My Family Owns a Business

Growing up in a region of India where everyone including my family owns a business, my wife and I were always dreaming of owning our own business. We always talked about someday having enough money to open a coffee shop with ice cream or may be own multiple gas stations with a convenience store. This dream came true in the form of a dollar store in 2003. My wife and I decided to open a dollar store in partnership with one of my colleague from Accenture. There were many things that needed to be done (i.e. create a partnership agreement, create a name for our company and store and hire a vendor to help us open the store). We made all the decisions together and hired a company out of Las Vegas to help us open the dollar store. This company’s job was to help us find a location, build a store and link us into their suppliers. The company organized many meetings with me and my partner to discuss the location. Each time they met with us, they emphasized how important it was to find a location that was low in rent due to a low profit margin in the dollar store.

After researching many different locations, we settled on Harmar Mall in Roseville, MN because it was the cheapest in rent. This was the worst decision of our life. Because of the location we selected, my wife and I lost $150,000 dollars in our dollar store over the three years that we owned and we ended up closing the store. The selection of Harmar Mall as the location for our store was an example of “The Anchoring Trap”¹ because there were many other locations that were more attractive than Harmar Mall but were expensive. As we were looking for a location, our minds were made up that we need to find a cheaper location because the vendor we hired had convinced us that cheaper is better. There were many signs that should have been “white flags”² for us that this was not the right location. For one, when we visited the location, we noticed that there were a lot of stores that were empty. The second sign was that the space we were getting was in the back of the mall and in a corner where it would be hard for people to find us. We ignored these signs because we had fallen into the “Anchoring Trap”¹.

Because of our decision to select a cheaper location, we fell into “The Status-Quo Trap”¹ because instead of selling the store or closing it in the first year, we kept it open for another three years, thinking sales would improve. Furthermore, as we kept the store open, we kept justifying our decision by adding additional money to the business for advertising, adding more expensive merchandise like cell phone accessories and I went as far as buying my partner out. Even though deep inside, my wife and I knew that this store was a lost cause, we still fell into “The Sunk-Cost Trap”¹ because we had already started talking of opening multiple store and me quitting my consulting job before we even opened the first store, for we did not want to