How much would a convenience store size grocery store have to make to break even? In other words, a small neighborhood grocery store would have to make how much a day, month or year to stay in business?
This question has way too many variables to have a set answer. First, is the store rented or owned? How much initial investment did the owner(s) make? How big is the store? How much inventory will it carry? What kind of inventory? Is the kind of inventory well-suited for the neighborhood?* How bad is inventory shrinkage? Is the owner going to work the store him/herself, or hire someone to do it?
As I said, too many variables. Someone else might come along with some formulas, so I’m going to leave this open and in GQ for now.
*For instance, I live in a mostly Hispanic neighborhood, and the grocery stores in my area carry many traditional Hispanic products, many American products which are labelled only in Spanish, etc. I’ve grown accustomed to seeing what I call “prayer candles” in grocery stores. When I lived in mostly African-American neighborhoods, I saw a lot of ethnic hair products, and ingredients for soul food. A store needs to carry what will sell in that particular neighborhood.
In addition to what Lynn said, I think one of the biggest things would be how much credit they could get their hands on. Will wholesalers give them a line of credit, how much slack will they give them? (The trick there is find a wholesaler that is willing to help them get started, someone that will take some risk with them, in return the store will buy lots of stuff from them and not just go to someone else as soon as they get on their feet). Also, what is the bank going to charge as far as interest? When they run out of money and haven’t paid their loan back, will the bank give them another loan? Some banks will do this, with the expectaion that they will continue to do their banking with that bank.
One of the biggest components of cost is also one of the most variable: rent. As Lynn mentioned (sort of), most small businesses are located in a leased storefront. Some well-located storefronts lease for so much money that even fantastically successful businesses have to shut down after a few months. There’s a corner in Berkeley, CA, across from the University, where shop after shop opens, attracts huge crowds, takes in money hand over fist, and closes in less than a year. It’s apparently more profitable for the landlord to charge more than a business can pay for half the year than to charge a sustainable rent year after year.
There are so many factors that it would be difficult to answer without a location, which would help determine how much things cost in that area.
Some of these factors are:
How many employees will you have on staff, for how many hours per day, and how much you’re paying them. How much are you going to pay yourself?
Rent
Utilities
Insurance
Merchandise
Various city charges. (Selling Beer?)
An accountant if you aren’t going to do it yourself.
My WAGs:
Two employees working a slightly overlapping 40 hours work week at a little more than minimum wage ($6/hr). $1920 per month, (and that’s before you pay your half of their unemployment benefits.)
Rent: $1000 per month
Utilities: $250 per month
Insurance: $175 per month
Merchandise: $1500 per month
Various city charges: I really have no idea
An accountant: ditto
I come up with $4,595 (or 1,148 per week) before you pay yourself, the accountant, city pockets or your half or the employees unemployment. But I could be way off in a lot of ways.
But there’s more.
Miamouse’s calculations attempt to identify the profit on sales you well need to generate to cover your fixed costs. But what kind of sales do you need to make to generate that profit? Answer: it depends on your margins.
Margins on groceries are generally thin, because small stores are competing with huge supermarkets. You may be able to make a bigger margin if you have some other advantage, like a good location which is really not convenient to a competing supermarket. On the other hand, such a location (unless is suffers from other disadvantages, like being in a poor neighbourhood) will command a higher rent.