Nearly every small business dreams of one day opening a retail location. However, many owners don't realize the costs associated with this endeavor. From rent to inventory to staffing, there are several expenses you'll need to factor in when opening a retail store.
Because owning a quilt shop and any other retail business can be very rewarding, but it can also be very challenging. Knowing these 3 things will give you essential information to help you piece together your financial freedom because you'll know what needs to be done. You'll also see when you need to make that change, giving you control over your money and on the path to enjoying financial freedom.
Costs of Opening a Retail Store
Use a Cash Management System
If you want to be successful in your business from day one, you need a cash management system. A cash management system is not your bookkeeping or tax forms. A cash management system tracks your cash, so you know the right amount to spend or save on the right things in real time.
A bookkeeping system tracks and records what happened, but sometimes we don't even get those financial statements or profit loss statements for weeks or even months afterward. While the PNL and other financial reports are needed for planning analysis, they don't provide fast, crucial reporting. And annual tax returns don't provide any real-time information.
We all know that cash is king, so we need as much information as possible. We know that cash is king and that most businesses fail because they run out of that cash.
I highly recommend the Profit First cash management system. It's simple to use and provides real-time information you can use to operate your business profitably
Know Your Breakeven Point
Every business has expenses to operate and run their business. Your breakeven point is the number of sales or revenue you need to bring in to break even to cover all your costs.
And retail has even more and higher expenses than most businesses. We have to buy products to resell, and then we have a physical location to store our products.
Even if we're an e-commerce business, we still have that. And because of that physical location, we'll end up paying utilities and other expenses. And depending on the size of your business, you'll also probably need to hire employees.
And before you know it, these costs start to add up.
So how do you find your breakeven point?
It's a simple equation.
Your breakeven point equals your fixed or overhead expenses divided by your gross revenue margin. So for example, if you had $5,000 in fixed expenses each month and you have 50% gross margin gross profit margin, using that simple e formula, we would have a break even point of $10,000, meaning that we would need to have an average of $10,000 in sales or revenue each month to cover our costs.
Plan and Have Backup Plans
Most retail and quilt shops have a seasonality; some months will be busier than others, especially if you're just starting out. This will put a huge strain on your finances and mental fortitude and stress you to your limits.
Simply put, it'll be harder, probably more challenging than you think. If you're expecting this, you can plan for and prepare us for what will happen.
Good or bad.
The plans of diligence lead to profit, but anyone reckless becomes poor. So knowing each of these points will give you essential information to help you piece together financial freedom in your retail store.
Costs of Opening a Retail Store
Final Thoughts
When opening your retail store, the key to financial freedom is knowing what you need and when. You must have a cash management system, an understanding of where the breakeven point lies for that particular business model as well has to have a plan, including backup options.
Smart entrepreneurs doesn't just start up their own business because they believe it's right; instead these individuals take time making sure everything falls into place before putting too many eggs into one basket by investing all resources towards being the most successful.
Knowing these 3 essential points will help you piece together financial freedom in your retail store from day one.
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