Opening a Store without Breaking the Bank

Before we even begin, let me point out that I do not recommend this business model for most people who want commercial success. I’m including this model because it’s a perennial topic for discussion. Many people ask if it’s possible. They don’t want to hear that it’s a bad idea or that it’s not very sustainable, or that it carries risks that can cost them everything they own. They just want to know if it can be done.

Assumptions

Usually, the discussion begins when somebody has an unusual opportunity for cheap space. In one case, the individual owned a commercial property and his tenant had moved out. In another, a landlord was willing to lease the space in exchange for upkeep on the property. Sometimes, it’s an adjacent space to an existing business and the owner wants to experiment with games. Other times, an existing business owner is willing to sublet some of his space and allow a friend to experiment. Lastly, the place might simply be a tiny commercial space with very low rental rate.

Whatever the reason, this plan counts on cheap to no rent costs. In fact, the figure used on the spreadsheet is $500. If you don’t have such an opportunity, you’ll find that the cost of rent quickly expands your costs to the point that you have to start looking at a “real” game store model to make things work.

Build-out

You have to do it yourself. You might offer to pay a few friends in games, but you lay the flooring, install the fixture, repair the light fixtures, replace the ballast, paint, fill in holes, add interior walls and doors.

Licenses, Fees & Professional Services

Get a d/b/a according to your local guidelines and operate as a proprietorship. If you already own a corporation, you don’t need to create a new one. Your corporate status allows you to operate any legal business.

You’ll probably need a local business license. On the other hand, you might be able to operate as a club, especially if you’re subletting from a friend. Operating as a club makes it difficult to obtain product, but if you’re sharing space, your friend should be able to open an account and designate you as the person in charge of ordering. Check your local requirements and make sure your business model doesn’t involve anything that would invalidate the club designation.

For a bank account, you can open a separate personal bank account at the bank or credit union you already use. You might have to order checks, but with many expenses being payable electronically these days, you might not.

While we’re being foolish, you’re also operating without commercial insurance. If somebody slips and falls, you pay for it when they sue you. If somebody breaks in and steals all your goods and cash, you’re on your own. Good luck with that.

Signage

The “real” plan calls for spending thousands of dollars on a box or channel can sign, but you can get away with less than $100 for a vinyl banner with grommets that allow you to hang it anywhere. Replace it when it wears out in a year or two, and it’s still cheaper than a wooden sign. Paint your window signage yourself or pay a friend in games (or just get a second vinyl sign when you get the first).

A neon Open sign costs about $100. You can get the old-fashioned kind that says “Open” on one side and “Closed” on the other for a buck or two.

Fixtures & Equipment

You can probably find an old computer around the house, buy one from a friend, or get one from a used computer store for a couple of hundred dollars. When it comes down to it, you don’t need one, but e-mail, looking things up online, and other bonuses make it a great value.

For a potentially lower cost, buy a cash register from your nearest wholesale club for less than $100. Collect some of the loose change in your house and throw it in the drawer for your opening till of about $50.

You can get a soft drink cooler from Coca-Cola or Pepsi for free, as long as you buy your product from them. Because they often require a certain minimum order, you might order only once a month.

Your major cost for this category will be shelving. You can make your own bookshelves while you’re doing your own build-out, but you won’t be able to reduce all your costs. You can’t make your own pegboard pegs and shelves, for example. You probably can’t make your own lit glass display cases. Look for bank auctions, closing businesses in your area, and other opportunities for cheap second-hand fixtures.

Secret: when big-box stores remodel, they sometimes throw away their old fixtures. Make friends with an employee or manager at one of these giant retailers and ask if they’ll give them to you. I’ve seen store owners get several thousand dollars’ worth of fixtures this way.

If you have space for them, install game tables and chairs. They’re cheaper than filling that space with merchandise.

Utilities

Go without the alarm monitoring and pest control. You can probably make do without separate bills for electricity, water and sewage, depending on how you’re getting your free/cheap space.

For utter minimum cost, use your existing cell phone number. You won’t get a phone book listing, but if you have the phone number in your window, it’s worth something.

Labor

You’ll work most or all of the hours yourself. You can do this by reducing your hours of operation so that they coincide with your off-duty hours from your real job. In combination with a partner, you might be able to cover a fuller range of hours, approaching a real store. Otherwise, you might open at 6 PM and keep the store open until 9 or 10 PM. On the weekends, you can work full hours.

Running the store yourself keeps your labor dollars down to zero. Because we’re talking about a shoestring operation and not a real financial bid at success, you don’t take a paycheck. A real business would pay its operator, whether that operator was the owner or a hired employee.

Marketing & Advertising

Word of mouth will be your primary method of new customer acquisition. Free and cheap Internet marketing will help. See the previous columns on Pre-Opening Marketing and Promotion for some discussion on free or low-cost online promotion.

You can get 250 business cards from Vistaprint.com for nothing but the shipping cost.

Local conventions offer another opportunity for letting people know you’re open. Run enough games to get free or minimal-cost entry into the convention as a game master. Talk to the vendors and gamers about your store. Hand out flyers. Sponsor a drawing or give away premium items.

Inventory

Inventory will probably be your largest cost. I recommend going only with the highest-turn items from each category that you want to sell and keeping only one of each in stock. Buy one D&D Player’s Handbook, for example, and one box of the latest Magic boosters. For a store like this, CCGs are one of your best bets; CCGs require a small footprint.

Warhammer 40k or Fantasy Battles is a good bet, too. Although each game requires a lot of space and heavy inventory, customers tend to buy large quantities, and you don’t need to carry every single item. You can carry boxes only (no blisters) to reduce your inventory needs to a minimum.

For collectible miniatures games, I’d start with a case of starters and boosters for a single game. It should require only a tiny section of your wall space and cost less than $150.

To add some diversity to your game selection, concentrate on board and non-collectible card games that are available for less than $25. You can buy enough to fill a section of pegboard for less than $1,000. You can cherry-pick the best titles for $250.

I’d add a selection of accessories to match my investment in each category for every category other than board games. That means sleeves and boxes for CCGs, dice for RPGs and paints and hobby supplies for the Games Workshop games.

You might also want some snacks from the local wholesale club. Keep your selection limited. Offer too many choices and the product will expire before you sell it because you already know that sales volume will be low.

Financials Analysis

My back-of-the-envelope figures for this shoestring store run $10,000 to open. If you have that much in cash, great. If not, adding in the repayment (even if you have to put it on credit cards) costs no more than $400/month. A signature loan, for example, might cost $200/month, based on a 3-year repayment and 8.5% APR. The spreadsheet shows that the store has to sell about $3,000/month, or about $100/day to break even. With the signature loan, it’s $2,500/month. If you have the cash up front, then it drops to $2,000/month.

That figure works fine with the amount of inventory you have on hand. If we spread that sales total out over a more reasonable sales pattern, you can make the bills every month if you do $200 on Friday, $250 on Saturday and $85 each of three other days you’re open. That figure doesn’t even count on the extra 2-3 days in each month.

So in response to the questions, yes, it can be done. I’ve even shopped at stores like this once or twice. However, expecting to bootstrap this type of store into a real financial investment is dangerously alluring. You don’t have a solid infrastructure on which to grow. Your best bet is to expect it to live only as long as you have the free/cheap rent and be ready to let it go when you lose it.