When expanding into brick-and-mortar, it’s important to understand the unique elements associated with opening and operating a storefront. Planning for and understanding your investment and how it can reward in sales, will build a strong foundation for success.
FURNITURE, FIXTURES & EQUIPMENT: Create a list of items and equipment you need including merchandise racks, a cash wrap and a point of sale system. There are many creative ways to layout your store without spending a lot. Knowing what you have, what you need and what it will cost is an important part of the initial investment in your storefront.
MERCHANDISE: You'll also need to account for the initial investment to merchandise your store. A well merchandised store is essential in creating a positive cycle of sales. Shoppers are drawn into a well stocked store, there are many opportunities to make purchases, sales grow, you’re able to reinvest in more merchandise and the positive cycle continues.
Conversely, having a store without enough merchandise will create a negative cycle of sales. Less shoppers are drawn in, they have less opportunities to make purchases, sales are low, you don’t have the capital to invest in more merchandise and the cycle continues downward.
PAYROLL/WAGES: To operate your storefront you will need employees and paying those employees can be one of the biggest expenses in operating a brick and mortar space. To calculate payroll expenses you need to answer three questions:
How many employees will you have working in your store?
How many hours are they going to work?
How much are you going to pay them?
If you're unsure how to answer the above questions, an average payroll cost for retail can be calculated as follows. This varies by location and sector and is for estimating purposes only.
1.5 employees x $10/hour x 40 hours/week = $600/week or $31,200/year
RENT: Unless you own your own space, rent needs to be considered. Every landlord handles rent differently. In properties we manage, rent is not a one size fits all approach. We analyze our operating costs for a space such as insurance, taxes, and maintenance. We ask businesses to outline their expenses and projected sales. Then we work together to see if we can come to an agreement on an amount that allows both to succeed.
Helpful Tip: Get the most out of your storefront rent. If you are paying for a storage unit, warehouse or office space to operate the back end of your business, there may be a way to incorporate your need for additional space into your storefront agreement. Doing so helps reduce multiple rent payments and eases logistics.
UTILITIES: In addition to rent you will likely need to cover basic utilities for your space. Utility cost will vary by the size of your space but general estimates for retail are listed below.
Electricity: $2 - $3.50 per square foot
Water: $0.35 - $0.50 per square foot
Internet: $100 - $200 depending on capacity needed
These are general estimates. You can talk to the property owner, other tenants and the utility providers to gain a better idea of how to plan for these cost in your space.
Now that we've discussed the expenses associated with a brick-and-mortar space, let’s analyze the potential reward associated with the investment. A strong brick-and-mortar location can provide access to increased customer traffic, exposure and ultimately sales. We’ve put together an interactive operations workbook where you can plug in real numbers to calculate not only the expenses but projected sales and profit to see the full picture.
Click HERE to go directly to the operations workbook.