The Start Up Costs of Opening a Craft Store
Some craftspersons open retail stores to sell their work direct to the public. They may carry a selection of their own pieces or craftwork from several craft artists to help fill the shelves and displays. If you have thought of opening a craft store, this article will help you understand the costs involved and perhaps help you save some money.
The monthly expenses of your new store include (but are not limited to):
Business license. Most counties require that every business have a license. The fee varies but expect to pay around $100 a year. If you plan on opening a checking account for your business, most banks require the business license before opening a business account.
Signs. The cost of your signage will depend on the size of your store and local sign restrictions. Some tourist areas have limitations on how high or large a business sign can be.
Rental or lease deposits, first and last month rental payments at commercial rates. Renting a commercial retail space will not be cheap. Expect to pay at least $1,000 a month in low traffic areas and much much more in popular locations. When calculating your expenses, don’t forget to account for first and last month rental fees which are typically due up front.
Insurance against fire, theft and other loss. Full coverage insurance for your retail store may run you anywhere from $50 to $200 a month.
Telephone at business rates. A business phone listing gets you in the Yellow Pages. Business phone rates average around $60 to $70 a month.
Utilities. Some retail spaces may include your utilities in your rental fee. However, even if they aren’t, figure an electric and water bill of around $25 to $50 a month.
Advertising. There are many ways to get the word out about your store without spending a fortune. Do an online search for “guerrilla marketing examples” to learn ways to market your business with free and low-cost methods.
Merchant account for processing credit cards. Having the ability to accept credit cards can boost your sales by at least 40 percent; even more so in tourist areas where travelers use their credit cards instead of cash. A merchant account can run you anywhere from $30 to $75 a month, plus around 3.5 percent of every sale.
Employees. If you will need employees, count on paying the government 30 percent of what you pay per hour. If you hire someone at $9 per hour, you’ll pay another $3 an hour in social security and workman’s compensation.
Inventory. If you intend to open a gallery of handcrafted work, get your inventory on consignment. Consignment means that the artist retains ownership of their items but you display them in your store and only pay for the items after they sell. Consignment costs you nothing except the bookkeeping and many craftspeople prefer to get their work in the stores rather than have it sitting at home in a box.
Fixtures. New fixtures are expensive. Shop around before you buy. Sometimes you can find retail stores going out of business who are forced to sell everything for whatever they can get. Budget a couple of thousand dollars or more depending on the size of your display areas.
Office equipment and supplies. To handle transactions, you will need a cash register or personal computer set up to handle over the counter sales. Figure $1,000 and up depending on how many registers you will have. You can save some money here by having a cash drawer built into your sales counter and keep track of sales with a receipt book.
Promotional materials. You’ll need business cards, brochures, price sheets and hang tags; count on a few hundred dollars for all of these.
Travel and auto expenses. Depending on where your store is located, you’ll have some daily travel costs going back and forth. You’ll also incur the costs of going to the bank, the post office or UPS, picking up supplies and more. Add in at least $200 or more per month for gas and wear and tear on your vehicle.
Your salary, though you may want to hold off drawing a salary for a few months. If you have a spouse who can help with your other financial obligations, you are in a better position.
What’s the Bill?
If you handle most of what is mentioned above as frugally as possible, you can count on monthly costs of at least $2,500 to $3,000 a month; and that’s a very low-end operation. You’ll also have one time up front expenses of another $4,000 to $10,000 for fixtures, inventory, installations, rental deposits, equipment and promotional materials. Hopefully, you’ll have great products and be located in a high traffic area.
Location, Location, Location
Choosing the right location is the most important element for success in a retail venture. An area of a city that has a thriving tourist industry is an excellent choice. In a high traffic tourist area, customers are there to buy. You can see this by just hanging out for a day and watching the flow of shoppers. The challenge for the new store owner is that the more popular the area, the higher the rent will be.
Taking any location with cheap rent simply to get your business open can be disastrous. Inexpensive rent can never make up for slow sales in a low traffic area, unless you can generate additional sales through a mail order catalog or through a website.