1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.
  2. WELCOME Grumblers
    Backup is now done at 3PM EDT. You may find the server down for up to two minutes at that time.

Retail start-up costs?

Discussion in 'Picture Framing Business Issues' started by Less, Nov 11, 2002.

  1. Less

    Less SGF, Supreme Grumble Framer

    So, let's say we follow Bob Carter's advice, and we have done all the right research. We are confident about our ability to run a business, we have the framing skills necessary, and we have found the perfect location based on his priorities.

    How much cash do we need to put this business in place and survive the growing pains of the first few years.

    With as much information about the average successful frame shop available, I would think it would not be to difficult to come up with some recommended start-up numbers.

    I'm no expert, but I'll take a guess at start-up costs for a small one-person shop.

    $15,000 cash for basic equipment, space preparation, signage, initial marketing, lease deposit, etc.

    $15,000 in cash or more to ensure overhead payments can be meet the first few years.

    $15,000 to ensure living expenses can be meet the first few years.

    If we did our research correctly borrowing money is safe, as the business should support itself and be able to make loan payments. We should still have living expense tucked away.

    If we didn't, well I hope we have enough money to make it through the growing pains.

    We could always buy an existing business, but a profitable one will likely costs us as much or more.
     
    Sponsor Wanted
  2. clifpa

    clifpa CGF II, Certified Grumble Framer Level 2

    Hi lessafinger!

    You raise an interesting issue. I was hoping that more folks would get on this band wagon, especially the new framers.

    Would you provide more detail as to how you arrived at your numbers, like, "$15,000 in cash or more to ensure overhead payments can be meet the first few years"? $15K doesn't seem like enough to keep a store front running for the "first few years". (my figures suggest that I will need 18-20K (cash) + generate at least 50%, of my break even, revenue from the business, per month, to keep my doors open for six months.(my break even needs to be 7K month where 10-12K is needed to pay me)

    I have already spent 10K for equipment, includes a large Seal combination press, which I have in storage at the moment.

    What I would also be (very) interested in would be the pro/con of starting a store-front business today?

    Startup marketing?

    Would in-the-home be better today?

    I know, most of the framers have been in business for a few years and this is not an issue that they can really talk to since they already have an existing customer database and have something to measure against. (this is the killer for us new framers)

    best Cliff P.
     
  3. Less

    Less SGF, Supreme Grumble Framer

    Cliff,

    I’m not qualified to carry this topic much further. I just wanted to get it started. I have been in the framing business for 6 years, and I have learned a lot. I started small, without grand expectations. When I got started, my living expenses were low and I had no dept, accept a small mortgage. I had cash in the bank and a great job that I kept for the first three years while I learned the business. A home-based business was not an option for me, as my house is difficult to get to and I wanted what I felt was the advantages that a retail store would have. I operated part-time in a 500 sq. ft. retail location. My hours were M-F 5:30pm – 9pm Sat. 10- 5, Sunday 11-4. I figured it was worth sacrificing a couple of years of my personal time to find out if I would still have the same passion about this endeavor, and whether I could build a client base that would help support the business when I decided to take it full-time. If I were not confident, I would have not continued the business.

    Anyway, the figures are probably low, and can obviously vary tremendously depending on what your expectations and needs are. I needed to start small to learn the business from the ground up. So, these figures are based on my experiences on what it would takes to start a “small” retail operation, and have enough cash in the bank for some level of comfort, in case the business does not generate enough profit to cover the overhead.

    I figured $15k could get you set up with enough (used) equipment, afford a rental deposit, fix up your space, pay for several months of advertising, and put a professional sign up.

    The second $15k was to create a comfort level with a cash reserve for operating expenses for at least the first year. (The reality for me was the business paid for itself from the start)

    The other $15k was to allow for potential lack of personal income. (This again, was not really a concern for me, since I lived well within my means and have a spouse that could handle expenses alone) But, since it has always been important for me to be able to be completely self-suficient, I needed to act like her income was not there, because the reality is someday it may not be. (I’m sharing too much personal information)

    This is my reality and not anyone else’s. I am not educated in the language of business, but I feel that I have enough common sense and self-confidence about my own ability to make it happen. One thing I can say for sure, is that running a business, even one that you love is a major personal sacrifice. I you are not really willing to make that sacrifice; you are better off working for someone else.

    I am currently in the process of taking what I have learned so far to the next level, a better location with a first-class frame shop and art gallery.

    I would like to hear how some of our business leaders and other framers got started.

    Check out Inc.com for some great tips.
     
  4. Cliff Wilson

    Cliff Wilson SGF, Supreme Grumble Framer

    I have had my shop open for about two months. I looked at the initial investment figures supplied by one of the franchise vendors and used those as a starting point for my own business plan. I am currently running about 50% better than plan, so I have more capital in the savings account than the original plan. I did a LARGE amount of the up front store design and fixturing myself. The result (If I do say so myself) is as professional and "high end" looking as the franchise stores I visited at about half their projected cost. The figures below are from an "older" franchise Discloser Statement rounded.

    Franchise fee 25K (possible savings here [​IMG] )
    Travel and expenses 1500 (Primarily for training and investigation)
    Real Estate 2K (Rent pre-pay. Obviously this is negotiable. I didn't pay any rent for 45 days while buildout occurred)
    Opening Inventory 10K
    Equipment 25K (I have a 4468H, two wall cutters, a saw, compressor, new v-nailer, F-2100, fillet chopper +; much of it used which I acquired for less than 10k.)
    Fixtures 7 - 15K
    Leasehold Improvements 2 - 24K (Highly dependent on what you find, what you want, and what you can do yourself.)
    Freight and Storage 1K
    In-store and store front signage 3k
    misc 4 k
    Insurance 1.2k
    "Grand opening marketing" 10K
    operating funds for 3 months 10 - 15K

    As for in home or store front ... How many people do you know that you can get in your home? I am finding that 90% of my current business is people who see the store and come in to investigate first. Will people "just come in" to your home? How "big" do you want to be? Is your home is a good demographic with all the other location questions

    Boy did I start rambling. Sorry.
    Hope some of this is what you were looking for.

    Cliff

    P.S. Most of the franchises offer initial investment estimates for the asking. Check out their web sites.
     
  5. clifpa

    clifpa CGF II, Certified Grumble Framer Level 2

    Hi Cliff,

    Good input!

    What I take from this is, for you, the startup cost + 3 months = (about) $45K?

    Did you factor in anticipated revenue?

    My equipment, like yours, is under $10K + several hundred for miscellanous items.

    Additional cost include insurance, 4% advertising, visa card, deposits, etc., all extra.

    Opening a store front I would expect to cover 100% of operating cost month 1 (TI's cover first 45 days of rent and 3-net)

    With advertising I would expect to see 50% revenue for months 2 and 3, 75% revenue months 4 and 5 and 100% revenue there-after. (would be nice, wink)

    So, based on my break even (which includes money for me) I should be able to cover the start up cost and keep the doors open for six months at about $30K out of pocket?

    What do you think?

    best Cliff P. (so we don't get confused, smile)
     
  6. Cliff Wilson

    Cliff Wilson SGF, Supreme Grumble Framer

    Hi Cliff,

    Yes, I factored in anticipated revenue. Although, I failed to take into account the difference between "bookings" and "revenue." (This is also where I messed up on my software selection, but that's another story.) Deposits on orders obviously become liabilities until the order is picked up and they become revenue. However, they play a critical factor in cash flow. My business plan (which "experts" reviewed and failed to see the flaw) did not accomodate this difference accurately.

    Your summary is very close. I did purchase two new computers and software. My bookings were on plan for October and appear to be headed in the right direction for November. Barring surprises (as if [​IMG] ) I am expecting a near even cash flow for November. I planned my opening for end of August beginning of September and only missed by about a month. I don't know how well I would be sticking to plan if I started at a different time of year. Also, MANY local business people have come in to tell me I have the BEST store front location in the city. (A little exagerated in my opinion, but it is a good spot.) More than half of my customers to date have told me they came in because the saw the sign/store front. I am paying considerably more than my original plan for rent, but I took the extra out of the monthly advertising budget (which doesn't buy as much as I thought it would) and I think it was the right move.

    If by covering the operating costs in month one you mean taking in enough cash to cover ALL expenses, I'd say no. (Plus, in my case, my 3N doesn't kick in until January 1. Part of the negotiations.) I found as much as I went over my initial stocking orders MANY times, I was still missing key items. Which meant adding to stock to complete orders. Some of the roughly 48K (I checked this morning) I put in so far was spent during October.

    For clarity, I "unlocked my doors" and started taking orders the second week in September, but the building was under construction and I had no sign and no advertising. Signs went up on the building the second week in October and I had my "Grand Opening" with a wine and cheese reception (invitations went out to five hundred of my closest friends.) on Nov 2. I don't count September as "open" although there was some revenue and I worked some of the kinks out of the book/order/complete system.

    Hope that helps,
    Cliff Wilson

    P.S. There is considerable variance based on local conditions, so you should carefully investigate your area.
     
  7. clifpa

    clifpa CGF II, Certified Grumble Framer Level 2

    Hi Cliff,

    I missed this also, "I failed to take into account the difference between "bookings" and "revenue.""

    I kinda accounted for this but....?

    What software did you buy and what do you mean by, (This is also where I messed up on my software selection, but that's another story.)?

    Lots of good luck, Cliff P.
     
  8. Jason Maranto

    Jason Maranto CGF, Certified Grumble Framer

    I'm assuming you are not using the "cash" system of accounting then?

    Jason.
     
  9. Cliff Wilson

    Cliff Wilson SGF, Supreme Grumble Framer

    Hi,

    When investigating software packages, I narrowed it down to two. One because it had the best POS entry and one because of the "extra" feature set like reports, accounting info, etc. The one with more features had an "automatic" interface to Quickbooks which I had selected for my book keeping. Unfortunately, during my first week of operation I discovered (and my accountant verified) that Quickbooks doesn't aide (my accountant said "has trouble with") in recording "bookings." Therefore, the POS software interface to Quickbooks handled everything but that. Therefore, I can't use the interface. Hence, I selected a package for the wrong reason and in hind sight would have selected the other package.

    I suspect that was as clear as mud.

    Cliff
     
  10. Cliff Wilson

    Cliff Wilson SGF, Supreme Grumble Framer

    Hi Jason,

    You are correct in that I am using an accrual method. However, I would think even under a cash method you need to have some account liability for potential "returned deposits." I am not an accountant, so I may have this wrong.

    But, the context of the earlier post was in starting a shop and creating a business plan. There, the cash flow versus revenue is a little tricky during start up times because DOOs are (in my case) about 50% of booking. Obviously over time the difference evens itself out, but, when planning to start up, it helps to recognize and have a handle on the difference.

    Cliff
     
Sponsor Wanted

Share This Page

Sponsor Wanted