New Shop Advice

Corbally

For a few years I have been toying with the idea of opening a shop and I am trying to do some projections but I am struggling with some of the figures. I have been working in retail for 10+ years and have a good knowledge of a lot of aspects but there are some things I haven’t a clue about. I am doing some back of the envelope calculations to see if this idea is worth spending some time on.



So assuming the figures are for an approx 2,000 sq ft unit in an average size midlands town are these numbers close or totally off the wall?

Rent €15-20,000
Electricity €2,500/year
Internet/phone/card machine €1,200/year
Bins €500/year

What would be an average for accountants fees, bank charges and insurance for a small retailer with a turnover of between €100-200,000 per year?



What other costs would I have (ignoring cost of fit out, buying stock, paying off debt and payroll)?

I am looking for some advice and possibly some real life examples. Any help will be much appreciated.

jimmii

First thing to add in is rates that's a biggie. Internet/phone/card machine will likely cost a good bit more than that. When you are small it's hard to get a decent deal on card payments 2% if probably as good as it gets to start with so that will probably be about a grand in year 1. You should be able to get bank fees waived for a couple of years after opening an account. Accountant rates are going to depend on what you need them to do. Very basic entry level would probably be a few hundred a year just for end of year for a sole trader and the works for a small business would be about €200/month for an Ltd with that turnover and include directors returns etc.

I would add in a budget for tradeshows. You should probably budget for at least one UK to start with. You wouldn't think shows are as important these days but they still are. It's easier to pick out the quality amongst a few hundred others at a show than amongst the millions online.

Unless you have a big marketing budget €150k first year is very optimistic. We opened in the city centre and the first 6 months are basically a write off!

We opened our first shop 5 or 6 years ago in Dublin after years in retail and I'm afraid to tell you its completely different! Obviously you have a reasonable ides of the day to day but there is a big difference running a shop and running a retail business. Do you have any buying experience or marketing experience? In my opinion these are the two critical things you need. Obviously the customer experience needs to be good when they get there but the first you need to do is get the customer in. You can have the best shop in the world but if people don't know it's there you done.

You would want enough money to cover running the place for at least 6 months and ideally closer to a year.

tl:dr

€2k tradeshows
€20k marketing
€1k accounting
€20k misc

And assume you will be taking zero out on the first year.

mrslancaster

What kind of shop? Clothes, food, convenience, hair & beauty?

you can get a business plan template from the local enterprise office and there are some free online too, you can adjust the categories and headings to suit.

Budget too for legal fees for the lease on the premises and company formation costs if you set up a limited company. you could do the accounts & payroll yourself or budget for monthly fees for those and then vat returns.

Security system & key holding, imro for music, recruitment costs if you need staff etc

Corbally

jimmii wrote: »

First thing to add in is rates that's a biggie.

Is there a published list or online list for rates or rate multipliers that you know of? I was thinking less than €5,000 for a 2,000 sq ft. Is this way off?
I had partially written off Year 1. I am trying to work backwards starting with if the shop could breakeven/turn a profit in Year 2 then work back and see what the worst case scenario would be in Year 1. I would staff it myself so wage cost in Year 1 would be low. I could probably get through 6 months by myself with minimal help from friends/family.
I have marketing experience but very little buying experience. I have watched from the sidelines.

When you say it is different running a shop and running a retail business what do you mean? Do you mean there is a lot more work to do and decisions to make?


It is a boating/watersports shop. The shop could/would also do engine work and canvas work. Boat covers etc.
I think if it was a chinese take away or a shoe shop or anything more common I would have a better idea of potential but right now I feel like I am totally guessing.


mrslancaster

Check out the valuation office website for information on rates in your county.

Corbally

mrslancaster wrote: »

Security system & key holding, imro for music, recruitment costs if you need staff etc

Security system is one thing I forgot about. Thanks.

mrslancaster

A specialist shop might need a fair amount of advertising unless you get passing trade if you are well located.

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hanksy123 wrote: »

Rent €15-20,000
Electricity €2,500/year
Internet/phone/card machine €1,200/year
Bins €500/year

You should probably budget for a decent website too with at least local seo done to it. Might seem unessential now or you may think a Facebook page may suffice but nowadays its essential. A website with an eCommerce facility puts your shop in every town in the country essentially, there`s also a lot of advertising and re-targeting options open to you.

jimmii

hanksy123 wrote: »

When you say it is different running a shop and running a retail business what do you mean? Do you mean there is a lot more work to do and decisions to make?


It is a boating/watersports shop. The shop could/would also do engine work and canvas work. Boat covers etc.
I think if it was a chinese take away or a shoe shop or anything more common I would have a better idea of potential but right now I feel like I am totally guessing.


Its like being a waiter for 10 years and thinking you know how to run a restaurant. When you work for someone else all you know of your little role its just one piece of the puzzle. Think about how many people have worked in management positions where you have been before you need to take on all those roles and all the roles of the people you never even met!

jimmii

mrslancaster wrote: »

A specialist shop might need a fair amount of advertising unless you get passing trade if you are well located.

Definitely agree with this. A niche store rarely has a good location.

Even more reason to attend tradeshows as well. For the big brands it's going to be hard to compete with online you'd really want to find small brands who aren't just looking for amazon selles.

SEPT 23 1989

Running something from top to bottom can take the fun out of it

Alkers

hanksy123 wrote:


It is a boating/watersports shop. The shop could/would also do engine work and canvas work. Boat covers etc.
I think if it was a chinese take away or a shoe shop or anything more common I would have a better idea of potential but right now I feel like I am totally guessing.


You will likely need different insurances if you're going to be servicing engines and repairing sails etc.
Jeep us posted, would support you if reasonably local or online, none of the marine shops have a particularly good reputation imo

CeilingFly

€200,000 turnover?

You're heading for a substantial loss no matter what industry it is.

Fashion / footwear, lucky to achieve margin of 40% after seasonal sales.

At 200k(+vat giving gross turnover of €246,000 or almost 5k a week), your gross profit is 80k

Rent, rates, utilities will be 30k+ leaving less than 50k.

Staff costs, advertising, shop supplies (bags etc), accounting fees, depreciation, miscellaneous bits, and another 30k is gone very quickly.

Just doesn't add up at that turnover.

Bandara

From a quick look I'd have your running figures out by 100% imho, everything costs and the million little things that you'll be hit for add up very quickly as well.

Do you have the capital yourself to get it fully up and running?

You will not get any funding whatsoever from the banks. They are not remotely interested lending to new retail or food service businesses, especially with no experience.

I also think you will struggle to get a decent location, landlords will be very wary of any new niche business with an startup operator

(sorry, don't mean to be negative- just stating my opinion of what you'll face)

antoinolachtnai

Doing engine work and sail repairs is completely different from retailing goods. You are essentially sourcing and selling labour and skill rather than products.

You need to think carefully about what this business is really about.

Corbally

CeilingFly wrote: »

Fashion / footwear, lucky to achieve margin of 40% after seasonal sales.

Can I ask where you got 40% from? Is this from personal experience?

antoinolachtnai wrote: »

Doing engine work and sail repairs is completely different from retailing goods.

I am thinking boat covers, biminis etc as opposed to sails. Another poster mentioned sails. This is something I would be doing myself. I have the experience from a previous life.
Engine work is something I could do as well but the more I think about it the more it would be a non starter. This seems to be pretty well covered as it is.

Bandara wrote: »

Do you have the capital yourself to get it fully up and running?
....

(sorry, don't mean to be negative- just stating my opinion of what you'll face)



I wouldn’t be going to the banks for funding.

I don’t mind the negative. The more real world knowledge/experience I can get the easier it will be for me to fill in the blanks.

It’s hard to know which advice to listen to and which to ignore.
I am not a 20 year old working in a sweet shop dreaming about having my own place but I am also aware I don't have all the answers.





CeilingFly

Yes, its from personal experience in the footwear industry.

Very difficult for an independent retailer to get discounts / offers and you also have to compete with online retailers from across Europe.

I'm still in the retail sphere, but very much online as costs for regular store would put too much at risk.


If you had a repair type store with a sideline range of products, that may be an option as that type of business is very location based and you'd be charging labour rather than hoping for retail profit

antoinolachtnai

Yep, if you can be the go-to place for some service or other in the area, get an inexpensive but accessible location, have a network of contacts and contracts in place in advance of the season, and sell a few things as a 'side business', that might turn out to be the most workable model.

jimmii

To give you some more optimistic margins from other retail sectors the two different places I am involved with our gp is ~52 for gift ~55 for homewares. It varies massively by product type food and drink is very low tourist crap is very high! I've never been involved in your area specifically but it does seem to have got a lot more competitive lately. The shops doing similar here (one of the shops is in a coastal town pop. ~6k) they seem to focus more on repairs than anything else.

CeilingFly

I'd be surprised at overall margin of 52-55 in gift and housewares. (i've been in that trade too)
Headline margin may be that level, but add in discounts, seasonal sales, end of lines, damaged stock, theft and some items becoming obsolete, you are better looking at 40% with figures above that seen as a bonus.

jimmii

CeilingFly wrote: »

I'd be surprised at overall margin of 52-55 in gift and housewares. (i've been in that trade too)
Headline margin may be that level, but add in discounts, seasonal sales, end of lines, damaged stock, theft and some items becoming obsolete, you are better looking at 40% with figures above that seen as a bonus.

Those are the numbers that are in the accounts not the cost of sale figures so pretty solid. We get a 3rd party audit done annually and have a specialist stock count company do stocktakes twice a year so the numbers should be pretty dam accurate with how much is being paid out! Because of the type of shop and buying policy there's a lot less discounting than you would normally see in most gift focus shops.

Either way it'd pretty irrelevant as it's not the same sector lol! OP just needs to open some wholesale accounts and see what sort of margin there is in the market.