Forums: Discussions for entrepreneurs and small business.

Hi everyone,

New to the site and to community. Scanned through tons of emails and advice including the community home ideas and events / ideas, but have some real concept questions to ask those successful business people out there.

Senerio: Assuming all research on retail business ( brick / mortar ) done, competition limited, lease and store location fair to good, area is vacation spot ( lots of tourists), business plan written, incorporated, credit card and bank account established, retail lisence checked out, start-up cost including merchandise calculated, have space for inventory and supplies, have idea and some skill in store layout ( building / buying displays, light fixtures, counter set-up, etc.), have POS software (intuit) and computer ready, Time line to poss. open? maybe 1.5 month.

Questions:

1. In all reality what is the earning potential of a small / medium retail store? ( gifts, candles, cups, home-decore items, sm. furnitures - nothing in the $1,000.- range). I mean there certainly is a sort of ceiling since the mark-up is approx. 50-100% on items ranging from .50c to $500.- and sqft of store is say 800sqft.
2. What % does one need to compensate for theft? Both shoppers and poss. employee.
3. What is the running cost, including my own salary ( how much can I ask to pay myself ) but not including purchase of new merchandise.
4. Assuming an avrg. cost of products ranging from .50 to 300.- and having an area of approx. 400sqft of products displayed, with mark-up of 25-75% of original cost, How many items must I move a day / week / month in cost to cover my expanses?
5. As a personal question - If I do not mind the tediousness sitting in a store, proficient in technology, friendly and good people skills -is it worth leaving a decent job in an industry that I will not be able to continue into my mid 60`s ( I`m in my early 40`s ), knowing that at this juncture to start over after failure of business is very difficult.
6. What exactly is the statistic and reality for retail business failures, and at what point should one look for the signs to call it quits before more loss is accumulated?

I know this sounds a bit pessimistic and cautious for all those inspired and excited self motivated professionals, and I know that self financing a start-up is the realistic way with tromendous risk and fear, but I just thought I could maybe get some clear insight from all of you who have success in a brick and mortar storefront.

Thank you all - good luck and good night

Y`know, I`m sure there`s going to be someone who can help on this. But what strikes my attention is that these kinds of nuts-and-bolts questions would be well-suited for a semester course on business and retail. Is there maybe a college nearby where you might take or audit a course? It`s obviously not Business 101, but with the way education goes today, there`s likely a course focused entirely on the initial aspects of running a retail operation?

Craig,

Nice thought, but I did look into some business courses at the local college and junior college. Unfortunately the academia type course work are very general and broad in respect to the type of senerios I have, and taking some course work is a great idea, but money and time is not a luxury I have in my decision timeline. I am contemplating to hold off for the time and do some more educational seminars on this. But also remember that people like myself work full time to keep the household budget afloat, so extra time is extreemly rare commodity.

Thank you for the advice anyway.

Well there are a lot of questions here. This is the type of analysis a development consultant can undertake for you and assist you in preparing budgets and plans. However, until your store opens and you get a real feel for the demographic purchasing power within your store, there will be a lot of unknowns. For example, you may need to alter your product mix to remove slow moving stock over time. Equally your margins from 25-75% seem on the low side to cover your costs but depending on product type and demographic this may be okay.

The harsh reality is that a large % of businesses fail in the first 2 years for a whole host of reasons. So you are right to be well prepared and understand all the risks going in. I am a believer that if you can live with and manage the worst possible outcome, then the good times will take care of themselves.

Good luck

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Business Development Services

Okay, I get the idea of time. I also get the idea of specialization in the coursework. I haven`t explored it directly, so I was taking a guess that there might be some specialized retail-oriented business courses. If there aren`t, is there a possibility of maybe an online course of that nature?

Going back to the original question, what I`m concerned about is I think related to what Cutts had to say. The questions are explicit, directly related to the daily tasks of operations and running a specific business. I`m not sure they can be answered on a general forum such as these boards.

Another option, then, would be to build into your business plan either hiring or partnering directly with someone who`s coming out of the retail industry and can provided exactly the knowledge you`re looking for?

The first thing you need to do is to create a detailed cash flow projection.  You can easily do this in XL.  Be conservative in your expected sales, margins and timing of cash payments.  My thoughts about your questions:

1)  Earnings potential is a function of store sales capactiy with fair margins and reasonable SGA expenses.

2)  Probably get this info by talking to retail stores in the area.

3)  Your Cash Flow analysis will show you how much you can pay yourself and when. 

4)  The cash flow analysis will tell you exactly how much sales revenue you`ll need to break even. 

5)  Only woth it if it is profitable and personally rewarding

5)  Many business fail for not properly understanding the financial dynamics PRIOR to opening the door for business.  Even profitable businesses can fail because of the timing of cash flows.  Your chances for success are much greater if you fully understand your financials and plan appropriately for "what if" seneriors.   

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--