Rent is how much?!

[Jen]

I feel in love with a boutique location but almost fainted when I found out how much rent would be. They are charging $33 / sq. ft. plus $14/ sq. ft in triple net. Which comes to almost $4000 a month (for 1000 sq.ft.) ! The location is in a new, upcoming and hip shopping center. There are already 4 other boutiques in the shopping center. The shopping center often host parties, such as block parties and fashion shows.

My question is, is it even possible to make enough sales to make a profit after paying all the bills? How can I figure out how much the other 4 boutiques are making? They've been there for at least one year, so they some how have to be able to make a profit, right?

[Pack-Secure]

That is a very difficult question to answer. You would have to take your actual sales (or projected sales) - minus your expenses etc. and any other variable to figure that out. Many well established businesses would have no trouble making that much and more to cover the rent. If the location is right it would be worth it for them.

Also consider any additional fees, insurance, utilities, repairs that might not be covered by the landlord etc.

I would suggest talking with the other owners and see if they would give you an idea of what additional costs they incur.

[nealrm]

The question is not only can you make enough to cover the cost, but is it worth it. If you make $500 less in an other location but the rent there is $1000 less, then being at this "new, upcoming and hip shipping center" isn't worth it. I suspect, you will pay a premium for being in this shopping center.

[Harold Mansfield]

My question is, is it even possible to make enough sales to make a profit after paying all the bills? How can I figure out how much the other 4 boutiques are making? They've been there for at least one year, so they some how have to be able to make a profit, right?
Don't be so sure. I used to beat myself up and wonder how some people seem to have such thriving businesses when they are less busier than I am. Are they charging that much more than me? Sometimes it's a facade.

Some people have the safety net of a spouse who's income pays the bills and then some.
Some people open businesses as a place to park, launder or loose money.
Some people open businesses to keep the wife or kid busy that never make a dime.
I know a 40+ woman who has opened at least 3 failed businesses and never made a dime in any of them, but has a nice home, cars and vacations often. How? She meets the right men and keeps getting them to back her.

And a lot of people are constantly a week away from losing everything, but they just put up a good front with all of the nice toys and accoutrements that they either had before the business or is all leased and their credit maxed out.

Anytime you see a store or business that seems to stay open even though the joint is never busy, you have to assume something else is going on. Money doesn't appear out of thin air.

When all else fails, ask them. Maybe one of them will be honest with you. Find the one that seems to be stressed or has thier family working in the place, and ask them how business is.

[Freelancier]

Run the numbers. As an example (and this is only an example!):

$4000 in rent + probably another $1500 in expenses + $5000 to pay yourself to run a retail business = $10,500.

To generate that, you have to sell $10,500 in inventory for $21K (round number, but generally you mark up your inventory 100% ... and then discount from there when the inventory sits to long).

Which means you probably need about $30K in inventory so that you turn your inventory about every 2-3 months.

So, think about your idea, what your inventory costs are, what you want to be able to pay yourself to work there 12+ hours per day every day even if you're sick (add more money if you have to hire someone), and then decide if the rent is the least of your problems. :)

[billbenson]

Tambien, a local popular but not so profitable store could be a good way of starting a brand that can become popular online? There are a lot of ways to look at this.

[fayt]

That is a rip off! The average rental rate for a upscale shopping center is $25/sq ft. without a triple net. Some of the older shopping centers average $18/sq. ft. I would avoid that place.

[Pack-Secure]

@Fayt: I guess that would depend on where THAT is. LA, NYC etc. that would be dirt cheap.

[fayt]

That is based off Central Virginia. While rent would be higher in LA or NYC so will the profit be. So it comes out about the same. People in Cali are paying just over $5 a gallon for gas, someone making $100k a year there, is the same as making $60k a year here.

[MyITGuy]

Run the numbers. As an example (and this is only an example!):

$4000 in rent + probably another $1500 in expenses + $5000 to pay yourself to run a retail business = $10,500.

To generate that, you have to sell $10,500 in inventory for $21K (round number, but generally you mark up your inventory 100% ... and then discount from there when the inventory sits to long).

Which means you probably need about $30K in inventory so that you turn your inventory about every 2-3 months.

So, think about your idea, what your inventory costs are, what you want to be able to pay yourself to work there 12+ hours per day every day even if you're sick (add more money if you have to hire someone), and then decide if the rent is the least of your problems. :)

On top of all that, you also have the build out itself which can reach 100K+ in some cases.

Regarding the rate, that sounds similar to the price I received when I was looking at space in a new shopping plaza here. In my opinion I would rather buy an out-parcel and build on it rather than paying those rates. In my case I would be looking at 3,000 square feet at a minimum and would be paying close to 141K/year...The out-parcels are priced at around 400-900K so it would likely make sense to buy/build rather than lease.

[Pack-Secure]

While rent would be higher in LA or NYC so will the profit be. Costs would most likely be higher, but not necessarily profit. Profit depends on so many variables.

We used to be based in Southern Virginia and the rents were less than the OP posted.

[huggytree]

is your store 'special' when compared with the other 4 similar ones.....will YOU stand out and take business away?....will they just copy you if it works???

why not spend the day at a store with a notebook.....get a feel for their pricing and watch what gets purchased....then run the #'s......you will know how much you can expect to sell and if its worth $4,000

yea its a bit of homework, but there is a way in this case to get a very educated guess


show up at various times and spend 1 hour in each store and keep track....do that off and on for a month