Business problem turnaround: Could colocation be a worthwhile tactic for your business?

November 22, 2016

This post is part of our Business Problem Turnaround series. Read the entire series here on the Clover blog, and explore for more better business tips and tactics.

The problem: You’re not maximizing revenue within your retail space.
The possibility: Buddy up with another business.

When it comes to running a small business, proprietors know there’s one cost that towers over all others when it’s time to do accounts payable: the monthly lease payment.

Essential—by definition—to restaurant and retail businesses, having a physical space in which to meet and serve your customers makes many of the new, trendy business models like food trucks or pop-up shops out of reach for those who’ve chosen to stake their claim to a corner on Main Street, USA and build a business from the ground up.

But what if those niche models weren’t so out of the question for small businesses with physical storefronts?

We’re talking about colocation: the idea that instead of trying to keep other businesses and their customers out of your showroom, you invite them in via some mutually beneficial arrangement, whether it be a single evening event, a seasonal consignment, or a long term sub-lease of some space on your floor.

Below, we’ve outlined a few scenarios for your consideration. Perhaps now is the time to ask yourself if a colocation arrangement is right for your business.

Seasonal Pop-ups

For those not quite sure if a long term partnership on space is right for their business, starting out with a seasonal “pop-up” shop is a good way to test the waters—especially during a part of the year when business is slow. Think bringing in an artisan soup chef with gourmet grilled sandwiches to your ice cream shop during the winter. Or custom mountain bike gear and maintenance to a ski shop in summer.

Key consideration(s): What’s my business’ personality? And that of a potential partner business? Do they mesh well?

Copacetic Clientele

Another avenue to colocation bliss is partnering with a very different kind of business that serves the same clientele. Washington, D.C. business Busboys & Poets has opened multiple locations across the city by offering D.C.’s arthouse crowd a restaurant, bookstore, lounge, and theater—all under one roof. Consider bringing in an artisan art supplier to your coffee shop, or vintage clothier to a hip salon.

Key consideration(s): Who’s my crowd? What other things do they enjoy? Emphasize psychographics more than traditional demographics when thinking about these partnership.

Location, Location, Location

The classical arbiter of value, the key to a mutually beneficial colocation arrangement could be where your business is situated. A central-city bar that draws an after work crowd but is a ghost town during breakfast and lunchtime hours might make a great co-working space—especially if said bar has history. The alt-weekly headline pretyt much writes itself: “Tech bros find cooperation, camaraderie in turn-of-the-century watering hole.”

Key consideration: What are the merits of my location? How might those characteristics attract a partner business?

Double Duty

It takes certain essential capital investments to get most small businesses off the ground, namely specialized machinery and equipment. And it’s often difficult to pay for all that equipment when first starting out as a new small business. So why not take advantage of that fact and rent that equipment (and the space it inhabits) to a fledgeling business in off hours? A daytime printshop could host nighttime printmaking classes or an independent, small-run publisher. Or a brisk weekend brunch spot could act as a commercial prep kitchen for food trucks during the weekdays off.

Key consideration(s): What else can my equipment make? Who else can it serve?


Perhaps one of the best known, yet still underutilized, colocation strategies is monetizing those unused nooks and crannies. Whether that means providing shelf space to house a local artisan’s wares, or allowing a favorite artist to hang their work on your restaurant’s walls, sharing your space with businesses of this kind can bring an interesting aesthetic to the table and a few extra dollars to your pocketbook. Or you could rent that unused show room or loading dock out back for fashion or music events. It’s up to you to realize the untapped potential of your space.

Key consideration(s): Who in community needs space to sell product/service and doesn’t have it?

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