If you are new to this blog, you might want to grab a coffee and start at the beginning . . . on October 14, 2008. If you are returning for an update, welcome!


December 16th, 2008 8:00 pm

Confession: I like numbers about as much as I like dusting! That being said, I knew that my next step was to put some numbers down on paper - what would my monthly expenses be, what was my earning potential, what annual expenses would I incur? Before I could risk telling my family what I was thinking about doing I needed to see some rough numbers. I needed to know that I could make money with my idea, but where to start . . .

My first question was: do antique shops make money? I turned to my local library for assistance and was pleased to learn that there was a Business Librarian on site. However, I was also overwhelmed by the information that was available - from sample business plans to print and electronic resources to access to federal and provincial databases that would give me the information that I was looking for in terms of earning potential - there were literally hundreds of places where I could choose to start my research. I left the library empty handed because I decided to take the first crack at breaking down the numbers on my own.

From my conversation with the first Local Business Owner I knew that rental rates were about $1.20/square foot in Small Town. I figured that this was as good a place as any to start. I also knew from touring the shops in the Big City that I was looking for about 450 square feet so I grabbed some graph paper and sketched out my shop. I sketched my desk, my entry, my shelving and my key display areas. Then I took my best guess at how much stuff I could fit on the shelves (this was my future inventory). The task of "visioning" my space, even though I didn't actually have a space, helped to make the shop more REAL to me. With my sketch complete I tackled my monthly expense projections:

lease $500
utilities $150
wages $700
telephone $75
insurance $50

For some of you, at this point in your journey you may already recognize that my initial expense projections were naive at best . . . just wait until you see how I approached earning potential!

Next, I felt that I needed to record some governing assumptions (forgive the terminology but I was really getting into this formal planning stuff). I decided that I would be open Thursdays from 1:00 to 8:00 pm; Fridays from 11:00 am to 6:00 pm ; and Saturdays from 10:00 am to 6:00 pm. I thought that I would continue to work at my fulltime job, Monday to Friday, and therefore, would have staff work two of the three days that I would be open. Based on this, I estimated my total monthly expenses to be $1600.

When I considered my earning potential, I considered a couple of different revenue streams. First, I wanted to develop an electronic newsletter for Small Town in which businesses would pay me to advertise. I developed a pricing structure for this advertising and determined that I could make $1,100/month from this activity. Revenue stream #2 involved selling consignment art. I felt that the average price of an art piece would be between $300 and $700 and that I would sell one each month at 30% commission for about $150/month from art sales.

Everything that I have outlined above, from the sketching my shop to calculating income from consignment art, took me about six hours. I put my pencil down, stretched and smiled to myself . . . the shop could almost run without ever selling an antique! Wait a minute, what was I thinking? I sat back down again and realized that I was still facing the same question: what was my earning potential from the things that I wanted to sell?

I went back to my inventory projections and determined that the items in my shop would range between $5 and $100. I also decided that 40% of my inventory would be under $15 (Category A average price $3); 50% of my inventory would be between $15 and $75 (Category B average price $45); and 10% of my inventory would be over $75 (Category C average price $87.50). I guessed that I would sell 23 items from Category A (or $69/week); 11 items from Category B (or $495/week); and 1 item from Category C (or $87.50/week) for a total of $2606/month. Holy cow! Maybe I should just quit my real job, save the wage expense and work in my own shop for 22 hours a week; it would be like semi-retirement at 41 years old!

TIP: if this line of reasoning makes sense to you, put down your pencil, raise your right hand about forehead level and give yourself a SMACK! Now get your journal and head to the library.

1. Talk to the Business Librarian and explain the type of business you are thinking about starting. Based on this discussion, and a visit to the Statistics Canada website, you and the the Librarian should be able to determine a NAICS code for a Performance Plus report that gives you the number of businesses in a certain geographical area; revenue; expenses and profitability. For example, the antique industry falls under NAICS code 453310 for Used Merchandise Stores. I wanted to see the data for the whole province and learned that there were 42 stores included in the report. I also learned that 48.4% of the industry was profitable and that annual profit ranged from $16,000 to $23,000.

2. Give some thought to where you think your customers will travel from - how many kilometres. Ask the Business Librarian to see PCensus data, consumer spending data, for the area in which you plan to open your business. In my case, I wanted to see data within a 50km radius of Small Town and I wanted to know what the average annual household spent on antiques. I learned that purchases of antiques represented only 2% of all money spent on Household Furnishings, whereas, works of art represented 6%. These two, antiques and works of art, translated into about $97 per household per year which doesn't sound like much until you factor in the number of households in this area at 83,282. Now we are talking an $8,078,354 industry.

3. Finally, you need to determine what piece of the pie that your business will represent. It would be unrealistic for me to think that as soon as I opened my doors that I would get all the dollars being spent in my industry. Ask the Business Librarian for a list of your competitors from Selectory. This database lists the contact information, number of employees, years established, annual sales and other information for each of your competitors. Record the answers to the following questions in your journal: Is there room for you in the industry? Have any of the businesses listed closed? If they have, what factored into their decision to close (if you can't locate the owner, ask their business neighbors as these people are usually willing to share their opinion on why the business closed).

Remember, your business idea is still in the "hypothetically speaking" stage, the time for determining a corporate structure, registering a business name, leasing a space, and applying for a loan will all come in due time. Before you do any of these things, before you start to write a business plan, you need to explore every aspect of your business idea by LISTENING to what others are saying, by ASKING the right questions, by RESEARCHING your industry and by pulling some realistic numbers together by which you can make an informed decision.

Useful Links:

Service Canada
Canada Business
Industry Canada
SME Benchmarking Tool

Upcoming posts: Finding That One Thing; Can I Make This Work?; Fail to Plan, Plan to Fail; Skin in the Game; I Am Woman Hear Me Roar or A Lesson in Dressing Properly for the Task At Hand

October 14th, 2008 3:00 am

"That is a ridiculous idea"! I had startled myself from slumber with that phrase on my lips. What had I been dreaming about? What idea? Who was I talking to and why was the idea ridiculous? As I lay there, bits and pieces began to emerge . . . a collectibles shop, something small and quaint where I could sell all of the boxes of stuff that hadn't been unpacked after downsizing. A home for my treasures! And books, I could sell books and serve tea and . . . my mind was racing! Forget going back to sleep now, I had to plan. Somewhere between putting on my slippers and putting on the kettle two perspectives began a debate in my head:

Pessimist: You can't start a business, you work fulltime.
Optimist: But I work for an organization that supports women through business start-up. I have access to the assistance that I need to make this work.

Pessimist: The community is too small, you won't have any customers.
Optimist: But my target market is in my backyard so to speak, in the Big City just 20 minutes away.

Pessimist: Antique shops are junk shops, nobody will come.
Optimist: I'll have something different, it won't be junky and I'll have books and cookbooks. Everyone buys cookbooks.

Pessimist: What do you know about retail? I thought the plan was to open a bed & breakfast someday.
Optimist: I love treasure hunting - garage sales, second hand stores. It will be something I can do with my girlfriends, we'll be the Junk Girls!

Pessimist: But what do you know about retail?
Optimist: I'll learn, I'll be a shop keeper and people will come to visit my shop just to chat with me and have a cup of tea.

Pessimist: What about sales?
Optimist: If I have a really cute place I'll sell stuff.

Pessimist: It is a recession!
Optimist: So!

Forms of this conversation went on for days but it served a very important purpose. I was tuned in! Over the next several weeks I paid attention to what business owners were saying, how they talked about their lifestyle and their businesses. I started to jot down business resources that other people mentioned and ones that I discovered myself. I listened to how the members of the community talked about the community. I talked to the local business owners about their experience operating a business in a small town, I asked about their customers and about the potential of the community to become a destination experience. I wandered the antique shops of the Big City and thought about how my shop would be different. I started to compile a list of what types of advertising they were doing - where and at what cost. I started to research the industry and more specifically what impact the recession was having on the industry. RECESSION had become my stop button word - whenever I heard it I stopped what I was doing to listen. What was being said? Who was saying it? Were they credible?

If you are thinking about starting a business, before you "bounce" your idea off of someone else, take the time to LISTEN. Once you start to tell people about your idea they will offer their own opinions about whether they think you should or should not. We all want to hear, "that's a great idea" but we rarely question whether that individual has any idea about our industry of interest or about what it takes to run a business.

TIP: Before you tell anyone about your idea, before you start to research your business idea in a formal way, get a journal and work through the following on your own:

1. Listen to both the Pessimist and the Optimist. Write down all the personal benefits of starting a business and all the obstacles that you think you might encounter. Write down all the financial benefits and obstacles that you can think of. Write down the reasons why you think your business will succeed and what factors you think could affect your chances of success.

2. Write a paragraph or two that describes your lifestyle TODAY. When you are done, make a list of how you think your lifestyle will be different after your business is started (we will talk about the period of start-up in future posts - this is the calm before the storm so enjoy it).

3. Write down your personal priorities (not your business goals). You must ask yourself the question, "what am I unwilling to sacrifice for my business"? For example, my husband and I had moved to a smaller community seeking a lifestyle change - a slow down in the pace of our everyday lives. Our vision was one of walks with our dogs in the hills, sunsets and quiet. I was unwilling to sacrifice the "pace" of our lives if I started a business.

4. Take a strengths and weaknesses inventory. Are you suited to the type of business that you want to run? The Optimist in me danced around the "retail experience" issue for months.

A word of caution about strengths - just because you can do something doesn't mean that it is a strength. I can dust but I hate dusting so, like most people, I tend to put off the things that I don't like to do. I would be fooling myself if I thought that just because I owned a business I would suddenly enjoy dusting because I was dusting in my shop. I knew that in reality dusting was a task that I would likely put it off in my business just like I do at home.

When you take the time to identify obstacles and weaknesses you give yourself an opportunity to think about the problems you may face. The solution to those problems may be more than you can solve on your own but at least you have identified an area that needs to be addressed. In the "dusting" example above, my solution was to find out if my mother would work for me. I knew, that although she may not love dusting, I could trust her to do a good job. I didn't approach her at the time, I simply noted in my journal that she may be the solution to my problem or obstacle. You have to write these things down because your brain simply cannot retain all the things that you will have to think about during the start-up process and there is so much to remember - people, telephone numbers, websites, and so much more.

Useful Links:

Women Entrepreneurs of Saskatchewan (or a similar organization)
BDC Entrepreneurial Self Assessment

Upcoming posts: Tell Somebody; Rough Numbers or Numbers in the Rough; Finding That One Thing; Can I Make This Work?; Skin in the Game