So, you want to open a small, local, brick & mortar business. Whether it’s a boutique, or a coffee shop, you definitely have challenges in front of you.
There are lots of “businessy” articles out there that will give you average profit percentages, retail fit-out costs, etc. The purpose of this article is to share what I’ve learned from years in marketing, and talking with other local business owners so that you can have some creative, out-of-the-box, lean ideas for starting a business.
Starting a brick & mortar business (the traditional way).
Assuming you’ll be the only employee for a while (or at least, one of the only), here are a few costs you should consider when launching your brick & mortar shop:
This of the biggest to get right, and make sure what you’re paying for is going to be sustainable for the long-haul. This will depend on how much space you need, and what you’re selling. For example, if you absolutely love a space in your small town, but it’s way more square footage than you need for your coffee shop and costs $3,000/mo, it’s going to take a lot of coffee sales out the gate to break even on that.
Find a space that accommodates your vision, but run quick numbers and make sure you know how many widgets (coffee, shirts, flowers) you’re going to have to sell to pay rent each month.
The space you’re renting will likely just include the walls, paint, and base utilities. So the next thing to consider is how much fitting out your space is going to cost. This includes everything from the equipment you need to actually produce your product, to paint, design, counters, tables, etc. Does your shop require a fully-licensed kitchen? Or can it be run with just a counter, a register, and some floor space? Will you need clothing racks? An espresso machine?
Make a list of everything you’ll need to get started (that you can think of and search for). But remember that you don’t have to buy new for everything! I’ll include some tips below on starting a shop on a budget, but remember that you can look into restaurant closings around you and get stuff for cheap, use Craigslist, etc.
How much staff do you need to run your shop? This depends totally on your budget and situation. If you’re taking a leap, and have other income coming in, so you can invest full-time in your store, then you should probably be the one working full-time. But I’ve also seen someone who worked full-time in insurance start an ice-cream shop, by paying someone else to run it. Just remember that staffing is one of those silent factors that many business owners don’t think through or calculate, that ends up costing them thousands each year.
For example, let’s say you’re running with 3 employees, and it could be done with 2. The 3rd employee makes just $10/hr working 20hrs per week, and only works half the year. That’s $5,000/year! So make sure you start lean, and add more as needed, and make sure the money is there to cover it.
My advice would be to only bring in more staff when you absolutely can’t handle a shift person by yourself, or when you’re leaving business growth opportunities on the table because you’re the one behind the register. If you can bring someone in at $10-15/hr, but it allows you to bring in new product, do more marketing campaigns, etc., then that’s also a fair consideration.
After you have your space locked down, and the fit-out is complete, you’ll need some inventory. Unless you’re in a rare business where you can create the product only after it’s ordered, you’ll need to have ingredients, clothing, merchandise, whatever it is you sell, all ready to go.
Starting a small, local business the “lean” way.
I should say up-front that I’m a big fan of being debt free, and remaining that way, even when starting a business. Now, that’s not to say that’s the only way. Many (maybe most?) successful small brick & mortar shops got started with taking out loans, or partnering with investors. It’s just that I think debt hinders me from taking risks, and adds emotional stress that’s not worth it to me. It’s a lot harder for me to take a business risk, knowing I’ll owe lots of money for the next 5-10 years of my life if it fails, then to start that same business in a way where I only stand to lose existing money.
I’m also a big fan of validating a business idea before diving head-first. Validating simply means finding out, “will my (assumed) target audience or customer base purchase this product? Do they feel the pain I’m trying to solve?”
I’ve already described the traditional way of starting a retail space: take out a 1+ year lease, purchase equipment and inventory, fit-out the space, put up the “open”sign, and hope that enough people come in to make it all worth it.
But there are other ways. I know, because I’ve talked to business owners who have started small, lean, and done it differently. There are low-cost ways to validate your idea, and run it at a small scale, and even start to build a brand before you go all-in.
Start a pop-up.
One way to start lean is to use the “pop-up” model. You’ve probably heard of, or experienced, this model first hand. Essentially, a pop-up is when a small business temporarily sets up shop at another business’ location, offering a limited amount of products.
A few examples of this include…
- A coffee shop selling pour-over every Saturday from a popular local boutique.
- A flower shop offering limited bouquets from a popular coffee shop.
- A food truck posting up at a brewery every Friday night.
- A portable, wood-fired pizza shop offering pizzas at a local distillery every weekend from 7-9.
This model is great because you’re not forced to pay any rent, and you can tap into an existing audience.
Bottom line: I’m a huge fan of the pop-up model. Let’s say you want to start a bakery that specializes in hand-made, locally-sourced, organic artisan breads and pastries. Why not partner with a like-minded coffee shop, who already has an audience that you think is a perfect fit for your future business?
Reach out to them, and ask if you can do a pop-up. Pitch how you think your offerings would be a perfect fit for their shop, and highlight how you think it will be something their customer base looks forward to every weekend. Offer to make exclusive offerings every Saturday and Sunday, something to draw more people into their shop.
Focus on how you’ll bring them value.
Once you’re in, focus on building up your brand. Tell customers to follow you on Instagram for future pop-ups and for notifications on where they can get your bread.
Keep at it for a few months. Expand to other local shops. Build your brand and followers. Gather feedback from customers. Save your money. Start selling wholesale to the coffee shops and restaurants you’ve done pop-ups at.
Once you have enough of a following, and some money in the bank (so you can do it debt free), feel free to open your brick & mortar. The difference is, now you’re opening to a waiting list of customers who have been following you, and love your product. You made money, so you know your costs. There is so much less risk and less debt, than if you opened out the gate.
Shrink your offerings.
Another way to start lean is to start with a minimal product line. Are you a brewery? Start with 3 flagship beers, not 10. And only offer growlers or cans, don’t worry about a bar space yet.
Are you a bakery? Offer 3 loaves and 3 pastries.
To be sure, some business categories need diversity. For example, it’s tough to open a coffee shop that only does drip, unless you’re doing it out of a pop-up or truck.
But in many cases, you can start with a minimal item. Moo, a popular burger joint in PA, started with The Moo Burger, and some variations of salads or lettuce wrapped burgers. That’s it.
Only after much success and moving the business to a new location did the owner add a chicken sandwich and vegan burger.
You have to strike the right balance: offer enough that people can get what they came for (a burger, a pastry, etc.) but not so much that you have an expansive line (20 pastries, and 10 loaf options).
Start from home.
Rye Goods, an organic, locally-sourced bakery in Costa Mesa, started out of a licensed home kitchen and sold goods out of a food truck.
You can create pottery, roast coffee, bake bread, and curate bouquets all from home. Pair this with the pop-up model, and you have a low-cost way to start your brand.
Start from a farmers market.
Another option for you if you’re trying to start lean is to post up at your local farmers market(s). Usually, it’s fairly inexpensive (a few hundred dollars maybe) to grab a booth space each week at a local farmers market. It’s a great place to introduce people to your offerings and brand, gain feedback, and make some money.
My main emphasis in all of this is that there is another way to start a small, local, brick & mortar business. You can start lean, build your following, build your brand, learn what customers want/don’t want, make mistakes, make money, learn to be profitable, and then move into that retail space.