Money Coach : finance, small business

The Profitability Hurdle

moneycoach — Mon, 15 Mar 2010 11:49:00 GMT

One measure of small business success: how long does it take to “break even” - and reach profitability?

The biggest hurdle that one faces when starting a small business is the profitability hurdle: the time it takes between opening for business and the day that the operation “breaks even.”

Typically, one spends (invests) money on inventory, marketing and advertising, rent and building utilities, and sometimes the salaries of employees before the business starts generating enough cash flow to cover those expenses. In a retail operation, one must cover the cost of purchasing, installing or constructing the walls, shelving, display area, etc., that make the store look the way it is supposed to look. Sometimes, reaching the “break even” point can take months or even years – depending on the type of business and the amount of investment it takes on a weekly basis to keep the operation going.

The “break-even” point is big milestone.

We have opened a retail store. As the accountant of our small business adventure, I had a number in mind – a goal – of exactly what sales target to aim for so that would know when the store reached that magic goal – self sufficiency. I hoped that it would not take more than a few months, as getting everything ready took most of the money that we had set aside from the tax refund.

The small town where the shop is located specializes in antique stores – it is a browser's paradise! When the weather is nice, there are often crowds of people wandering in and out of the unique and eclectic stores that line the main street of the town. Friendly people, warm country folk … and tourists: our target customers were potentially plentiful.

The week we opened was slow – every other business owner that we knew in town let us know that it was much slower than usual for the time of year – things would get better. Customers came into the store in a trickle – but we seemed to do OK. The weekend was sunny, but cold for this time of year – there were more customers than during the week, but not as many as I expected …

I ran the reports – and added up our sales for the first week …

We exceeded our break even number by $14.57 in the very first week!

The second week was even better … and still other business owners are telling us it is abnormally slow due to the weather …

Definitely a positive sign – the operation is paying its bills from the start. Next goal – reaching positive cash flow ...

Open for Business

moneycoach — Tue, 23 Feb 2010 09:36:00 GMT

Our small business start up adventure continues …

It really is quite amazing (everyone tells us so) just how much we've accomplished in the 21 days since we took the frightening step of signing a 6-month lease on a 1200-foot retail sales space and committed the majority of our tax refund money to starting a small business! Our plan was to set everything up and hope to be open for business by March 1st.

In the past three weeks, we have managed to purchase, paint and set up all of the seven-foot tall, double sided shelving units that we purchased used – giving us lots of space to display the various items we have for sale. We obtained the necessary business license and sales tax number. A glass display cabinet was found, which needed some repair to serve as our cash register counter and bought a clearance cash register (and figured out how to work it!), found places for the eight tables we have! We met our neighbors, small shop owners that sell everything from antiques to eclectic, vintage clothing, one who sells beads and the materials to make your own jewelry and many others. Oh yes – we took out an ad in the local merchants' newspaper as well – now it really seems official!

Several hundred cases of accumulated inventory was trucked in, sorted, priced (mostly) and placed on display and we opened for business four days ago (February 20)! Certainly not the GRAND opening we envisioned, with boxes cluttering the back of the store and about 40 boxes of inventory that remains stacked on tables in our back room, unopened. We don't yet have our window sign, the telephone service is waiting to be installed and we can't yet take credit card payments … but the store is OPEN FOR BUSINESS!

What a relief! We decided, after being told by several of our small business neighbors, that we should stick an open sign in the window whenever we were in the store, even as we are organizing and setting up, since the shop “browsers” (especially on the weekends) would then come in search of bargains! The store generated sales of $200 in two days on a weekend that we are told was unusually slow!

We still have a few things to accomplish … I have to finish the web page for the store, paint and hang a sign in the window, get the telephone and credit card services working … and clean, sort and organize a lot more!

But it feels like success …

We opened for business, and the customers came in ...

And bought things …

(I'll keep you posted on our small business adventure as it continues!)

Opening A Small Business: Its All In The details!

moneycoach — Wed, 10 Feb 2010 09:40:00 GMT

Our small business adventure continues this week ...

I have discovered that there are a huge number of things to accomplish when starting out in business. We are knocking them off, one at a time … and hoping we haven't forgotten anything. Projected (hopeful) opening day: March 1st.

This week we have inhaled paint fumes, strained muscles, swept and mopped and driven our minivan all over Leon and Gadsden counties in search of bargains while spending as little (of our limited budget) as possible. Its amazing to me just how easily the money gets spent when starting a new business! We have stretched our “tax refund financing plan” to the fullest extent possible without becoming completely broke, and we still haven't put a single item out on a shelf or table for sale yet!

Its been an exciting and stressful ten days since we signed our lease and officially became small business owners. We have, I believe, been judiciously economical in our purchases. We acquired thirteen seven-foot tall double-sided metal shelving units for $22.50 apiece, a lighted display cabinet for only $60 and purchased six folding plastic tables for about $40 each. The cash register came new from Office Depot for only $50 (we found a closeout model). Since we already owned four folding tables and two large shelving units, and since our landlord left the two (very, very large) antique display cabinets (approximately 8 feet wide, 5 feet tall and 3 feet deep) in the store (I suspect that it was more from avoidance of muscle strain on his part than as a gift to us!) we have a fully furnished shop for about $1,000 after buying the paint and lumber needed to clean up the space, set the shelving units in place and paint away the rust spots! Not bad, as I'd only budgeted $1,500 for the project.

That part is done … the fun part starts now.

Over the next five days the three or four hundred boxes of accumulated inventory will be trucked via rental truck (another $150) to the store to be opened, sorted and placed in some (hopefully) organized way on the shelves and tables. After that, we have to take care of the business license ($15), place an ad in the local paper (about $100) and spend whatever we have left over on signs, flyers and business cards.

Only 18 days left until opening day.

Money Coach : finance, small business

The Profitability Hurdle

Open for Business

﻿Opening A Small Business: Its All In The details!

Opening A Small Business: Its All In The details!