Budgeting For A Retail Store: Key Elements Entrepreneurs Should Consider
Budgeting For A Retail Store: Key Elements Entrepreneurs Should Consider
While the pandemic helped fuel the demand for online retail and eCommerce, in-store retail shopping remains a staple among millions of American consumers.
In the United States, there are currently more than 153,597 small specialty retail stores as of 2023, an increase of 1.9% from last year.
A wider economic outlook reveals that in recent years, consumers have relied heavily on their savings and credit cards to make up for higher costs due to soaring inflation. On the back of this, small business owners and entrepreneurs are considering new routes through which they can draw in customers, and save money while remaining operational during economic downturns.
Regardless of the financial challenges posed by the dwindling economy, budgeting for a small business or any business for that matter is no easy challenge, and no one knows this better than entrepreneurs and small business owners.
Keeping track of everyday operations, while also juggling to find a suitable store to rent does not come without a lot of protests. Ensuring a commercial or retail space is equipped with all the right resources that will help your business thrive can increase the level of uncertainty for any type of owner.
Before signing a lease and while you’re still shopping around for the perfect store, you might want to consult a property management specialist that will highlight all the important factors you need to consider when opening a brick-and-mortar location.
Retail And Commercial Pricing Structure
Unlike leasing a house or apartment, which is typically rented at a predetermined price, retail and commercial pricing is somewhat different.
Typically a commercial space will be rented based on the size of the premises, and the price per square foot or meter. This would imply that the larger the space, the more you will be paying per month to rent the entire facility.
In the U.S., retail real estate prices average $ 20.85 per square footage, while the average monthly asking price per square foot of shopping mall real estate is $ 26.84 as of 2022.
Retail real estate is often more affordable when a store is located in a separate building or a designated shopping zone of a town. This however does limit the potential foot traffic, but shopping malls are notorious for being exorbitantly expensive, especially for small startup businesses.
Cost Of Shop Fitting
Another cost factor to consider is how much you are willing or able to spend fitting out the shop. This usually includes fittings, equipment, and additional structures needed in the shop.
Usually, a business owner will draw up a plan that can help them determine what is required for their store. This will not only include the layout and design of their store, but also the price of equipment and fittings, labor costs, and a timeline by which they need to be finished.
Shop fitting can be an expensive endeavor, especially if you are renting a space that is bare, and requires a lot of work to be done beforehand. Aside from budgeting for the physical fittings and equipment that will be fitted into the store, you will need to have the additional cash flow available for any maintenance problems you may endure that are not covered by your monthly rental.
Facilities And Utilities
On top of having to pay for rent, businesses typically need to cover the cost of facilities and utilities they are using on the premises or building.
Some commercial buildings will charge additional fees for bathrooms located outside of the premises, additional advertising space, signage above the store or any nearby billboards, and any additional floor space that is used. Then there are fees for maintenance and repairs, garbage disposal costs, and leasing application fees.
Other expenses such as utilities can also drive up the cost of renting a retail space. According to research, energy is the fourth-largest in-store expense for businesses in America.
While not all of these fees and expenses may be included in your rent, it’s important to read through the contract beforehand to get a clear understanding of what you’re going to be paying for a retail space, and what your potential capital return may be.
Labor And Employee Overheads
Hiring an employee or employees can help you as a business owner during the start and operation of the business. While having more hands around a store to help with managing inventory and assisting customers, there is however a price for their labor.
In the United States, on average an in-store retail associate could be paid $ 11.94 per hour, while a store manager can earn anything between $ 27 and $ 41 per hour. Hourly wages can change depending on where a store is located, and local jurisdictions.
In recent years there has been a push from union groups and employees to raise the average minimum wage to $ 15.00 per hour.
Consider whether it is at all necessary to hire someone at first. Once the business starts growing, and the workload becomes unmanageable for you as a single owner, you can consider taking up the costly responsibility of hiring staff.
Licensing And Permit Fees
Before you can welcome your first customers, you will need to have registered your business as a legal entity with local authorities. If you haven’t done so until this point, you will need to decide on the type of legal structure you want to operate your business in.
This may include either a limited liability company (LLC), sole proprietorship, partnership, or limited liability partnership, among others.
On top of this, you may need to be required to apply and pay for appropriate licenses and permits to operate as a business.
Some of the permits that might be required by law include an Employer Identification Number (EIN), state licenses, resale certificates, and a seller’s permit.
The process of having these permits approved can take several days or weeks, so be sure to apply well in advance. Make sure to keep all receipts or proof of payments when you apply.
In-Store Technology
Not all businesses may require technology or additional equipment for their day-to-day operations, but in the long term, having these systems up and running can save both time and money.
Typical in-store tech such as a point of sale (POS), card machines, internet connectivity, cameras, inventory management, and even ordering infrastructure could come at additional costs.
There also might be a need to purchase software to run several programs or systems, which will need to be installed by a professional.
Before opening a shop, consider which systems will suit your business needs best, how they will help with store operations, and what the potential return on investment might be in the short term.
Marketing
Marketing is an important element for any business, especially in a digital age where the competition has grown increasingly strong.
Making sure enough of the budget is allocated to an effective marketing plan or strategy will help ensure your new store will receive the online and in-person exposure it requires to become more self-sufficient.
On top of this, marketing also requires assistance from professionals that might charge you additional fees for their services. Printing new banners, posters, pamphlets, or any other type of marketing material will also need to be worked into the budget.
It’s best to shop around beforehand to see what your available options are, and how much you are willing to spend for having specific marketing material in your store.
Business Insurance
Keeping your valuable insured is a way to give yourself some peace of mind, and for business owners that have a brick-and-mortar store that’s constantly exposed to all sorts of risks, business insurance is non-negotiable.
The average cost of business insurance can range between $ 65 to $ 261 per month, depending on the type of policy and product you select.
Not all policies will cover your business, the store, or any inventory, meaning you will need to look for a plan that covers a broad range of interests at the most affordable price.
Keep in mind, that in some cases, insurance providers may charge different rates for companies depending on the size of their business, the industry it operates in, and where it may be located.
Final Thoughts
Though it’s not impossible to open a brick-and-mortar store, even as the rise of online shopping becomes more mainstream, it’s important to be aware of the initial upfront costs that are involved when giving your business its own space from where it can operate.
Setting up a budget is the best way to ensure you can cover all the necessary expenses, and that you have enough physical cash flow available in your business to pay for any additional fees, expenses, or emergencies.
Make sure to double-check your figures with a professional, and also shop around for the best possible prices before making a final call. While it’s a daunting challenge at first, opening a new store for your small business can be a rewarding experience.
Published First on ValueWalk. Read Here.
Featured Image Credit: Photo by Andrea Piacquadio; Pexels; Thank you!
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