Saturday, February 24, 2007

What does it cost to run a retail store?

I get asked this question by people looking to start or buy a retail store... what are the costs involved? Now, I could go into a whole thesis on the cost on your family, time and sanity, but I think the folks are asking about "the green". How much moola, greenbacks... etc.

Here's a list of the costs involved in running the store. It's related to my specific business of paint-your-own-pottery, of course, but the list is applicable to retail in general. In planning your business, if you believe that the item in the list is relevant, then you'll need to do a little research to determine what the actual $$ might be. Publishing my specific numbers would just not be kosher, and could be misleading if you're in a different area of retail or a wildly different location. If you have questions, aren't sure if an item is applicable, or need help, send me an email or leave a comment.

The assumption here is that this list would be used in the planning stages of a business. If you're already in business, and have something to add, please leave a comment!

The Basics (i.e., things you can't do without):
Rent - plus CAM or triple net; plus real estate taxes that may get passed from landlord to you; plus association fees
Payroll - which may or may not include yourself
Taxes - sales tax, payroll taxes, property taxes, unemployment taxes, etc. This will vary wildly based on your location. Call an accountant to get a good understanding of your tax liability.
Inventory replenishment
Utilities - electric, gas, water, telephone, internet, trash removal (if not covered in CAM by landlord). I also consider having a website a necessity, so add in the cost to maintain the site and your URL.
Insurance - business insurance, works comp, etc. Give your insurance agent a call and get their opinion on what you might need. Note that a lot of what the agent comes up with might be optional (one option I had was to insure the cash in our register - that's not necessarily covered in case of a break-in)
Credit card processing fees - I'm not sure if there's any business starting out today that can consider not accepting credit cards.
Advertising - many newspapers publish their basic advertising costs online
Printing - flyers, brochures, forms, etc
Office supply replenishment - for us, this is everything from computer printer ink and paper to pens to sticky notes to new sets of dry erase markers every now and then
Cleaning supply replenishment - trash bags, floor cleaner, window cleaner, etc. And my employees have become very fond of swiffer dusters and swiffer wet jet .
Other supply replenishment - toilet paper, hand soap, paper towels, etc Shopping bags could go in this list, too.

"Optional" things that we do have at The Pot and Bead:
Security - if you choose to have a system such as ADT or Brinks
Bottled water delivery - a little nicety for my employees and customers. Drinking lots of water is healthy. :)
Muzak - Did you know that it's illegal and you are subject to fines by playing CDs or even the radio in a public place like your store? Having a service like Muzak (XM offers a service for businesses, too) takes care of all that and sounds great.
Accountant - I choose to have an accountant prepare my taxes each month rather then wade through all the papers I don't understand myself.
We also use a couple online services that go into the cost of running the business. Constant Contact ( www.constantcontact.com ) is for managing and sending out e-mail newsletters to existing customers. The best thing I've found for clocking employees in/out is an online service called Time Clock Online ( www.timeclockonline.com ).

Lastly... if you are starting or running your business on any type of credit (i.e., bank loan, credit cards, etc) don't forget to take into account the monthly payments you'll be making, including interest.

These are just the recurring costs. This does not take into account any cost associated with getting the doors open like deposits, fixtures, initial inventory costs and advertising costs. It also doesn't take into account the random unexpected costs that come up from time to time usually when something breaks (the toilet, the water heater, chairs, etc etc).

You can read more about some of my specific money issues in my book, Cute Little Store.

Any questions? I have to go pay a bunch of bills now...

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Thursday, February 15, 2007

Checklist for opening a retail store...

I've had many requests for this kind of a list, so here goes. It's based on my experience and anecdotes of other small business owners I know. If you've had experience in this area, please feel free to comment or add your own ideas.

Here's the checklist. It's broken down roughly into 3 sections, and can be followed in the order presented.

1 - Research and Planning
1a) Create a Business Plan. This is a must. It does not have to be a 50-page polished fancy document. It can be as simple as listing your main products and services, your mission and philosophy and some other details. But it absolutely does need to exist.
1b) Create a Financial plan. This is also a must. It can be included as part of your business plan. You have to have an idea of what your expenses will be and a conservative guesstimate of what your income will be. This can't be in your head, it needs to be written down.
1c) Create a Marketing Plan. This can also be part of your business plan. How are potential customers going to know about your business when you start/open? At a minimum, this will be a simple list of things you will do (i.e., obtain a website, attend related networking events, post flyers around town, etc)

2 - Money and Space
2a) Find your space and secure a lease. If you're a retail store, by definition, you'll need space. Most landlords will also require a business plan, by the way.
2b) Secure funding. You might have money in the bank, or you might need a loan. By the time you've completed steps 1 and 1a, you'll know how much you'll need to get through the first 1-2 years. Oh... if you need to seek funding through a bank loan, most will require a business plan. Good thing you've already completed that step.

3 - Get ready to open
3a) Design your store. This might have been done as part of securing your lease. Some landlords will require that you submit a "site plan" for your store during the leasing process. But now you'll need to obtain all your furniture and fixtures, point of sale system, extra lighting and anything else you need.
3b) Purchase inventory. Chances are you'll have one or more regular suppliers so you'll need to arrange with them your first and probably largest shipment ever.
3c) Create operational procedures. This was one of the last things I did before opening, and my procedures are always in need of tweaking, but it was good to know what to do when we opened and was good to have something ready for when I hired my first employees.
3d) Hire some employees. I opened The Pot and Bead knowing that I wasn't going to be in the store at all times, so I started the hiring process right away. Lots of businesses, if they can afford to, hire and train some key employees before opening their doors. You'll need to decide for yourself if this is right for your business.

Now, before I opened, I had a "To-Do" checklist that was more detailed than above and was very specific to my situation - the above list is a simple overview, not meant to be 100% comprehensive. I encourage you to take this as a starting point, and expand each item to create your own detailed list. (Note: I'm in the process of writing the sequel to Cute Little Store and am considering including a more detailed checklist there.)

If you're still thinking about starting a retail business and haven't read my book yet, pick up a copy of Cute Little Store today. It's an easy read and will give you a feel for what it's like to leave the safety of the career you've been in for so long and try something else. I made a lot of mistakes in those first couple of years, which I write about, so you don't have to (make those mistakes, that is).

:)

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