The other day I was going out to get a sandwich for lunch and I noticed
this new business going into this retail strip center right next to
The sign on the front said..."Coming Soon: Milkshake Mania!"
Another store that's going to bite the dust after being open for 2 months.
And if only people would do a very simple financial analysis before they
even think of starting a business so lame and unprofitable.
What is the financial analysis?
1) Add up all the monthly "fixed" costs to run the business including
rent, employees, insurance, utilities, inventory, etc. Say it'll run
you $10,000 on the very low, very simple side of this equation. (The
reality is that the expenses will be more than $10,000 a month.)
2) Figure out the "average" product cost. For a milkshake, I can't
imagine demanding more than $4 for each one they sell. But, since we're
in California where people spend more money, say each sale is worth $5.
3) Now...how many freakin' $5 shakes do you have to get to cover your
$10,000 a month? (In case you don't have a calculator, that's 2,000
milkshakes you have to sell every month or about 67 per day.)
And is selling 67 milkshakes a day realistic???
Uh...no! Not by a longshot.
And that's just to break even, folks. If you want to profit about
$10,000 a month, you'd have to sell 134 milkshakes a day or 4,000 a
Sorry but I'd rather sit at home and sell sh** on eBay for $10,000 a
month working 2 hours a day rather than holding up a counter in a boring
milkshake shop for 12 hours a day, 7 days a week.
I am flabbergasted by the amount of times I see some little yogurt
or donut or some other low-end money-making shop go in (and out) of
business because I guess not many people have access to a pad of paper,
a pencil, and a calculator these days.
(I'm in the process of talking my 17-year-old step-son out of the prospect
of opening up a retail bike shop by making him do the exact calculations
that I outlined above.)
The unfortunate truth is that many of these small business owners can't
afford to hire staff so they're stuck with "hold up the counters" of the
place for all of their (long) business hours, netting themselves either
nothing or less than minimum wage per hour.
Doesn't make working for someone seem like a bad deal after all, does
Except working for someone or making a costly mistake opening up a retail
store aren't your only money-making choices.
Most people think very small when it comes to making money. When they
finally up the ante on themselves and try to think like an entrepreneur,
the best they can come up with is some retail store idea.
Do you have any idea what it costs to open any type of retail store?
A lot more than any other type of business because your rent is much
higher, you need equipment (for food establishments) and inventory.
And it ain't cheap!
So...why this would be the first entrepreneurial choice is beyond me!
We're talking about the possibility of raking in millions a year...in
See you at the top!