One of our most eccentric customers that we have had take a business loan was a night club entrepreneur, who had already owned clubs in various locations around the state of Ohio. He noticed that the clubs he had already owned were always full, and they often had to turn customers away as there wasn’t enough space for them to be let in.
Essentially, his clubs had to begin running a one in, one out philosophy. Whenever someone had left one of his clubs, then someone else would be allowed in. Usually, this practice is only common for clubs in big cities where they expect the crowd to become too large, but because his clubs had a special type of atmosphere customers seemed to love, it just continued.
Within the space of 9 months, he wanted to double the number of clubs that he owned within the state. He wanted to build and open a second club next to or near the already existing club that was becoming too busy. This may sound pointless, but the reason he built them next to each other was so customers didn’t decide to go elsewhere, and he could monopolize that area.
It was a very smart business model, but it came at a cost. The loan had essentially cost him $89,000 in overall interest by the time the loan was repaid. This is a significant amount, and many lenders will tell you it is rare for one customer to repay that much in a loan unless they are a significant company they are lending to.
Now, we knew that as he already had an existing business model, either way we would get our investment back. But we were pleased to see that he managed to open his clubs a month early and increase his profit margin by 213%. That is a ridiculous rate within the space of a year.