Overcapitalisation – The Renovators Nightmare

In the island of the Gods the never ending cycle of regeneration continues unabated.

“I have just moved to Bali now what should I do? I know, I’ll raise sheep, nothing like a woolly jumper to keep you warm on a winter’s night…….. Maybe not.”

“I could start a mini market, not a lot of competition there……. on second thoughts……..”

“I’ll open an International Health Clinic? I can charge a fortune removing wax from people’s ears and cleaning navels….. Oh? Really sick people go to Singapore do they?”

“I know, I’ll open a restaurant, no one has thought of that before. Throw a few bits and pieces in a pan, fry them up, what could go wrong?”

It never ceases to amaze me how many people come here and decide to open a restaurant or bar. They think it will be so easy. The fail to see that the whole island is littered with empty restaurants and bars and that the few that are successful are run by people who really know their trade, have worked hard and hung in there for years until, finally, they have found a formula that works.

Like reinventing the square wheel they make the same mistakes time after time. Not being in touch with the local situation, they inevitably pay over the odds for the lease, they select a poor location and then, just to make sure that success will be just a pipe dream away, they spend a fortune renovating the place making it virtually impossible to pay back the debt. What they fail to see is that, as long as the place is clean and the kitchen and toilets are presentable, it is what you do in the place rather than the place itself that brings success.

I have been watching a case in point, some time ago a very wealthy person new to Bali, built a restaurant from scratch on a well located site. They spent a fortune building a stunning, purpose-built building. It had a good location, great parking and a beautiful venue, how could it not work?

It failed miserably. Each day I drove past it wanting to shout out “change your menu, get yourself a new cook, get rid of that obnoxious waiter”. After several very sad, empty years it closed.

Time passed (it does you know).

Then, one day, activity started, a new owner, a fresh start.

As is always the case the tukangs moved in with their wrecking hammers. The beautiful tiled floors were torn up and replaced with a rather fetching shade of – grey. Time will tell if their efforts and expenditure will be rewarded.

Renovation is something most of us get involved in from time to time (my wife works on it every morning) but renovation does need some careful thought.

First, we need to ask “do we really need to renovate or would a simple paint job do?“

If yes we then need to consider why we want to renovate.

You might answer:

  • We need to improve our office or restaurant to a standard that reflects our business in order to impress our target customers.
  • We want to sell or lease out our property and we want to get a higher price.
  • I am returning the house to the landlord and my dog has torn the doors to pieces.
  • The roof is leaking, I have rising damp and my feet are wet.
  • We have taken over a welding shop and wish to turn it into a luxury spa.
  • Our business is expanding and now we can’t swing the cat.
  • When I am banished to the dog kennel there isn’t enough room for both me and the dog.


Overcapitalisation if probably the single major mistake that many people make when renovating, they pay out large sums of money that the renovation will never be able to pay back.

We need to be brutally honest about value and return on investment and by value we are not just talking about money, we might be talking about the improvement of the company reputation, the effect on staff morale, the quality of the clientele we attract or the efficiency of our operations, the list goes on.

Somehow we need to work out the financial benefit we will gain. How much will it increase the selling price of the property, will it really attract new customers, would it be cheaper to find new premises better suited to a new business model? Can the renovation cost be justified with such a short period left on the lease?

Finally, we need to carefully look at the estimated costs and trim them to what is appropriate for the value of the gains we expect to make. Do we really need to retile the floor or do we buy a rug? If we don’t knock that wall out we won’t need the high cost of strengthening the building structure. Do we renovate the dog kennel or just get rid of the dog? Often a little bit of careful thought can save a lot of money.

For more information on renovation go to www.mrfixitbali.com/building-renovation-and-remodelling/building-renovation-strategic-approach-128.html


Previous “Fixed Abode” articles can be found subject indexed on our website at www.mrfixitbali.com. Opinions expressed are those of Phil Wilson. He can be contacted through the website or the office on 0361 288 789 or 08123 847 852.

Copyright © 2019 Phil Wilson

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