I'm planning opening a pasty shop - what are the profit expectations?

Alan_M_2

10 x rent is a bit of a generalisation...but as a generalisation it's not a bad start. It's a little dependant on a gross margin being at an expected percentage.

The thing with starting any business from scratch, especially if you've not run a business before, is you're often clueless about real costs.

Work it backwards.

Rather than say, I'm going to sell 50,000 pasties a week and be laying on a beach in the Bahamas by the end of next year what you really need to do is get firm figures on your overheads from day 1.

Get the following:

Rent on premisis (A3 use) The use is important, A3 is seen as a licence to print money, and any retail premises granted this use immediately become more valuable.
Business Rates on premises (A3 use) - This may be a shocker
If existing property doesn't have planning consent for A3 will I get it and what will it cost?
Fit out costs for shop.
Staffing.
H&S Requirements
Combined business Insurance.
Utility costs.
Supplier costs, stock costs and terms.
Advertising/promotion.
Accountancy.
Delivery costs.
Banking and card service fees.
Rubbish removal.
Cleaning.

You then get a figure that represents an annualised cost to operate the business. (Overheads).

Then it's easy to calculate how many units (pasties) you are required to shift to break even.

At this point it will quickly become apparant if the business model is viable or not.

Add to this that you need to do a detailled cash flow forescast for 12 months (anything beyond that is on the whole nonsense no matter what banks suggest).

You may have a viable business but find that cashflow is crippling without a large cash injection from the word go.

carolt

dopester wrote: »

There are probably good reasons for no local Waitrose or Starbuck or Greggs in certain areas. If there is no local Greggs, it doesn't mean someone setting up their own independent pasty shop is going to service the demand, and tap a lot of profit.

But equally, it may just be coincidence, and it may just be that the local area is crying out for one and you could fill a local need.

With my teeny business, I was v surprised there was nothing equivalent in the area, so I did some local research and basically had people begging me to start up - it's been like that ever since, with basically no need for advertising.

The reason entrepreneurs potentially make more money is because they have the bottle or initiative to do something that hasn't been done before. Obviously, it may be that there have been several similar pasty shops, and they've all failed. In which case, probably the wrong area...though not necessarily.

Do some research - ask people, or try a market stall, farmers' market or the like - see how it sells and if you like it or actually find all the cooking and washing up quite a faff (I would).

dopester

fc123 wrote: »

Some would say donate them to your local outreach centre that helps/feeds the homeless.
Or eat them yourself, every night for supper, so Conrad may get a little larger than now.
Or feed them to the birds/badgers/foxes in your garden..........

Or to max up profits, freeze them for another time......which will make them taste not so good and could be dangerous.

Yes fc, but I got the impression Conrad wanted to project fresh and higher quality. The freezing bit, if it gets known to customers, might make his shop's reputation suffer, and future sales with it.

Also if he's not shifted his anticipated 640 fresh pasties on a day, with a few hundred left over, he could have another pasty supper, dish them out staff, or free to the homeless or feed them to the dog... but it won't particularly do his profit margins any good.

Setting up and expecting to sell at low-profit margins 640 pasties a day Conrad. Now and into the future. Rather you than me. :rotfl:

Adebisi

I live in the sesspit town of Newcastle where there is a 24 hour greggs and also a greggs seconds store where they sell bad pasties and sweepings for next to nothing. There is a spot in the city center where you can see 4 greggs - it's like the starbucks situation in NYC.

PasturesNew

fc123 wrote: »

http://www.channel4.com/programmes/gerrys-big-decision/4od#series-1

Conrad may find episode 2 worth watching as features a pasty maker who won best pasty award and hasn't made a profit since he bought the business. You can see the flaws though.
.

Watching this now. Cheers.

This be they: http://www.takeachunk.com/

carolt

Adebisi wrote: »

I live in the sesspit town of Newcastle where there is a 24 hour greggs and also a greggs seconds store where they sell bad pasties and sweepings for next to nothing. There is a spot in the city center where you can see 4 greggs - it's like the starbucks situation in NYC.

Wow. That is the definition of...something or other.

Scarey. I mean, I like a pasty as much as the next (wo)man, but 4? :eek:

And what the hell would the quality of a Greggs' 'second' be?:eek:

fc123

PasturesNew wrote: »

Watching this now. Cheers.

This be they: http://www.takeachunk.com/

I was chatting to LIR about this show on your other site PN (you know, the one you created from nothing but brain and a bit of software ) and the furniture guy seemed to have had some tragedy as the bank insisted he brought in a manager and there were pics on the mantlepiece of kids and a wife I am sure yet he lived alone with his young son....and modestly it seemed too considering the size of the house.

At no point did Gerry berate him on not being hands on etc whereas he did in other programmes.

There were only 3 made and all I found fascinating.
Actually inspired us to really get a grip on marketing and sales too. Have delegated to OH for now


These progs really showed up the luck you have with employing staff too.
They can help make or break you.

As Alan M says, work out the costs and then T/O needed......and working out projected T/O is like how long is a piece of string sometimes.

fc123

Pobby wrote: »

The 10 times rule? Well that depends on all sorts. Let`s say in my industry, over supplied in product, and margins ripped to the bone.

So here`s the real deal. 10k rent and 100k turnover. Taking in, even without staff, and that figure is net of V.A.T., you are likely to make a gross mark up of about 35% if you are lucky. Take out utilities, business rates and all the rest of it, you are just over minimum wage.

fc123, I am sure you are acquainted with The Lanes in Brighton. A buddy of mine closed down 2 shops there, despite a £400k turnover and they were small shops, just no money to made because of low margins. Also he was hit with huge delaps when quitting the leases.

.

If the buddy was GC, I am sure it was 2 units @ 25k pa each...I am trying to remember but that was the going rate in that location....not now mind ....so, if they had T/O 500k, may have been OK?
Gift mark up is smaller than fashion but doesn't date as quickly....we tet 6 weeks with some stuff....mind you, better than a day which is the shelf life of a pie.

PasturesNew

fc123 wrote: »

Actually inspired us to really get a grip on marketing and sales too. Have delegated to OH for now

Marketing is my interest. It always has been. I've never been able to afford the courses though, looked into it once back in 1993 when I got a 2nd job doing reception where the Cambridge Marketing College used to run an evening session. £1200 back then it was!

Actually started a marketing course in 2006, 3 weeks before I was laid off and it was 25 miles away so I couldn't see the way forward with that as I had just forked out £1500 for a different course to do, had no job, course was 2 hours/week on a 50 mile round trip and I couldn't see where the money was all coming from on JSA... so I stopped going as I got a self-employed role which didn't finish until 6pm at the earliest and that was the time the course started too. Couldn't have got there before half time.

People lump marketing and sales together, but they are separate and different skills and skillsets.

Marketing is working out who to sell to and how, sales is actually doing it. What appeals to me about marketing is data crunching, analysing and targetting. Of course marketing breaks down into two areas too: data/analysis and the more commonly seen networking and copywriting/PR side. It would be difficult with just a desire and no qualification or experience for me to get into the data/analysis and sectoring part without some old boys' network taking me in ... a who you know thing. So it won't happen.

It's for the marketing aspects that I fiddle about with the stuff I do.

PasturesNew

One thing with the food industry that's always irked me is packaging. I wonder if they've ever actually tried to eat their food how the customer receives it.

For example, I love Pukka Pies... a lovely top crust, dry/flakey, lovely. Except chip shops will often microwave it, then plonk it on top of the chips and wrap them up together. Result: flat/soggy pie.

Or a baguette company I had a few from when somebody in the office went and asked what everybody else wanted... lovely shop, super products... but all the cheese melts where rolled up in a piece of greaseproof paper and when you unravelled them the cheese was stuck to the paper and it was a mess.

Then there are the indians/chinese we've all had that were spilt a little before we got them home - and I'm lucky that my bag only ever contains a curry, a rice and a bread. Max. Over the years I've seen many a carrier bag that's literally stuffed with metal takeaway cartons and you know the bottom ones must be squashed and everywhere before they're got home.

They just don't think about the wrapping/packaging, which is a shame. I'm sure if they did, or there was even an extra 10p for a posher choice, people would opt for it.