I posted this on the marketing page but there isn’t much traffic over there. Curious what everyone has to say.
As I get closer to my nightmare…oops did I say that? My dream of opening my own shop. I am constantly tormented by this one question. "How much cash do I need to have in the bank when I open? I really need to pay myself 1800 a month to live. I am planing on working open to close daily for sometime. I’m looking at a break even for a carryout/ delivery store of about 3000 a week .That number includes my wages of 1800. I did a cash flow projection based on doing $1050 in sales the first full week of operation then raising sales $105 each week I found I would go sideways about 13k before I got to break even. My thought was that I need to have 20k in the bank when the doors open. Plus my beginning inventory already paid and 15,000 door hangers also in stock. Any thoughts?
the typical rule is to have at least 18 months of working capital banked, enough to cover 18 months of operation paying all the bills without a single person walking through your door.
It can be done with less, but 18 Months worth is the safe zone
Warren: I am not a businessman but one who follows his dreams. Our entire budget for the shop was 50k. We opened with 25k in the bank after spending 25k getting needed equipment and the shop ready to open. This was all we had to cover the shop and the home we are purchasing. I try and focus not on money but envisioning life going happily. Money always seems to fall into a stress free place as long as I don’t dwell on it one way or the other. Fortunately going on 4 months open we have paid that off long ago and are making more money than we ever dreamed of and the crowds keep getting larger every week. Judy and I are not focused on getting rich. We focus on doing good work for people with disabilities. Walter
Walter, I remember hown successful your opening was. Anything you can tell me that helped with the grand opening? What is your location like? Huge traffic count? Did you do any advertising or did you just open the doors?
Also in looked onbthe stones i dont see any stamp on them so I am guessing they are not the origional blodgett stones.
Warren: We just opened the doors. We are in a strip mall, hidden in a corner with low visibility, and in a very nice neighborhood fairly central to Reno. We still haven’t paid a dime for advertising and never will. It has all come via media coverage, word of mouth, and facebook/yelp reviews. Our social cause coupled with the work I have done for the past 25 years with people with disabilities got more advertising than we wanted. We held off the local TV channels till a couple weeks ago. People want to help those that are disabled and if eating good pizza does that it is a win win for everyone. If you check our website you will see we have limited hours, no delivery, no specials, no discounts, no TV/music, and a very limited menu of just pizza/salad. I say do one thing right and it will always win out. Too many places do way to much on a sub par level of quality IMO. Walter
Thats so fricking awesome.
Thanks Warren. We have had a couple of investors ask us about franchising as well. Life is good and I hope your pizzeria is a smashing success! Walter
$1000 per week is a dismal low number and to my way of thinking would not be worth doing. Are you investing anything at opening to drive traffic?
Also, why would you pay yourself a salary at the beginning vs just living from savings? The difference? Why would you want to pay the taxes on the salary? That is just silly. Wait until the business is profitable and has repaid your starting shareholder loans to the corp before you pay yourself a taxable wage! Talk to your accountant about it. I suspect you are looking at giving the government taxes that you do not need to give.
I would say that you need about a month’s gross sales (for where you expect to be after a year) as a reserve for the business PLUS enough money for you personally to live on for 6 months. Additionally, I suggest to new businesses that they have about 15% of the first year’s sales as the marketing budget for the first year. That amount drops to a more typical 5-7% of sales by year three.
18 months working capital? If you have that much money why would you open a pizza shop??
I opened my shop with 100 bucks or less after the build out.
Got 7 day terms with my food vendor and paid the 1st order with the 1st weeks sales. Opened doing 5-6k a week for the first 2 years or so.
Now we are where we are today. If you can build a pizza shop and have 18 months capital you should just retire and enjoy life
Share holder loan repayment was how I planned to pay myself. You are right about taxes and I have zero desire to pay those. Other than workers comp. I can pay that on myself at about .25-.35 an hr and have coverage should something happen. And you are right that $1000 a week is dismal! I was planning for worst case and preparing for best case. I will have 15,000 post cards printed before i open and 15,000 doorhangers. I will also banner wave in front of my shop, the banner will have a VERY readable offer and the person holding it will be in a giant pizza slice costume. I will have the word PIZZA and the phone number made out of 40inch tall mylar ballons floating over the head of the person in costume . We will put out 2,000 doorhangers a week. Typical doorhanger responce for a market like this will be 3% so we should get 60 orders a week from that. My POS system will print mailing lists and every customer will get a post card a couple times a month. I figure opening up a shop is worth 150 a day (1050 weekly)in sales even if the olny thing the sign says is pizza. The doorrhanging is worth 900 a week and the person with the banner another 900 so I would think I could open at about 2900 a week. But…if that doesnt happen i dont want to be toast. Thatw why i was curious about other peoples exp.
WOW thats great news! Can you give me a rundown on your shop when you started? What was the location like the signage etc? Also is the pizza on your profile pic one of yours? Looks great what kind of crust do you have? Is it hand tossed or run through a dough sheeter?
I opened with negative working capital. I was the working capital. 100 hour weeks doing everything with minimal crew. I was only 22 back then and my body could handle it. I could not do that today.
Guys, I am not saying that I had 18 months of working capital. I am just saying that 18 months worth is the safe zone you want to be in.
1 day before we opened (7 years ago) I had less than $20.00 to my name. I did COD on everything and hoped we had a great opening weekend.