What methods did you use for financing? I know the banks right now are so tight even with great credit. What would be the best way to finance a business in 2009? I know there are so many probable variations to this question but just looking for some numbers and possible solutions. Thanks…Love reading all your posts
Re: Whats the average you spent setting up your pizza busine
“best way to finance a business in 2009”
As always… the best way is CASH.
Second best is… CASH.
Where to get the cash? Save it up.
Seller financing is also good way to go. Banks are not going to lend any meaningful amount. Family is also good as long as they understand the risk.
The SBA has programs that will lend through your local bank. Unfortunatly, they sometimes loan too much and leave a business saddled with more debt than it can really support.
Every year we see a few new posts like this that end up open for business and then closed for lack of cash a few months later. Some of these were viable businesses that simply did not have enough $$ to make it to when the business produced cash flow. Others were poorly conceived and needed a mercy killing.
Most importantly, you must have a suitably conservative business plan and the ability to live without outside income for a period of time to get things up and running. You also need to achieve a certain scale in order to have a business you can live on. Tiny little stores are just buying yourself a job… a job with long hours and low pay.
Not to say it can not be done differently, but, in my opinion it takes 150-200K minimum to get rolling with some scale. Even if you buy the carcass of a failed store for 40K, you will burn another 100K getting it re-flagged, branded and producing cash flow. You can do it for somewhat less by working 60 hours a week for no pay, but you still need living expenses for a time.
I did mine with cash. About 150K ten years ago for the first store.
Re: Whats the average you spent setting up your pizza busine
He’s right on… CASH IS KING. As a Commercial Banker for 15 or so years, I can tell you if you don’t have cash in the deal don’t waste your time. I’d say you will need at least 30-40% cash in the deal, good credit, solid biz plan, and a decent personal balance sheet (net worth). However, do check with your local bank as the new stimilus program has put some $$ in the SBA coffers. From what I can tell it’s all about job creation as you might expect. Lot of red tape though.
Re: Whats the average you spent setting up your pizza busine
I found a location, a really good location for 1000 a month, came with a hobart 80 qt, a hood and ansul unit and a fridge. I bought everything else remodeled the whole place my self. and with my first food order have 20k invested… Not bad… It will not cost you 150k unless you are buying a building. You can buy whole pizzerias all the equipment for 25 k right now. I paid cash also…
Re: Whats the average you spent setting up your pizza busine
Italy,
We are not talking about just the equipment. Total start up cost includes money spent until the place actually earns you a profit above paying yourself as a pizza maker.
Can it be done for less than 150K? Sure. As I pointed out above, if you can afford to work for nothing until the place makes money, you can take that cash flow out of the number. It is also possible to open a dinky shop and buy yourself a job for less. Creating a business that earns money above kitchen wages is another story alltogether.
The issue is scale. A shoe-string store that does a 100K or 200K per year can be opened for less and in a location with $1000 rent… but with rare exceptions, opening a location that will actually earn money above kitchen wages means a location that does quite a bit higher volume. Both the startup and the rent will be more than the numbers you mention. In most places, a location that can produce at critical mass will cost more like 3000 per month or more.
In my case, I was able to buy the whole equipment package for 35K (about the price of one of the ovens) and spent another 10K on a sign, dough trays, freezer and various small wares. Initial marketing, printing costs, etc and losses until profitable was another 100K. Rent, 10 years ago was $2500 per month. Today is more like $3500.
Re: Whats the average you spent setting up your pizza busine
BTW, I did buy the building a few years later. That was another 250K. That was the best investment of all since it is not worth about 550K. So… no, the 150K number would not involve buying building anywhere other than in the boonies someplace.
Re: Whats the average you spent setting up your pizza busine
There is no one size fits all answer. I have done it for $5,000 and I have seen guys spend $500,000. I have seen no money down owner financed deals where the store was very successful before as well as after the sale. If you don’t have to do a buildout, I think you can definitely do it for under $100,000.
Re: Whats the average you spent setting up your pizza busine
In our area there are at least 3 vacant restaurants for rent…More or less fully equipped and ready to go…They may not have exactly the equipment required but you could open for a a few thousand $$$s…
Re: Whats the average you spent setting up your pizza busine
What it costs to get “open” and what it costs to get to profitability are two very different things.
Re: Whats the average you spent setting up your pizza busine
That just depends how good you are. 
Re: Whats the average you spent setting up your pizza busine
…and how long you can afford to work for nothing, which is just another way of spending money. And again, by getting to profitability, I mean making some profit ABOVE a decent wage for the work you do to reflect a return for the risk taken. Many (most?) small pizza stores NEVER make a profit beyond paying a kitchen wage to the owner.
If opening a store for 30K and earning 40K per year after a startup period to run it works for you, then great. You can open a store for 30K. On the other hand, opening a store that can pay a manager 40-50K (you or somebody else) and then earn a significant profit is different thing alltogether. No doubt it has been done for 30K, but I stand by my statement above: you are doing well if you pull it off for 150K.
Re: Whats the average you spent setting up your pizza busine
Im not getting ya… Your assuming because my rent is only 1000 a month I will only do 100-200k and i am a shoestring store. The prior pizzaria was doing 350k-400k and the place was a dump, nasty disgusting… I have seating for 30 and a decent size kitchen, I remodeled the whole thing myself with the help of one of my employees… I know I am not going to be making 3000 a week profit right now, but I will have all my initial investment paid back within 3 months… I am doing very well in this location already, lots of repeat customers already and I have a good product. I shouldnt have no problem doing 400-500 k here in my rinky dinky shoestring 1000 dollar a month store… I hope all the other guys take that as a insult also…
Re: Whats the average you spent setting up your pizza busine
Congrats on your success. Perhaps you are that exception and pulled it off on a small amount of cash and a lot of elbow grease. Also congrats on finding that rare location that can produce sales with hardly any rent. By and large, commercial locations that can produce the 350K you mention are going to rent for a lot more money because, over time, people will pay it.
Those opportunities are rare. My intent is not to insult you or any one. There are lot of examples of people that find a deal they can get into for 20-30K and then do not have the $$ to make it to profitability, discover that the failure of the prior business was location or discover that they have purchased a job for themselves where they work 70 hours a week for $10 per hour.
We meet them every few months here on the forum when they arrive with a message of “HELP!! I am working my a$$ off and losing money!!” I also meet them in my capacity as a SCORE counselor every month or two.
Your reported success does not change the fact that the scenario of opening a successful shop for 30K is the exception, not the rule. My goal is to put good information out there that helps people looking to open a store to be properly prepared and not loose the money they put into a new effort by not being prepared to fund the ramp up or to work for little/no pay for an extended time.
Re: Whats the average you spent setting up your pizza busine
Anyone needing additional information or examples of all these scenarios, please come visit me in St. Louis! I’ll be the tired guy at the pizza table still made about where the 100k went the first 4 years!
bodegahwy, where were you 6 years ago!!!
Re: Whats the average you spent setting up your pizza busine
Anyone needing additional information or examples of all these scenarios, please come visit me in St. Louis! I’ll be the tired guy at the pizza table still mad about where the 100k went the first 4 years!
bodegahwy, where were you 6 years ago!!!
Re: Whats the average you spent setting up your pizza busine
On the original topic, I have to agree that cold hard cash is the best way to finance a new shop; especially a first location.
If you get a system together and open 3 or 4 of them then leverage isn’t so bad. You know you have a winner and you know that you can handle debt payments. For your first store, if you can’t afford at least 80% cash I’d say you’re not ready to open yet.
I speak from experience. I borrowed most of the money to open my shop against a brokerage account. I thought I would be maximizing my return my having the pizzeria and still holding the stock. It was a very bad idea that caused me much more stress and money than if I would have just sold the stock and paid for everything cash outright. Five years in, and I am just getting to the point where I own the whole place outright - it’s a great feeling that I could have had right from the beginning.
My store, including the injections it took to get to profitibility, cost right around $175k.
italy206gt, I have to agree that you are the exception to the rule. You said the store you’re in was doing 350-400k. Why did they close up? At $1,000 rent they should have been making a small fortune.
How did you get all of the equipment you needed, your dining room furniture, and all of the materials for your remodel for under 20k? My building permits alone cost me $3,000.
Re: Whats the average you spent setting up your pizza busine
The reason why they moved was because they thought there customers would follow them to there new location 8 miles away, which was just stupid. They ruined the place… I had to put all new drop ceilings in, paint and patch all the walls, rip out the old floor put new cermaic down. I did all the work myself I am very handy and saved myself a lot of money doing it myself. The location had a hobart dough machine, 2 fryers, a few tables and 2 fridges. I had to buy ovens, bought them for 3000.00 blodgett 961 double decks. I bought a new range 1000.00 a slicer 100.00 a shredder 600.00 and some pots pans. i bough booths for 500.00 they were from a friends sub shop… I watched my money close looked for deals and paid cash. My signs were 1000.00 Building permits were 0… If I had to pay someone to do all the work than probably it would have cost me another 20k… I do agree there are lots of hours… way too many but it pays off…