A Word of Caution: The Brutal Math of Business - 2025-11-09

Kids, I've been watching the business world, especially here in Singapore, and I need to share some hard truths—especially if you ever dream of opening a cool cafe or restaurant.

The news articles I read recently paint a scary picture of the Food & Beverage (F&B) industry. Imagine this: 82% of all F&B businesses are losing money. Only a tiny sliver—about 5% to 7%—actually turn a profit. Despite these odds, and even though over 3,000 businesses shut down this year, people keep pouring money into it. Why? Because they underestimate the monster of fixed costs.

⚠️ The Landlord Trap: The "Milk Cow"

The biggest danger in F&B is the rent. Landlords often treat successful tenants like a "milk cow." They let you build up a great business, attract a loyal crowd, and then, just when you're succeeding, they hit you with a massive rent hike.

I saw this happen with your uncle’s ex-company. Their rent for a fruit shop went from $4,000, to $8,000, and eventually, to an impossible $12,000. They had no choice but to close the doors. I also read about a cafe owner who had to shut down after five years because the landlord raised the rent twice in 5 years—even though the place was sitting empty for months before she moved in!

This is not just business; it's a financial trap.

💸 The Financial Avalanche

Starting an F&B business is like stepping into a financial avalanche. Before you even sell one coffee, you need to budget for:

  • Renovation: $100,000 or more.

  • Equipment: Another $100,000 to $200,000 for fryers, ovens, and chillers.

  • Monthly Overheads: $5,000 to $10,000+ in rent, plus thousands more for electricity, water, and gas.

With costs this high, you must be a genius in the kitchen AND a ruthless financial wizard. That's why I see some new places make a fatal mistake: they price their items high and don't offer promotions, just expecting a crowd to show up. They usually don't last long.

✅ The Smart Way to Start a Business

Look at the hawker stalls that do survive. The one I always go to—the mixed vegetable rice stall—always has a long queue. Why? Good quality, fair prices, and generous portions. They focus on value, while the high-cost, low-value stalls around them constantly close down.

So, here is my core advice to you:

  1. Be Skeptical of F&B: Unless you have a truly revolutionary idea and a massive safety net, I'm against you rushing to open an F&B shop.

  2. Start Small & Prove It: If you must, start tiny first. Build a base of regular, returning customers before you commit hundreds of thousands to a bigger space.

  3. Lock Down Your Biggest Cost: If you decide to go big, try to buy the shop first. A mortgage instalment is relatively fixed, giving you a predictable cost. This protects you from the sudden, business-killing rent hikes that can increase your cost by 100% or 200%.

  4. Embrace Low-Cost Startups: The smartest path to entrepreneurship involves businesses with very few fixed costs. Think about starting a business that requires your brainpower more than a shopfront:

    • Tutoring

    • Accounting Services

    • Programming or Web Design Services

You can work from home and your fixed cost is almost zero. This gives you a long runway to succeed without the pressure of having to pay $10,000 in rent every single month.

Remember: You need to understand the problem before you try to solve it. Look at people who use their own HDB flat to sell food—they've successfully eliminated the biggest cost! Always focus on how to reduce cost and make a profit, not just on how to serve a dish.

Comments

Post a Comment

Popular posts from this blog

The Perils of Blind Trust: Navigating the Complexities of Estate Planning - 2025-02-27

The headlines grabbed my attention: a wealthy individual, with an eccentric vision, drafted a will that would delay the distribution of his fortune for a century. Intriguing, right? But the devil, as always, was in the details. The news casually mentioned that the lawyer entrusted with this bizarre mandate had sold off the properties and deposited the proceeds into a bank account. That, to me, was a glaring red flag. Imagine the lost potential. Real estate, especially in prime locations, tends to appreciate significantly over time. By liquidating these assets and placing the money in a bank, the descendants were robbed of substantial long-term gains. Inflation alone would erode the value of that cash over a century. This case serves as a stark reminder: even with the best intentions, poorly executed estate plans can lead to devastating financial losses. Contrast this with the story of an Arab trader whose opulent Orchard Road residence was transformed into a rental property. The asset ...
Read more

The Simple Yet Powerful Rule of Input and Output - 2025-03-09

There's a fundamental rule that applies to many areas of life: if you want to gain more, your input must be greater than your output. If you want to reduce something, your output should exceed your input. This principle is easy to understand and can be applied to a wide range of situations: 1. Weight Management If you want to lose weight, you need to burn more calories (output) than you consume (input). This means eating less, exercising more, or both. However, be mindful of health conditions like low blood sugar—always consult a doctor before making drastic changes. 2. Wealth Accumulation If you want to grow your wealth, you must earn more than you spend. Even if you make millions, spending billions will leave you broke. Smart financial management follows the input-output rule—save and invest wisely! The Classic Water Tank Problem - from your Primary 5 math olympia This rule even applies to math! Consider a water tank being filled by a pipe that takes 18 hours to fill it complete...
Read more

Unearthing Hidden Stories: The Fascinating World of Long-Term Shareholders - 2025-02-27

I have a peculiar habit: whenever I delve into a company's annual report, I'm drawn to the list of major shareholders. It's like a treasure hunt, searching for intriguing names that whisper stories of the past. Take SBS Transit, for example. While browsing their shareholder list, I stumbled upon "Changi Bus Company (Private) Limited." Intrigued, I dug deeper and unearthed a fascinating piece of Singapore's transportation history. This wasn't just any bus company; it was the "mosquito bus," a humble operation that predated modern Singapore. Imagine my surprise to learn that the government, recognizing its importance, orchestrated its merger, transforming it into the SBS we know today, a powerhouse encompassing both buses and rail. This company, born 77 years ago, holds 691,548 SBS shares, a testament to its enduring legacy. At a price of $2.41, that's an investment worth $1,666,630.68! Your god-grandfather used to ride those "mosquito bus...
Read more