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  #1  
Old September 12, 2011, 05:39 PM
-TW
 
Posts: n/a
Default I don't understand business...

I'm pressed for time right now, so I will try to summarize this...

Basically, how in the WORLD do small biz's survive? Talking about storefronts.

Locally we have a cheese shop (yup, an actual cheese shop -- they sell wine too, etc.). I went in there for the first time (+ only time, I think -- their prices are outrageous -- luxury market).

I bought a tiny slice of cheese for $4.50 ($30/pound). Later, in my mind I was trying to figure out how much biz they need to do to stay afloat. How do ANY small biz storefronts stay afloat?!?!

Rent has to be at least $3k/mo. Their markup is probably about 100% (keystone) on what they sell. Electricity, employees, advertising, etc.

Err, umm, then hopefully there is a profit (???)

WHAT DO THEY NEED TO *GROSS* EACH MONTH!?!?

If I bought $4.50 worth of stuff, I'm sure I'm at the low end of the average spent per customer. But still, let's say the average spent is $30 -- how many customers do they need to get PER MONTH.

Note: I have NEVER seen anyone in the store -- from looking through the window from time to time (anecdotal).

It seems IMPOSSIBLE for them to have enough customers per month to cover all the expenses, etc., etc. (PLUS a profit).

It's like those EXPENSIVE SHI-SHI stores in the mall (designer sunglasses boutique or Louis Vitton type stores) -- you never see A-N-Y-O-N-E in there (customers). How do they survive??

I don't get it.

-- TW
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  #2  
Old September 12, 2011, 06:03 PM
MMacGillivray's Avatar
MMacGillivray MMacGillivray is offline
Eternal Optimist
 
Join Date: Sep 2006
Location: Helensburgh, Argyll
Posts: 243
Default Re: I don't understand business...

Hi, TW - interesting question - well, I know one small cheese shop near Bridge of Cally in Perthshire which seemed to survive ok - but they are in the middle of a rich farming community where big estates make money by letting large houses to very wealthy hunting, shooting and fishing types. It's a couple of years since we were there, so not sure how it's surviving the recession. Oh, I just checked the website and they seem to be live and kicking - http://www.mcdonaldscheeseshop.co.uk/

I don't know if "your" cheese shop serves a similar area? Do they do deliveries? Do they sell cheese and wine online? Do they have a mailing list? Do they supply cheese wedding cakes as the McDonalds Cheese Shop does?

Best
Margaret

Quote:
Originally Posted by -TW View Post
I'm pressed for time right now, so I will try to summarize this...

Basically, how in the WORLD do small biz's survive? Talking about storefronts.

Locally we have a cheese shop (yup, an actual cheese shop -- they sell wine too, etc.). I went in there for the first time (+ only time, I think -- their prices are outrageous -- luxury market).

I bought a tiny slice of cheese for $4.50 ($30/pound). Later, in my mind I was trying to figure out how much biz they need to do to stay afloat. How do ANY small biz storefronts stay afloat?!?!

Rent has to be at least $3k/mo. Their markup is probably about 100% (keystone) on what they sell. Electricity, employees, advertising, etc.

Err, umm, then hopefully there is a profit (???)

WHAT DO THEY NEED TO *GROSS* EACH MONTH!?!?

If I bought $4.50 worth of stuff, I'm sure I'm at the low end of the average spent per customer. But still, let's say the average spent is $30 -- how many customers do they need to get PER MONTH.

Note: I have NEVER seen anyone in the store -- from looking through the window from time to time (anecdotal).

It seems IMPOSSIBLE for them to have enough customers per month to cover all the expenses, etc., etc. (PLUS a profit).

It's like those EXPENSIVE SHI-SHI stores in the mall (designer sunglasses boutique or Louis Vitton type stores) -- you never see A-N-Y-O-N-E in there (customers). How do they survive??

I don't get it.

-- TW
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  #3  
Old September 12, 2011, 06:34 PM
-TW
 
Posts: n/a
Default Re: I don't understand business...

Hi Margaret...

It's not just cheese shops I wonder about. It's pretty much any mom + pop storefronts + even those high-end boutique type stores. You'd THINK that, in order to stay afloat they would need MANY customers flowing in + out, ACTUALLY buying stuff -- yet that seems NOT to be the case ---- so how do they survive?!?

You KNOW the "outgo" (overhead) is VERY HIGH -- so WHERE'S THE INCOME?!?! At any given moment you'd think there would need to be SEVERAL customers in there -- but whenever I look in, there are N-O-N-E!!

This seems to be a paradox -- no?

How do these biz owners keep from FREAKING OUT?!?!

Last edited by -TW : September 12, 2011 at 07:03 PM.
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  #4  
Old September 12, 2011, 08:24 PM
MMacGillivray's Avatar
MMacGillivray MMacGillivray is offline
Eternal Optimist
 
Join Date: Sep 2006
Location: Helensburgh, Argyll
Posts: 243
Default Re: I don't understand business...

Well, I can't speak for everyone - but in our case, we keep a tight control on overheads - and that means staff costs. Sandy and I do most of the work ourselves these days because the expense of employing someone is too high. We also have to do something special to keep people coming back; in our case, it seems as if we create a special atmosphere and go the extra mile to keep our regular customers happy.

I think that most small stores have to offer a service to complement the range of goods on sale. The stores which add in that little bit extra manage to keep people coming back. The ones which open and just do what's necessary will have a much harder time. Sandy and I were on holiday recently and we called into a coffee shop on our way home. We always look to see the differences between their service and ours. We ordered our coffee and cake and just commented between us that the chairs in the establishment were comfortable; I heard a noise behind us and Sandy went and opened the door to allow a lady in; she was trying to open the door while balancing on two crutches. The coffee shop assistant just sat at a desk and watched. The lady got her cup of tea and drank it. When she got up to leave, we opened the door for her again.

It's such a little thing, but that made the lady's experience of the coffee shop much better. We try to do this all the time; there will be occasions when we don't manage it but, believe me, it makes a huge impact when we do.

The other thing which we have to try and watch is the cost of the inventory. This can be difficult when you're dealing with craftsmen and women, but occasionally getting goods which allow a higher than usual margin puts us in a better position to survive the quiet times.

All I can tell you is that a lot of people start small stores and fail; it's a bit like publishing a website - unless you're very lucky, the number of people visiting your site or your store will only increase if you keep on giving value and make the enterprise attractive and entertaining.

M
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  #5  
Old September 12, 2011, 11:13 PM
Phil
 
Posts: n/a
Default Secret Many Don't Realize about Specialized {Specialty} retailers, Mom/Pop Biz's Too!

[Smart] Specialized Specialty retailers, business models and Whatever...

Focus on Wholesale accounts... Restaurants, Hotels, Grocers, Cafe's, Bakeries, Bed and Breakfasts, Wine specialty shops, Especially with Cheese related Goodies etc. etc. Other Specialized business that Require their Particular products...

Don't Forget Mail Order, Online and other [Hidden] Revenue Generating Opportunities and Ideas like Tourism related Opportunities and Possibilities...

Mom and Pop Enterprises In Many cases are Smarter than Most Think! ...

Lots of ''Twistable'' business ideas in this one Brokering deals... Wheeling & Dealing... Joint Ventures, Cross Promotions ''Services'' related Consulting and Ideas including Public Relations, Social Media etc. etc...

Phil
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  #6  
Old September 13, 2011, 05:43 AM
Ankesh's Avatar
Ankesh Ankesh is offline
Senior Member
 
Join Date: Sep 2006
Location: Mumbai, India
Posts: 692
Default Re: I don't understand business...

Consider rent as advertising expense. And the calculations will fit.

I have a friend who gets an average of 10-12 people to visit his shop per day. Thats less than 2 people per hour he remains open. His shop is in one of the posher locations in Mumbai - very high rent. And yet he makes money. (I think it was 50% of all who enters his shop ends up buying from him.)

The store itself does not make his enterprise wildly profitable. But the store gives him an avenue to create a mailing list of buyers. And he makes a lot of money on repeat sales - via specialty exhibitions and sales. Many of these sales transactions don't happen in his shop - but they happen because of his shop.

Its the same direct marketing model.
Good audience.
Good product.
Good pricing.
Good advertising.
Good backend.

You need to have all 5 in place.

No idea about cheese shops. But I had heard that the Jaguar showroom that opened recently near my home needs to sell less than 2 cars a month to remain profitable.

With the right product-pricing mix, you can remain profitable even with very very low foot fall.
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  #7  
Old October 12, 2011, 07:47 PM
sandalwood
 
Posts: n/a
Default Re: I don't understand business...

Quote:
Originally Posted by Ankesh View Post
Consider rent as advertising expense. And the calculations will fit.

I have a friend who gets an average of 10-12 people to visit his shop per day. Thats less than 2 people per hour he remains open. His shop is in one of the posher locations in Mumbai - very high rent. And yet he makes money. (I think it was 50% of all who enters his shop ends up buying from him.)

The store itself does not make his enterprise wildly profitable. But the store gives him an avenue to create a mailing list of buyers. And he makes a lot of money on repeat sales - via specialty exhibitions and sales. Many of these sales transactions don't happen in his shop - but they happen because of his shop.

Its the same direct marketing model.
Good audience.
Good product.
Good pricing.
Good advertising.
Good backend.

You need to have all 5 in place.

No idea about cheese shops. But I had heard that the Jaguar showroom that opened recently near my home needs to sell less than 2 cars a month to remain profitable.

With the right product-pricing mix, you can remain profitable even with very very low foot fall.

Ankesh,

I like what you wrote with one exception. Rent is an item, at least for tax purposes, that has its own line on the tax form. A person can consider rent an advertising expense but has to, again tax wise, report it as such. To me, thinking of it as advertising could make sense but the reality of it says not to juggle the mind w/exotic thinking especially with a fixed expense. Used your creative thinking talents for ways to build a mailing list or increasing foot traffic, etc.

Just my 2¢

tk
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