CompareShop money
Buy the shop you rent, or keep renting?
Your landlord wants Rs 40,00,000 for the shop you rent. Here is the number almost nobody works out, and the four questions that actually settle it.
Do the arithmetic before you decide, not after. For most small shops the honest answer is to keep renting and put the money into the counter, unless a notice to leave would badly hurt you and the purchase would not empty your working cash. Then buying is right. Here is how to tell which one you are.
The morning your landlord mentions it
Quarter past nine. Rafiq, who has owned these four shops since before you took the key, stands at your counter with tea he never finishes. He is not here about the rent. His sons want everything divided, he says, so he may sell all four. Then the number: Rs 40,00,000 for yours, and he would rather it went to you than a stranger.
You have paid him rent for eleven years. Rs 25,000 a month now, Rs 9,000 the year you started. In four minutes a question you avoided for a decade is sitting beside your cash box.
What happens next is usually the wrong order. You decide first, with your stomach, in the hour after he walks out. Then you spend three weeks hunting for arithmetic that agrees with you. If the fear of being moved on is loud that day, you decide to buy and go looking for the money. If the price frightens you, you decide the shop is fine as it is.
Both feelings are honest. Notices really do arrive, and a shop with your name on the papers really is a different quality of sleep. But a feeling cannot produce a number, and this is the largest number a small shopkeeper ever writes. Calculate first, decide second, and let the feeling break the tie.
One boundary. This page compares paying rent against owning outright, with money you have or can raise from family and savings. If you would have to borrow most of the price, that is a different decision with costs of its own, and nothing here prices it.
The number almost nobody works out
Ask ten shopkeepers what buying costs and ten will say the price. That is not the cost. The cost is the price plus everything that money would have earned somewhere else, and somewhere else is not mysterious. It is your own counter.
Rs 40,00,000 sitting in walls is Rs 40,00,000 not sitting in stock. Not in a second counter. Not in the deeper range that stops people buying one item from you and the other six elsewhere. Not in the cushion that lets you buy a whole season in one order at a better rate.
Property rises slowly and steadily. Stock money moves fast. Buy at Rs 88, sell at Rs 100, do it six or eight times a year, and that money has worked far harder than any wall in the same twelve months.
Say the shop rents at Rs 25,000 and the landlord wants Rs 40,00,000 for it
Made-up figures, chosen to show the shape. They assume the shop can genuinely absorb Rs 15,00,000 of extra stock and that you would truly put it there. Change either assumption and the answer changes.
The third block surprises people, so read it twice. The walls made you money. The counter made you a great deal more, out of a slice of the same purse.
That sum has three soft spots. Your shop probably cannot swallow Rs 40,00,000 of stock, which is why it puts only Rs 15,00,000 to work and leaves the rest idle. It also assumes you would truly invest that well. If the money would drift into a wedding, a plot somebody's cousin recommended, and a car, buying wins, because walls are a discipline.
The third soft spot is the big one: it prices no risk. Ten quiet years is the best case for a renter, and a renter does not choose whether they stay quiet. Work out what your money earns first, using your shop's real profit instead of a feeling.
What renting really costs, told straight
Four things, and the fourth decides most cases.
The rent itself is easy. Rs 25,000 a month is Rs 3,00,000 a year and it is gone. It buys nothing you keep, it is usually the biggest fixed cost a small shop carries after wages, and every rupee must be earned first, which is the arithmetic behind how much your shop must sell before you earn.
The rise at every renewal is the one people forget. Eleven years took your rent from Rs 9,000 to Rs 25,000, and the next eleven will do something similar. Comparing today's rent against today's price flatters renting badly. Compare ten years of rising rent.
The deposit is dead money and nobody counts it. Rs 3,00,000 lying with your landlord for eleven years has earned nothing and comes back only on the day you leave.
Then the fourth. A landlord can ask you to go.
Six in the evening, two turns from your street, Salim is loading shelves into a pickup. He sold cloth from that shop for nine years and got three months of notice, more than many get. The fittings cost him Rs 2,80,000 and he took maybe Rs 40,000 of it out on the truck, because racks built into a wall do not come out. He was closed six weeks. The new shop is three streets away, and three streets is far. Half his regulars simply stopped. Not out of anger. They passed another shop on the way home and it was open.
That is the true cost of a move: the fittings, the closed weeks, and the customers who do not follow. For a shop whose whole value is its position and its regulars, this is not a footnote. It is the argument. A tailor can move and take the business with him, because the skill is the business. A general store on a corner cannot.
What owning really costs, told just as straight
Buying is not the safe choice. It is a different set of costs, quieter ones, easier to miss.
The price is only the start. There is the paperwork and the transfer, and the work before you can trade: the wiring you did not know was old, the shutter, the floor, the front. Every repair afterwards is yours. A leaking roof used to be a phone call to Rafiq; now it is Rs 60,000 and a fortnight of your attention.
Flexibility is the cost nobody prices, and spending it is permanent. A tenant hands back a key. An owner must find a buyer, agree a price and wait for the money, in whatever market exists that day. If trade turns bad you cannot shrink, because your capital is the room you stand in.
The hardest one to accept: a shop you own is much harder to walk away from when the street changes and the business should move. A new road takes the traffic to the other side. A renter sees that and moves at the end of his agreement, for the price of fittings and six weeks. An owner sees the same street and stays, because leaving means selling, and selling means admitting the place is worth less than he paid. So he waits for the street to come back. Often the business dies politely, in a building the family still argues about.
If growth rather than security is really on your mind, this money has a competitor: open a second shop or grow the one you have.
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Renting and owning, row by row
Side by side, on the things that genuinely differ.
Renting and owning, on the eight rows that genuinely differ
Notice the shape. Renting wins almost everything about money and movement. Owning wins one row, and that row is security. If security is not your problem, you are paying an enormous amount to solve a problem you do not have. If it is your problem, no arithmetic on the other rows fixes it, because a shop you are asked to leave stops earning.
The four questions that settle it
Four questions, answered in one evening with your book open.
How much of your working money would the purchase eat? This can end the discussion by itself. Add the price plus the work before you can open, and see what is left of the money that runs your shop. If buying leaves you unable to hold normal stock, or to carry the udhaar your regulars expect, or to survive one bad month, the answer is no. The rule that keeps people out of trouble: after buying, you should still hold enough cash to run the shop for six months unaided.
Is this location the business, or is the business you? Be brutal. If customers come because your shop is on the corner they pass twice a day, the location is the business and losing it is close to losing everything. If they come because you fix what nobody else can, the business is you and it travels. Test it: if you opened three streets away tomorrow, how many would come?
How likely are you to be asked to leave in the next few years? Stop guessing and look. Has the rent been raised hard? Is the building being divided among heirs, where most sudden sales begin? Have other tenants in the row been moved out? A landlord who has said the word "sell" out loud has told you something. Low risk means a written agreement is enough.
Could you buy without emptying the shop? Not "could you find the money", but "could you find it and still be standing". If it takes every rupee, every ornament in the house, and money from three relatives who will now have opinions about your business, the answer today is no. It may be yes in two years. This is why shop money and house money must stay apart long before such a decision arrives.
The answer for most shops, and the middle roads
For most small shops the recommendation is to keep renting and put the money to work in the business. That is not fence-sitting; it is what the arithmetic says when a shop can grow and the money can turn. A shop is a machine for turning money over. Walls are not.
Buy anyway if three things are true at once: your location genuinely is the business, the risk of being asked to leave is real rather than imagined, and you can pay without stripping the counter bare. When those three line up, buying is not sentiment, and the earlier sums stop mattering, because they assume ten quiet years you will not get.
The middle roads are where most people should end up. A longer written agreement instead of a purchase: five years in writing, with each year's rise stated, costs almost nothing and removes most of what frightens you. Many landlords sign happily, because a tenant who stays beats an empty shop.
A first-refusal understanding is the next. Ask Rafiq plainly to be offered the shop first if he ever sells, and get it in writing even if it is one signed line on a plain page. It buys time, which is what you most lack when a sale happens.
Then buying later, after two more years of growth. Two years of money in stock rather than walls can leave you able to buy without pain. The price may be higher; you may also be twice the business. Or buy cheaper premises: if owning something is what you want, it need not be the shop you stand in.
Whatever you decide, make a notice survivable
Do this part now, whichever way you lean. It costs almost nothing and turns a disaster into an inconvenience.
The renter's insurance policy: do this whatever you decide
- Get the tenancy in writing, with the length and each year's rise stated
- Agree the notice period in advance and put it in the same paper
- Write the deposit down with the date, the amount and a signature
- Ask for first refusal in writing if the landlord ever sells
- Photograph the fittings you paid for and keep the bills at home
- Keep a phone number for every regular customer, not just a face
- Keep the balances and their history somewhere the shop is not
The last line is the one shopkeepers ignore, and it is the most valuable thing in the shop. Your customers, their numbers, what each owes you and the history behind every balance must survive a move. A record living on a wall calendar and in your head is tied to the building.
The decision runs on two numbers you should already have: what your shop truly earns in a month, and what it truly spends. Rent is one of the largest fixed costs on that second list. A shopkeeper who records his expenses and knows his profit answers all four questions in one evening; one who is guessing argues with his family for a month and is still guessing. Wasoolo keeps expenses by category and shows a profit view. A register does the same job if you write in it.
For the customer record the test is simple: if the shutter came down tomorrow, could you still reach everyone who owes you? Wasoolo keeps customers, balances and their full khata in a cloud backup you restore on a new phone, and it is 100% free to download. A notebook photographed page by page and kept at home does the same job. Either way, keeping your khata safe is worth an hour.
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Common questions
The rent I paid over eleven years could have bought the shop. Doesn't that prove I should buy?
No, and it is the commonest trap here. Rent bought you eleven years of trading with your money free to work in the business. Add up what that free money earned before you call the rent wasted. If the honest answer is nothing, because it was never put to work, buying is your better discipline.
My landlord has never raised the rent much and we get along. Should I still worry?
Worry less, but write more. A good relationship is not an agreement, and it does not survive a division among heirs, where most sudden sales begin. Ask for a longer written agreement and a first-refusal line while everything is friendly. A landlord who likes you is the one who will sign it.
I can only buy it by using most of my stock money. Is that ever worth it?
Almost never. A shop with empty shelves loses customers faster than a rented shop loses anything, and once regulars learn you do not stock what they need they are expensive to win back. If the sums only work by stripping the counter, the answer today is no. Ask for time and first refusal instead.
What if the landlord sells to somebody else and the new owner puts the rent up?
A rise is survivable; being told to leave is not. This is why a written agreement matters more than a purchase for most shops. A tenancy in writing usually carries over to a new owner, and an agreed notice period gives you months to find a place and move fittings.
Owning means I could rent it out later if the shop fails. Isn't that a safety net?
It is, and worth something. Just do not let it hide the other side: an owner who should move rarely does, because moving means selling. Count the rent it could earn if you left, and count honestly how likely you are to leave a building you own.
How do I work out what my shop money earns, so I can compare properly?
Take what you paid for the stock you sold in a month, work out what it earned above that, then see how many times a year the same money comes back. Buy at Rs 88, sell at Rs 100, six times a year, and each rupee earned well over half a rupee. A register or an app matters far less than having the number.