she is drowning, like so many other entrepreneurs today. As you will see, this woman’s entrepreneurial spirit is enviable, and I am sure that her current problems will help her achieve business success later on. If I have decided to share it in an article, it is because I think other people’s mistakes and experiences can help everyone else.
I have been here in Europe for 10 years, 7 of them in Spain. I am very happy, because coming to Europe was a dream come true. I also came before the euro, I saw the boom years and I travelled a lot all over Europe, from Norway to Portugal. I travelled like nobody else, because travelling is my passion.
I stayed in Spain and my life is here, but now my home country is on the rise and I wonder whether it is time to go back. My businesses here are not making a profit and I cannot even cover my expenses, while my country, right now, can offer me jobs in big companies with a very good salary and benefits that people here cannot even imagine. I have been carrying a weight on my shoulders, and your blog opened my eyes to the fact that I am on the wrong track…
The thing is, I do not want to go back home right now. I wanted to prepare myself, go back with a degree, maybe a master’s, improve my languages, perfect my Spanish and my English. I need more time!
So, reading your blog, I understood that I need a plan, a long-term plan, like a life project…
Let me explain.
Around 2003, when I arrived in Spain, I was “lucky” enough to become a partner in a bar. The business went well for 5 years and I was able to save money.
With that business I bought an apartment back home that cost me 30,000 euros. Today it is valued at 70,000 euros, it is paid off and I rent it out for 650 euros.
Here I never took out a mortgage, because it did not make sense to me to put down 30,000 euros (plus all the extra costs) and keep paying a 1,200-euro mortgage for 30 years for very ordinary flats.
Even so, I also got caught up in the speculation. In 2006 I took over two businesses by paying for their existing leases (a “traspaso”, as it is called in Spain): a tapas bar and a takeaway sandwich shop.
Both were overvalued. Between the lease payments, the building work and the decoration, I spent almost 100,000 euros. Since I could not run both at once, I sublet the sandwich shop and ran only the bar.
Last year, tired and with no cash, I sold 50% of the bar.
With one place sublet and the other run by my partner, I went home on holiday for a month to recharge my batteries.
When I came back to Spain I brought money with me, because I had built up some savings there from renting out my apartment.
With the money I brought back, I took on a call shop (a “locutorio”). More about that later…
But my partner was not having much success with the bar: it was not making a profit and the expenses kept piling up. So a couple of months ago my boyfriend, who is a chef, joined the bar as cook, and we are getting by with set menus and inexpensive dinners. With my boyfriend we are making a profit, but we are paying off the debts from the previous months.
As for the sandwich shop, the tenant left in May, just when I had taken on the call shop. In August I reopened it, now selling pizza and piadinas to take away.
My boyfriend runs it, but he also has to work split shifts at the bar as a cook. He works long hours and I do not want to push him too hard… because they are not his businesses and he does not get any of the profits, though he deserves to.
The truth is that I have 3 businesses that give me no financial peace of mind. I am working to pay the employees and the rent, and I am paying for it with my health, because the debts do not leave me a single quiet day. I live under constant psychological strain…
Reading Rich Dad, Poor Dad I understood: money is not working for me!!!
This week I want to make the decision to put everything up for sale, all 3 businesses. I know it is not the time to sell and that I am going to lose money, but I am losing time and money, and what I earn does not justify it. The workers want a raise, but I am like the “Hispanic Entrepreneur” who does not even earn his own salary.
With whatever I get, I want to invest in bonds or property back home and have cash again…
And, as a last chance for Spain, focus on just one thing: take on a restaurant with my boyfriend where they only ask for rent…
What do you think? Is there another solution?
I hope you can help me.
Our reply
First of all, congratulations on your truly entrepreneurial spirit. Just from reading you, I know you are an intelligent woman and, in fact, you have not been as wrong as you think. You thought things through properly when you bought property as an investment and, above all, when you organised the work in your businesses.
The only problem, I think, has been the type of business. It has always been said that hospitality businesses are businesses that enslave you. I would not touch them with a barge pole, unless you have a large chain of establishments that keeps you from having to stand behind a counter yourself. People go into these businesses thinking it is all profit because of the high margins, but at a certain level of sales an imbalance appears: there is a threshold beyond which expenses rise by 50% while profit rises by only 8%.
Not to mention the tax increases, the rise in electricity prices, security measures and occupational risk prevention, all of which add up to another salary. And a call shop, unless it is large and offers plenty of complementary services, has no profit margin to speak of, as you will have noticed.
I imagine you have already done your financial analysis and know that you are not making a profit, and that if you want to, you would have to lay off staff and do their work yourself, which you will not be able to keep up for long.
I think you have already found the solution yourself, and you are not far off the mark. When a business is not a business, try to turn it into cash and get rid of it without a second thought, as long as you have the chance to do so and do not end up deeper in debt.
See also: How to get to the million-dollar idea (part 1)
As for whether to stay in Spain or go back to your country, it is a pity for an entrepreneurial woman to leave Spain, but it is true that your country is one of the emerging economies, with incredible opportunities right now, especially with 2016 on the horizon.
Rather than investing in property there, I would advise you to invest in rural land that could be rezoned for development, as long as you know in advance that there will be demand to build on it. Do not invest in bonds, at least not in Spanish government debt, since a fixed-term deposit at any bank is currently paying you more. In any case, you can invest in your country or anywhere in the world thanks to the internet, so that is not a problem.
I am sure that whatever you decide will be a good decision, and that this rough patch you have gone through in business is actually a very good thing, because you will certainly learn from the experience for your next ventures.
IF YOU HAVE NEVER FAILED, YOU HAVE NEVER LIVED.
I wish you the very best of luck, and we are here for anything you need. Warmest regards.
Featured image: David Adam Kess, CC BY-SA 4.0, via Wikimedia Commons.
