Hi
I have a little bit of savings and can get a business loan 25k, but I would need to draw a salary. I would have to double my hours in order to make my current salary which is fine but how do I measure the projected sales are? I have crunched the numbers and crunched them again and it seems a massive amount of sales to cover the outgoings. What would be a fair turnover for a small shop in a village... How quickly does it take to get going? It all seems a bit of guesswork... Is it wrong to ask local shops what their monthly turnover is? I've got no doubt that people will buy the goods it's just if there is enough people .... How does anyone set up a retail shop unless they have got pots and pots of cash?
Also because of the location sales would be seasonal.
Do I or don't I?
Now, where do I start? My self and my wife set up our B&M gift shop 5 years ago now with a similar cash sum that you have. We were fresh into retail with previous management skills but no retail or other 'own business' experience although we had attended several Business-Link (now sadly, defunct) courses to get the basics.
First and foremost have you done a business plan? If you're not hoping to secure funds on the basis of a BP this does not have to be as daunting as it sounds - but a simple one for yourself will be useful to give you direction and focus. The BP should identify the local demographics and the market within the demographic to which you're going to aim at.
Do a SWOT analysis. Make a list of Strengths, Weaknesses, Opportunities and Threats - this could form part of the business plan.
Identify what type of things are you going to sell? What would you LIKE to sell (this may not be what you end up selling but it's a start). Have you got buying prices? Have you been to any trade exhibitions and seen what's available?
Work out your markup - typically this will be something like x2.4 for general giftware right up to x5.0 or x10 for jewellery. Are you going to be VAT registered? Do your RRPs allow for this?
PLEASE DON'T ask other retailers what their turn-over is - they simply will not tell you!!!!!
Don't get too hung up about turn-over! High turn-over doesn't always mean high profits. Profit is KING! Think in terms of GPM - Gross Profit Margin. I understand that a typical GPM for giftware retail is meant to be around 35-40%. But our GPM is currently about 62% and barely make a living. Our aim is to get in excess of 75%.
In the first few years, I'm afraid it is very much finger-in-the-air-job. Our bank and financial advisers were way, way-out on projected turn-overs. We ended up with about half of what they 'confidently' projected.
IMPORTANT: Do yourself a cashflow forecast with two columns (Budget & Actual) for each month so you can see that what has happened is what you expected to happen (or not as the case maybe). This will build up and become more and more meaningful over time. It should also lessen the risk of any nasty surprises.
A little advice on buying:- don't spend too much initially with any one supplier (like we did). Because of today's economic climate you will find an increasing number of suppliers happy to offer low minimum orders and 'little-and-often' ordering set-ups.
Review your business plan at least every year and adapt/change if need be. The great USP with independent retailers is that we can adapt and change at a moment's notice - we're not usually tied in to supply deals and long-term contracts like the big boys.
We have a e-commerce website to compliment the shop, but unless you have a really 'must-have' or unique product it is incredibly difficult to get people to see it let alone buy from it. We have spent several hundreds of pounds promoting our website but most sales come from word of mouth.
Forget this 'no need for the high street any more - everyone's buying on line now' simply is not true for a lot of retail sectors. Certainly every retailer I know with a website-shop has seen
REDUCED sales over that last couple of years. Talking to our customers there seems to be an increasing wariness from buying on line.
I now work twice as long as I used to in a reasonably well paid office job with a stress level that's in the clouds sometimes. But do you know what?
I wouldn't have it any other way when I think about going back to the alternative.
The advice I've offered is very basic and I could go on for hours more ....
I won't, but I will wish you Good Luck with your venture and hope you have exciting times ahead of you.
