North Tahoe Business Question - Help with the numbers

[coolcheech]

Here's the backstory: [ame="http://www.tetongravity.com/forums/showthread.php?t=183217"]To Truckee/North Tahoe Natives - Teton Gravity Research Forums[/ame]

I've been writing a business plan for the beer store, and I'm coming up with depressing numbers.

If anyone working/living in North Tahoe/Truckee wants to chime in a see if I'm barking up the right tree, please, any info is appreciated.

Anyway, here's where I'm at:

Based on what I'm seeing out there 35%-38% is going to be the markup on a retail level.
If that's right, and I have monthly fixed expenses of $16,500, I'm going to need $65,000 a month in sales (assuming 35% mark-up) in order to just about break even.

At $65,000/month in sales, with a 35% mark up, I'm looking at $48,150/month in inventory, leaving me a gross profit of $16,850. After fixed expenses, I'm left with $350, so that's the break even point. Fixed expenses cover my monthly payroll, rent, utilities, and advertising. My inventory costs are the only significant variable expense I can see.

I'm guessing the average person is going to come into a store like this, in N.Tahoe, and spend about $20. $65,000/$20=3,250. 3,250 sales a month, I think, is impossible.

But to anyone with experience in this kind of business, do these numbers make sense? Am I figuring this out correctly?

Thanks.

[coolcheech]

I'm going to bump this, since I posted it super early.


(Sorry if bumping your own thread is a no-no.)

[carvedog]

My first question is why are the fixed expenses 16,5K per month.

Even with two to three employees, utilities, debt service if you have a loan, I am guessing that puts rent at 8-10K per month......

Rents have fallen drastically here in our resort area.

Can this be right?

[coolcheech]

For the rent, I'm looking to get a place that's around 1,500 sq.ft. I spoke to a commercial real estate guy in Truckee, and based on what he told me is it's $2/sq.ft for rent plus .70/sq.ft for Common Area Maintenance charges. I know that's high, but I'm just using worst case scenario numbers.

So 1,500 sq.ft x $2.70 = $4,050/month rent.

Payroll would be me and one other employee (in the beginning). One full time employee at $12/hr x 40hr week = $2,080/month plus $4,000/month for myself. My salary can change, I'm just guessing what will just cover living expenses.

Payroll = $6,080/month

For utilities and advertising, I'm taking what my business is doing now and just chopping it up. I'm guessing about $5,000/month in advertising, and $1,500/month in utilities.

It all comes out to $16,630.

[Patches]

Why only $20? And why isn't the 3250 attainable?

Hang out outside a couple stores in town with clickers and see how many people go in and out. Or bribe employees ofr other stores (not direct competitors) to tell you how many sales a day they make. Actually just go in and ask business owners. They will be happy for you to come in next door if it sounds like a nice establishment. Good neighbors = more business for them.

Your math seems spot on except the million dollar question - how many sales will you make and what the average ticket will be.

[carvedog]

For the rent, I'm looking to get a place that's around 1,500 sq.ft. I spoke to a commercial real estate guy in Truckee, and based on what he told me is it's $2/sq.ft for rent plus .70/sq.ft for Common Area Maintenance charges. I know that's high, but I'm just using worst case scenario numbers.

So 1,500 sq.ft x $2.70 = $4,050/month rent.

Payroll would be me and one other employee (in the beginning). One full time employee at $12/hr x 40hr week = $2,080/month plus $4,000/month for myself. My salary can change, I'm just guessing what will just cover living expenses.

Payroll = $6,080/month

For utilities and advertising, I'm taking what my business is doing now and just chopping it up. I'm guessing about $5,000/month in advertising, and $1,500/month in utilities.

It all comes out to $16,630.

If the markup on beer is really that poor I have a hard time imagining $2500 a day in beer sales at a new store.

If you really budget 5K a month in advertising I would love to be your account rep.

Just throwing out some ideas here:

Free tasters to all the taxi drivers, bus drivers ( post shift of course), concierges and anyone else who can drive traffic your way. Either a coupon or....???? When I was a taxi driver here a restaurant did that and I ate there and could recommend it because I was too dirtbag to ever go out....it worked - I sent them tons of people, but they did have good food.

Even if you don't want to do a "restaurant" I think you have to have killer, fresh food of some kind besides deli sandwiches with cold cuts.

Have a video "specialty" rental store with every cool ski flick ( and/or other sports genre) ever made in DVD, Blueray or whatever. The kind of stuff you won't find in a regular vid store or netflix or what have you. Of course that's what you have on the flat screen all the time anyway.

Keep in mind for every 6K in payroll you will employer contribution of almost a 1k per month. Accounting and bookkeeping you may be able to do some or most, but .........I would get a pro.

That's all for now.

[mmmm...pow!]

I'm not a numbers guy, so I can't help you there. But I personally would really like to see a store around here with a big selection of beer - microbrews from all over the country would kick ass. The selections available around here is not that big, and it's tough to find stuff I haven't tried before. But if you want to make money, you need to go beyond beer. Selling wine would drive up sales, but it would be tougher to compete with the supermarkets and boutique shops who have a pretty good inventory. Maybe if you had a bigger selection of wines from other states and countries it could be done, though.
Just using your math, though, I don't know that those numbers are impossible. You're talking a little over 100 sales a day, so maybe 10 sales each hour you are open (assuming a 10 hour day). You just need to make sure you offer something different from the supermarkets to draw people in. Good luck.

[irul&ublo]

For the rent, I'm looking to get a place that's around 1,500 sq.ft. I spoke to a commercial real estate guy in Truckee, and based on what he told me is it's $2/sq.ft for rent plus .70/sq.ft for Common Area Maintenance charges. I know that's high, but I'm just using worst case scenario numbers.

So 1,500 sq.ft x $2.70 = $4,050/month rent.

Payroll would be me and one other employee (in the beginning). One full time employee at $12/hr x 40hr week = $2,080/month plus $4,000/month for myself. My salary can change, I'm just guessing what will just cover living expenses.

Payroll = $6,080/month

For utilities and advertising, I'm taking what my business is doing now and just chopping it up. I'm guessing about $5,000/month in advertising, and $1,500/month in utilities.

It all comes out to $16,630.

don't forget employers share of taxes (medicare, ss UI) and worker's comp.

[frorider]

it seems that medicinal marijuana retail sales has provided a better business case in the tahoe region.

perhaps combine the two?

[barney]

I noticed that Florian's shut it doors recently, they were a beer and wine store but had a good selection. They were also next to Safeway, where you can always find something at a steep discount. The shoulder seasons in spring and fall are what kill all businesses here. You can print money when it is busy but you are not going to have close to $65,000 in sales. It is not just that there are 10% of the tourists but the locals have less money in the spring in fall.

[coolcheech]

If you really budget 5K a month in advertising I would love to be your account rep.

Just throwing out some ideas here:

Free tasters to all the taxi drivers, bus drivers ( post shift of course), concierges and anyone else who can drive traffic your way. Either a coupon or....???? When I was a taxi driver here a restaurant did that and I ate there and could recommend it because I was too dirtbag to ever go out....it worked - I sent them tons of people, but they did have good food.

Even if you don't want to do a "restaurant" I think you have to have killer, fresh food of some kind besides deli sandwiches with cold cuts.

Have a video "specialty" rental store with every cool ski flick ( and/or other sports genre) ever made in DVD, Blueray or whatever. The kind of stuff you won't find in a regular vid store or netflix or what have you. Of course that's what you have on the flat screen all the time anyway.

I hope I'm overestimating my advertising budget, but I would like to be able to advertise a little out in the SF area during the busy seasons, and especially build a presence locally in the beginning.

My initial idea for sandwiches might be a bust, seems to be a great deal of headache involved for even the simplest food preparation. So for food I think I might stick with the cheese/meats, and I've been thinking pickles/olives too.

I really like your idea about the video store, very interesting, I've been really working on this for 6 months, and my brain is getting stagnant, any fresh ideas are welcome.

[coolcheech]

I noticed that Florian's shut it doors recently, they were a beer and wine store but had a good selection. They were also next to Safeway, where you can always find something at a steep discount. The shoulder seasons in spring and fall are what kill all businesses here. You can print money when it is busy but you are not going to have close to $65,000 in sales. It is not just that there are 10% of the tourists but the locals have less money in the spring in fall.

They closed in early April. Safeway had a decent selection, and the health food place across the street (Moon-something, I think) had a small, but decent selection too. But like you said, I think the limited market size and lack of money is the real hurdle here.

[skiballs]

A stand alone beer store in a market where grocery stores sell beer and wine is a loser everytime.
You need an additional hook, health food, organic food, cigars or hell man it's Reno Hooker supplies.

[rideit]

Don't forget liquidation of dead (expired) inventory, and sale pricing. These will bring your expected profit margin down quite a few percentage points annually (good small retail businesses are lucky to enjoy an 8% margin overall!).

What are the insurance, licensing, and liability costs?
Theft and pilferage?

[sIlentRagE]

Based on your numbers and some rough calculations in my head you'd need to make an average sale every few minutes you're open. That seems unrealistic to me at least. Now if your average sale is greater than $20, you can cut expenses somewhere, or you add another draw to the store as per above then things change...

[carvedog]

Stripper pole aerobics classes....

[LightRanger]

I don't know shit about small businesses, but it seems to me that your ad budget is high too. If your place is cool, word will get around... even among Bay Area people and second-home owners.

[coolcheech]

I know, at $20 sale, it's impossible to break even with these numbers.
But I don't know if it's going to be $20/sale. For me when I go into a similar type of beer store I'm spending $40, but I'm a nerd. I'm assuming most people are going to want to try a few interesting beers, buy maybe 3-4 bottles, probably $6-$7 each.

The cheese, meat, pickles, olives, etc I'll assume will bring the margins up, but I haven't done that much research into it yet, and beer is going to be the bulk of the sales anyway.

$20 per sale is a total guess ... do you all think it's an accurate guess? I'm assuming some of you fall into the customer demographic.

[rideit]

Will you be selling 'Joe-Sixpack' beer, too?

[sIlentRagE]

If you could pony up for a liquor license then that $20/sale would skyrocket. Also, the local market will not support the store, get the tourons in and you could do well...

[coolcheech]

Will you be selling 'Joe-Sixpack' beer, too?

No. Only micros.

[powpig]

Don't know if it's feasible or legal but how about selling some tap beers for carryout in growlers? Albertson's in JH used to have such a setup, maybe they still do. No drinking in house, but carryout only. Just a thought.

[coolcheech]

Don't know if it's feasible or legal but how about selling some tap beers for carryout in growlers? Albertson's in JH used to have such a setup, maybe they still do. No drinking in house, but carryout only. Just a thought.

There would be. I would like to have an in-house tasting nights as well. And if I can swing it, a seating area where people can drink the beers they bought (not like a bar though).

[rideit]

No. Only micros.

Oh.

Your fucked.

[45hill]

Oh.

Your fucked.

I agree. There is a reason Budweiser is "King of Beers" Do not alienate any customers. You may be a nerd but not everyone is like you. Cater to everyone or you will be out of business in a year at best.

I've been a bartender in a resort town for fifteen years so I know a thing or two about beer. We have 18 beers on tap and here's our top sellers, Coors Light 4-6 kegs per week, Bud 2-4 kegs per week, Rolling Rock ($2 all the time) 2-4 kegs per week, Widmer Hefe, Sierra Nevada Pale, Bud Light, Guiness, Bass, Firestone DBA, two Mammoth beers, Shock Top Belgian white, Fat tire, NewCastle, Dos Equis Amber, Busch, Stella, and Alaskan Amber all one or two per month.

A niche market is great but you really need to carry everything.