If you don’t want to read it, you can watch this video.
Do not open up a physical store. Don’t do it. Is that clear? I understand you have a dream. I understand the romantic aspects of opening up a store.
This is the thing. I’d had three different storefronts. It’s an incredible amount of work. To run a store. It’s like having a child that never grows up. You have to have resources to hire people before it makes a profit because otherwise you will wear yourself out.
Here are some parameters for you. If you’re going to open up a store, you need to have $30K somewhere. Are you still with me? You need to have a minimum of $30K after you’ve leased the space. You need $30K left over after you’ve bought inventory. The reason you need so much cash on hand is because as soon as you open up, the money clock is going to start ticking really, really loud.
The first of the month will come so quickly. Whether your store makes money or not, you’ve got to pay rent. You’ve got to pay the power bill. You may have to pay for trash. You may have to pay something like a HOA fee for the maintenance. If you get a yellow page ad or an online ad, that’s a monthly fee.
Before you know it, you’re burning $5K to $20K to $30K a month before you make your first dollar. So, if you’re going to do it, those are some parameters. You need money to rent the space, money for inventory and then an extra $30 left for operations.
You are going to have to hire people. Now this is a truism. This is the reason so many people are in love with the “solopreneur” lifestyle. The average entrepreneur starts to fall apart when their team grows to more than three or four people.
Most people can handle two to three employees. When you’ve got five employees, you’ve got to create schedules and SOPs. There’s a lot more to deal with. Managing people is a job within itself on top of running a business. So, wrap your head around that.
You are not going to grow without a plan for growth. It’s not going to happen. You can have that store for the next 20 years and still be prodding along without making much progress. You must have a written plan for growth.
This is why you’ve got to have a plan for growth. Getting rich and making money can be a byproduct of growth. It can also be a recipe for bankruptcy. It depends on how you grow. It’s the reason you need to be well capitalized when you open up a store. You have no choice. When we had our store, the worst months were June, July and January; and to some extent February. Then when people got their tax refund, they started spending again.
Online, it never stops. I remember making $10K to $20K the day after Christmas, in one day. Our months were really slow in the summer in the physical store, but online it never slowed down. In the summer, we switched product categories and we were busy.
If you’re going to grow something worth selling later on, you’re going to have to learn how to hire people. The most people I ever had working for me was 15. It was interesting. I did it for a few years.
You’re going to have to put on your management hat. People fall in love with “being the boss” at first. Okay. That shit doesn’t mean anything. You are the responsible one. That’s who you are. You have many bosses even though you own a business. You have to make the adjustment. You will not grow a visible business without carbon based life forms. Notice I said “grow”.
You can stay in business the next 20 years by yourself, but let me give you a good example. When I exited the storage auction business because of health problems that my partner and I were experiencing, we had employees. The problem was we didn’t have anyone that could replace us. That was the critical flaw.
Target is really good at running stores and they have closed a lot of stores in the past year or so. They’re gone and they know what they’re doing and they’re well capitalized. They just did the math and realized it wasn’t working.
Walmart is having to reorganize. They gambled wrong and Amazon is a bigger company than they are now. So, don’t play the physical store game unless you have a serious game plan. Don’t do it.
I never bought stuff off the streets. It’s too damn risky. I didn’t know if it was hot. If the shit’s hot, you’re in trouble. You didn’t commit the crime, but depending on the District Attorney and how they look at it, you could be in hot water.
If you do it once, nothing is going to happen to you. But if your name comes up 15 or 20 times associated with hot goods, they’re coming for you. That’s something that could happen and you have very little control over it. When people sell you hot stuff, you don’t know the origins of it.
Let’s review. From the top; cost, capitalization and employees are the reasons you should not open up a store. Forget about it. I told a client not to open a store and they went ahead and did it. He ended up admitting I was right when I told him not to do it. He said, “I should have never opened up that store.” You make less than your employees, especially in the first two years.
You might be struggling like crazy. So, don’t do it. It could ruin your life.
Let’s talk about my experience. We did not start off with a store. We were doing garage sales. Then we moved to the flea market. We had extremely low overhead for the first two years.
Then we opened the store. I thought we’d get a lot of traffic because it was on a busy highway. Nope. The road was slanted, so when people were driving, they couldn’t see the store. It was like we were invisible. No one was coming in. It got to the point that we stopped going into the store except for the weekends or to meet Craigslist customers. We were using Amazon money, eBay money and Craigslist earnings to pay rent on a store we weren’t really using much.
We closed the store and went straight to the warehouse. That first three months, we made the most we’d ever made in the business because we were streamlined. We were in one place and we had a plan. That’s why I’m telling you – don’t open a store.
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