Business costs for Retail Shop

[Rob N]

Trying to collate a list of business costs for a small 2,000 sp/ft shop with a with a projected turnover of £250k. Please add any I have missed

Running costs(yearly)

Rent £10k
Business rates £4k
Wages £60k
Employer NI £4k
Repairs £1k
Electricity £1k
Shop Insurance £1k
Liability Insurance £1k
Shop van & petrol £2k
Stationary £500
Shrinkage £500
Accountant £500
Till Software Rental £500
Marketing £500
Broadband £250
Phones £300
Website maintenence & hosting £400
PDQ Rental & Fees £3.5k
PRS Music License £250
Bank Account £200
Staff Xmas Party £150
Software Licenses £200
IT Depreciation £200

(Ongoing Investment in stock ??)

 

[Chris Ashdown]

Not all running costs but a few points

What type of shop

What average markup are you planning on

Fixtures and fittings

Building insurance landlord normally buys it and charges you then your own insurance you arrange for damages and third party

Not much on marketing

Your own wages and stock
Signs

 

[ToyWorldNW]

Some of those will definitely depend on the type of shop.

Agree with Chris that not a lot on marketing, would say the same about shrinkage too - on £250k sales, 0.2% would be EXTREMELY lucky for some types of stock.

Would maybe consider looking at EPOS as a capital outlay rather than a running cost, depending on purchase cost compared to the rental.

Taxation?

Just a few thoughts which immediately spring to mind.

 

[Rob N]

Costs are rough estimates, getting a definitive list is the need just in case anyhting has been missed we haven't thought of. Thanks for contributions so far, some good ones

 

[Jaymac-safety]

Hi Rob,

Just a couple of quick points,

Have you included the costs of your fire safety provisions in order to comply with the requirements of the Fire Reform Order regs. These include a fire risk assessment, fire extinguishers, annual servicing and certification of extinguisher equipment and staff training.

For your budgeting I have provided the costs for these using our prices, (these are rough estimates as to your requirements based on the basic details you have provided)

Fire Risk Assessment, you can do yourself or using a contractor like us would cost around £250.

Fire Extinguisher Equipment, installed and commisioned with certification. Rough guess depending on what you sell and other associated risk factors, i would say you need 2 water or foam based extinguishers and 2 CO2 extinguishers. Around £300 for units, installed/commissioned.

Annual Servicing and recertification of extinguisher equipment. Again varies from company to company but we charge a fixed cost of £50+vat which includes the site visit and the first 5 units serviced (£7.20 per additional unit thereafter)

Staff Fire Safety Training. If you sent candidates on a pen course you would be looking at between £50-£80 or if you have a course delivered on your site it would be around £300.

All of the above are legal requirements and generally insurance companies are insuring based on the minimum legal requirements are met. Prices vary within the fire safety service sector so please shop around.

My second point, which has already been addressed above is in relation to shrinkage, having worked in profit protection/loss prevention/risk management for the last 10 years, I feel your estimate is slightly on the low side. This depends largely on the products you sell and what safeguarding measures are in place. The companies i worked for generally had targets of between 1.5%-3% of turnover budgeted for shrinkage and they are high street store operators with quite comprehensive profit protection strategies.

Have you also factored in CCTV? Not only as a deterrent or evidence collation for theft both internally and public but also to defend any liability claims. Over the last few years i have been called to investigate a number of claims arising from "accidents" only to find that these claims have been exaggerated, staged or even completely made up. CCTV has provided vital evidence to defend my employers at an early stage.

Hope this helps and all the best in your new venture.
If you require any further info, please do not hesitate to drop me a line on here.

Regards
James,
Jaymac Safety Ltd.

 

[Patrick @ BIG in the UK]

I love that this includes a staff Christmas party! Brilliant.

As touched on above... Possibly an unrealistic shrinkage guestimate based on the volume of sales you're looking to shift.

How did you calculate these costs?

 

[Rob N]

Yeah, was going to put cost of crackers down too, but thought against it

Great additions so far, I will add on suggestions for a complete list soon.

Forgot about about fire safety (sigh) which has led me to think about electric testing, which I think is now also a legal requirement too. Is it called PAT testing?

 

[Rob N]

Not all running costs but a few points

What type of shop

What average markup are you planning on

Fixtures and fittings

Your own wages and stock

It is a niche sport shop, gross margin is about 42%. My own wages included in that £60k, not pulling much out.

 

[Jaymac-safety]

Hi Rob,

Reference PAT testing, Portable Appliance Testing or PAT testing is a bit of a grey area.

There is no legal requirement for PAT testing to be carried out, but the Electricity at work regs 1989 state that electrical equipment should be maintained to confirm safe operation and the best way of doing this would be PAT testing.

This isn't something we currently do ourselves at the moment as we sub contract it, but to give you a rough figure of costs the going rate is around £30 (site visit fee) + £1 per item.

On a general point of safety requirements, you could spend a small fortune unnecessarily, but it is about taking reasonable and sufficient measures to ensure safety, many items of safety are easily overlooked until something goes wrong then they can end up biting you on the bum.

There is plenty of free guidance out there in the public domain .gov /HSE ect, use this to find out what you need, don't rely on safety companies advice (even though that's what i operate!) but there are to many that upsell by scare tactics or misleading information as to what's legally required.

Regards
James

 

[Patrick @ BIG in the UK]

Hi Rob,

Reference PAT testing, Portable Appliance Testing or PAT testing is a bit of a grey area.

There is no legal requirement for PAT testing to be carried out, but the Electricity at work regs 1989 state that electrical equipment should be maintained to confirm safe operation and the best way of doing this would be PAT testing.

This isn't something we currently do ourselves at the moment as we sub contract it, but to give you a rough figure of costs the going rate is around £30 (site visit fee) + £1 per item.

On a general point of safety requirements, you could spend a small fortune unnecessarily, but it is about taking reasonable and sufficient measures to ensure safety, many items of safety are easily overlooked until something goes wrong then they can end up biting you on the bum.

There is plenty of free guidance out there in the public domain .gov /HSE ect, use this to find out what you need, don't rely on safety companies advice (even though that's what i operate!) but there are to many that upsell by scare tactics or misleading information as to what's legally required.

Regards
James

A genuine post showing integrity. I like it! Sound advice.

 

[Chris Ashdown]

The fire safety mentioned is a rum deal, you can download a free risk assessment form from your local fire station which comes with a full guide and takes about 30 min for a shop to undertake

Fire extinguishers can be brought with site gauges online about £30 each and replaced when in doubt but no need for yearly inspection and at that price cheaper to replace

For most shops i guess a couple of gas water extinguishers and a couple of CO2 would fit the bill and clearly marked exit doors and common sense

 

[Jaymac-safety]

Hi Patrick,

Thanks for your comment.

Thats exactly the stance we like to take as a company. Were about honesty, transparency and integrity. I have had to deal with too many companies (whilst employed within health and safety of national companies) that treat their customers like cash cows and extracting as many pound notes as they can by misleading with what's required or the end cost.

It has been quite funny though when you query " is that really required?" or "under what regs does it state we need that" lol

I may be wrong in this approach as my background is that of an adviser and not a salesman but i prefer the client to see exactly what their paying for is required, with no hidden charges hence we are one of the only fire safety companies that advertise our prices openly online along with independent information on what's required.

Sorry Rob for hijacking your post, i'll get back down of my soapbox now, safely lol.

James

 

[Patrick @ BIG in the UK]

Hi Patrick,

Thanks for your comment.

Thats exactly the stance we like to take as a company. Were about honesty, transparency and integrity. I have had to deal with too many companies (whilst employed within health and safety of national companies) that treat their customers like cash cows and extracting as many pound notes as they can by misleading with what's required or the end cost.

It has been quite funny though when you query " is that really required?" or "under what regs does it state we need that" lol

I may be wrong in this approach as my background is that of an adviser and not a salesman but i prefer the client to see exactly what their paying for is required, with no hidden charges hence we are one of the only fire safety companies that advertise our prices openly online along with independent information on what's required.

Sorry Rob for hijacking your post, i'll get back down of my soapbox now, safely lol.

James

I don't think that approach is wrong at all. Consumers are much smarter these days, they see through hard sales and nonsense, whether the salesman accepts this or not.

Integrity and honesty are excellent competitive advantages to have - ones money can't buy.

And yes - Sorry for the hijacking Rob! It's just unusual to see someone acting in that manner when they could have pushed their own business down your throat!

 

[Jaymac-safety]

Hi Chris,
Further to the points you have made re fire safety I don't know why you have described it as a rum deal, i was only providing a ball park figure for Rob to work with.

Firstly, Fire Risk Assessments can be carried out by the business owner which is what i stated in my post, for some they dont have the time or expertise to carry this out and choose to use a contractor.
Secondly, yes you can buy cheap extinguishers online, generally these are of poor quality and imported with very little traceability. Some contain approval logos such as BAFE, BSI or Kitemark even though they have not been tested to these standards. I could sell these cheaply all day long but prefer to offer British made equipment that i have checked and confirmed are correctly accredited.
Also you post sounds as if you can buy couple of extinguishers online, attach them to you wall and jobs a good one, when in reality (generally when something goes wrong) you'll find out that this isn't the case.
Fire extinguisher equipment should be correctly installed and commissioned by a suitable qualified technician (someone who has passed a BAFE certified course) then this certificated which the site must retain within the fire log book.
Annual inspections/testing with recertification of compliance is then required to confirm the equipment meets the required standards, again this should be carried out be a competent person.(one exception to this is P50 extinguishers which are been marketed as service free and are priced around £150 +vat)
These inspections and certifications are cover in the British Safety Standards BS5306 which are then used as the required standards of the Regulatory Reform Order (Fire Safety) 2005.

This post is in no way ment to be aggressive but i would like to dispel the myth that you can just go out,buy extinguishers and install them yourself and feel confident that you have meet the required standards. Again all this that i have said can be found on various independent websites such as .gov which provides a good source of information.

Regards
James

 

[MOIC]

Add 30% to your expense account and reduce your expected turnover during the first year by 40%.

That will give you a realistic base to work from.

 

[Chris Ashdown]

Hi Chris,
Further to the points you have made re fire safety I don't know why you have described it as a rum deal, i was only providing a ball park figure for Rob to work with.

Firstly, Fire Risk Assessments can be carried out by the business owner which is what i stated in my post, for some they dont have the time or expertise to carry this out and choose to use a contractor.
Secondly, yes you can buy cheap extinguishers online, generally these are of poor quality and imported with very little traceability. Some contain approval logos such as BAFE, BSI or Kitemark even though they have not been tested to these standards. I could sell these cheaply all day long but prefer to offer British made equipment that i have checked and confirmed are correctly accredited.
Also you post sounds as if you can buy couple of extinguishers online, attach them to you wall and jobs a good one, when in reality (generally when something goes wrong) you'll find out that this isn't the case.
Fire extinguisher equipment should be correctly installed and commissioned by a suitable qualified technician (someone who has passed a BAFE certified course) then this certificated which the site must retain within the fire log book.
Annual inspections/testing with recertification of compliance is then required to confirm the equipment meets the required standards, again this should be carried out be a competent person.(one exception to this is P50 extinguishers which are been marketed as service free and are priced around £150 +vat)
These inspections and certifications are cover in the British Safety Standards BS5306 which are then used as the required standards of the Regulatory Reform Order (Fire Safety) 2005.

This post is in no way ment to be aggressive but i would like to dispel the myth that you can just go out,buy extinguishers and install them yourself and feel confident that you have meet the required standards. Again all this that i have said can be found on various independent websites such as .gov which provides a good source of information.

Regards
James

James

My point was that your message to a new shop owner of only 2000 Square Foot was not really realistic, but may well have been for a more complex company setup where the relevant skills would be more likely to be required. to say design and fit a fire repression system would indeed require the use of skilled people, but as you agree a few fire extinguishers would be suitable most most operations in a simple shop

As quite a few major companies supply low cost extinguishers fully marked, i somehow think the fire brigade or trading standards would act on them if found to be faulty, so i think that's a bit of scare mongering

 

[oldoakey]

Are you opening as a Sole trader or are you considering protecting yourself by going as a Limited company, if so add at least another £1,000 to your accounting fees.
What about the VAT

 

[MattCollins]

Hi Rob,

A few other costs to potentially add to the list:

• water
• waste disposal
• window cleaning
• carrier bags

By the way, from what I'm seeing at the moment, £2.5k should be enough to cover your PDQ rental and fees assuming you're willing to shop around for competitive rates.

 

[Mayor]

£150 for the Xmas party ? Are you inviting any staff ?.......

 

[Zumiweb]

Just to add to the PRS licence fees - when we looked at it, we found we also had to apply to the Council for an Entertainment Licence (with overpriced announcement in local press, specifying times and days music would be played in shop), at least as expensive as the PRS, and annually renewable too. That's Kent (Shepway), others may differ- it was the same form and process as for a 10,000 seat festival or building a cinema/theatre, so our 250sq ft shop did without music. Seemed a little over the top when we just wanted a radio on!

Yours would be on a bigger scale so more justifiable, but watch out for those council fees... entirely separate from PRS.

 

[jayeverall]

Zumiweb - sorry to hijack but you won't need an entertainment licence for your shop - there's a clear exemption for "incidental music" which is essentially defined as music which isn't the main attraction of visitors to the venue, isn't advertised as such, and isn't played at a volume which is disruptive to other activity from taking place.

Also...£400 for hosting/site maintenance?? Call me!

Jay

 

[Zumiweb]

Thanks Jay, Shepway council staff were adamant that we would need the licence. We did ask to make sure as it was so over the top. I'm sure you're right and equally sure they just tell everyone that a licence is required.

We get through one bin bag of rubbish a week, but we still needed a formal commercial waste contract too... all part of the joy of small businesses...

 

[Scalloway]

Official government advice on entertainment licences

https://www.gov.uk/entertainment-licensing-changes-under-the-live-music-act

 

[promdressers]

Unless I have missed something, you don't appear to have allowed for credit/debit card charges and commissions.

 

[Stuart Bailey]

don't forget legal fees for completing your lease approx. £1,000

 

[Parcelhub]

£500 for marketing may be a bit on the low side, but design the shop well and it could sell itself, maybe consider working with a local PR agency or doing some charity events?

 

[promdressers]

I think there is a bit of confusion (unless I am mistaken, and the rules are change since last November - but the Gov site is still showing this).
Or I may completely have the wrong end of an embarrassing stick!

A business MAY need a Local Authority licence for an event, but most businesses also need a PRS and a PPL licence:
https://www.gov.uk/licence-to-play-background-music-ppl
http://www.ppluk.com/
https://www.prsformusic.com/Pages/default.aspx

 

[willv]

£400 for web hosting and maintenance seems to be a low-balled figure in my opinion.

Hosting is cheap enough anywhere, but you won't get much in terms of maintenance for £400 per year. If the hosting is £100 per year, that only leaves £300 for maintenance, which is only 15 updates all year if charged at £20 per hour (very cheap for a professional developer).

You may not need many online updates and have accounted for this correctly, but thought I'd point it out. Just seems very cheap that's all

 

[Root 66 Woodshop]

I love how security is never mentioned in such threads

CCTV has been mentioned with Jaymac - but what about locking products, a safe for overnight storage of cash, Security Alarm, Roller shutter services/repair work - security grilles... ?

Most businesses when taking over a new lease just take the keys from the Landlord/letting agency, walk in and think that's it... all tickity taboo - how many people have got keys to your new premises? and how many of those people shouldn't have keys to your new business?

Website maintenence & hosting £400

What kind of website do you have? - If it's a directing to the shop website then £400 isn't far off... if you're in the middle of building an online shop to work alongside your retail shop, expect to pay a lot more than that...

£400 would probably just about cover the cost of your server/hosting - if you've been offered an online shop for that kind of money personally I'd walk away... it'll be a a flop... sorry just my opinion

 

[myfairworld]

Agree with the comment about a security alarm. If it is a monitored alarm i.e. via Red Care that will add some hundreds of pounds per year to the cost but an unmonitored shop alarm simply going off will tend to infuriate your neighbours without particularly deterring thieves. I think issues such as roller shutters need very careful consideration. They may be right for some businesses but leaving your premises looking like Fort Knox at night can be off-putting to potential customers and also cuts you off from the marketing opportunity of good window displays and people around in the area in the evening being able to see into your shop.

Music is an issue. You are almost certainly going to need not only a PRS but a PPL licence too which adds up. There is a way around this by playing non-copyright music. A number of companies offer this where you buy a CD/CDs for a relatively high cost (about £40 unless there is an offer on) but have the right to play it/them forever without further fees in that particular shop. After paying fees for many years I eventually switched to non-copyright music via a company called AKM. You have to choose the CDs carefully (normally you'll be able to play samples of the music online before you choose). Music is a bit of a problem in retail outlets. Many customers will say they hate it but if you don't have it many will say they feel uncomfortable in a 'silent' environment and worry about everything from the sound of their footsteps to the sound if they pick an item of stock up and put it down again! Selling gifts isn't like selling tomato ketchup, the 'gift' customer wants to feel comfortable browsing at leisure. Once upon a time I used to cough up for the yearly PRS etc fees and played music which seemed particularly appropriate to our stock but customer opinion still seemed to be divided 50/50 some loved it but just as many hated it. In the end I went over to non-copyright music and decided that a selection from the AKM stuff was the best thing to try for us. Long term it is definitely cheaper and interestingly I don't think we've had a single complaint about the music since we switched but we do get lots of people saying they like it.

 

[promdressers]

When I ha a retail shop, I was determined npt to pay Red Care. It is not as if they send a squad of heavies around to protect ypour property when the alarm goes off!
I bought an attachment to the alarm system that telephoned, IIRC, up to three numbers in succession until a code was received to stop dialling. We could then drive to the shop and determine any threat level before calling police, or otherwise.
But it is true that security costs are rarely mentioned when someone asks for a cost list

 

[Root 66 Woodshop]

When I ha a retail shop, I was determined npt to pay Red Care. It is not as if they send a squad of heavies around to protect ypour property when the alarm goes off!
I bought an attachment to the alarm system that telephoned, IIRC, up to three numbers in succession until a code was received to stop dialling. We could then drive to the shop and determine any threat level before calling police, or otherwise.
But it is true that security costs are rarely mentioned when someone asks for a cost list

There are alarms which can be supplied and installed by SSAIB installers which already have this facility installed - so much so by ensuring you use an SSAIB registered installer and keeping them on as the maintenance company this can and does reduce insurance costs (all insurance companies have different discounts set up, so probably best to shop around).

We supply & install these for as little as £450 + VAT pending on the requirements of course, our maintenance is only £89 + VAT per year.

In most cases, it's the maintenance that helps with reducing insurance than having an actual alarm installed.

 

[Talay]

Rent £10k
Business rates £4k - check the discounts available
Wages £60k - make sure this is real and not just plucked out of thin air. Always count 13 months as well as they are off 28 days and when you get others to cover, you are effectively paying twice.
Employer NI £4k - again, allowances available.
Repairs £1k
Electricity £1k - perhaps but what about heating ?
Shop Insurance £1k - sounds too high
Liability Insurance £1k - should be included in above
Shop van & petrol £2k - no where near when including insurance and depreciation
Stationary £500 - too high - print straight from quality laserjet (around £50 per year).
Shrinkage £500 - too low
Accountant £500 - too low
Till Software Rental £500 - quality EPoS is a couple of grand.
Marketing £500 - much more in first year
Broadband £250
Phones £300
Website maintenence & hosting £400 - likely too low
PDQ Rental & Fees £3.5k - nope, £20/25 a month (on 12 months) and around 1% on credit, much less on debit.
PRS Music License £250
Bank Account £200 - free for 12/24 months
Staff Xmas Party £150 - £50 a head more likely
Software Licenses £200 - for what ?
IT Depreciation £200 - Write off in 12 months.