| Our mailbox stores offer value, a full range of business and home office services, and needed impulse merchandise to their customers, all at competitive prices.
Profitability, of course, depends on many variables. The location, level of service, promotional efforts and the management skill of the owner are just a few of the many factors that will ultimately determine the level of profit. |
Therefore, a few key VARIABLE cost categories will determine how well the store performs. They include:
COST OF GOODS AND SERVICES
- A well run pack and ship / mailbox / business services center will typically have an overall cost of sales of about 42% (Bizminer Industry Analysis, December 2008). This includes merchandise cost and the costs associated with packing, shipping, and all other services that your store will provide.
WAGES
- You should strive to keep your overall labor costs (including a salary dedicated to the owner if you are going to work the store full time) at no more than 16% of sales (Bizminer Industry Analysis, December, 2008). Typically, the hours in this business are such that the owner and / or their spouse can work the business alone; adding hours only during peak shipping periods. Your actual labor percentage to sales should be significantly lower.
SALES
- Sales level is the other key factor that will help determine your profit level. Sales per square foot will vary from location to location and from store owner to storeowner based on a myriad of factors. The size of the community, general customer traffic of the shopping center, store location, proximity to the anchor, previous business ownership, management and merchandising experience of the owner, and personal daily involvement of the store owner are just a few examples of the variables that will determine your level of sales. The business skill and experience of each owner, along with the level of involvement in and commitment to their store will have an impact on their success.
| DESCRIPTION | RECOMMENDATIONS ON HOW TO DETERMINE COST |
|---|---|
| HEALTH INSURANCE | - typically, this is a major medical policy for the store owner. You can offer no coverage, major medical coverage, or different levels of more complete coverage. It is recommended that this cost be kept at around $100 per month. |
| INSURANCE | - this category relates to general business coverage and includes public liability, fixed articles, theft, and other coverage. Contact a local insurance agent for quotes. |
| ELECTRIC | - the local power company can give you estimates of electric cost for retail establishments by square foot. |
| TELEPHONE | - determine usage — again, your local phone company will give you insight into this nominal cost. |
| RENT | - this figure includes the monthly stated rent and charge for common area costs. The lease agreement will state these charges. For preliminary planning purposes, contact with local realtors will give you a good idea of the cost range. |
| SUPPLIES | - this category pertains to office and store supplies. Pens, tape, paper, printer cartridges, and like items. |
| ADVERTISING | - routine advertising is always recommended to keep your store in front of the public. The local newspaper will provide various rates and programs. |
| DEPRECIATION | - pertains to the periodic write-off of capital cost items. Your local accountant can provide further information. |
| OTHER EXPENSES | - this is a catch-all for other costs that pertain to your business operation. |
THIS EXAMPLE OF KEY FIXED COST CATEGORIES IS NOT INTENDED TO BE COMPLETE AND SHOULD BE USED FOR GENERAL INFORMATION PURPOSES. IT IS ALWAYS PRUDENT TO DO YOUR HOMEWORK AND DEVELOP A RANGE OF COST LEVELS THAT CAN BE USED FOR FINANCIAL PLANNING PURPOSES. AT THE END OF THIS SECTION YOU WILL FIND A BLANK WORKSHEET TO USE TO CREATE YOUR OWN ESTIMATES.
THE FOLLOWING ILLUSTRATION SHOWS THE RANGE TO USE IN DETERMINING ESTIMATES FOR VARIABLE COSTS:
ILLUSTRATION FOR A SMALL STORE
SUMMARY OF VARIABLE COST RANGES AS A PERCENTAGE OF SALES
| VARIABLE COSTS | RANGE AS A % OF SALES | USED FOR ILLUSTRATION PUPOSES ONLY |
| MERCHANDISE | 40%-47% | 42% |
| WAGES | 10%-16% | 12% |
| PAYROLL TAX | 1%-1.6% | 1.30% |
| WORKERS COMPENSATION | .25%-.50% | 0.40% |
| TOTAL | 51.25%-60.10% | 55.70% |
| ESTIMATED
ANNUAL FIXED COSTS |
RANGE AS A COST PER 1000 SQ. FT. | COST ESTIMATE – USED FOR ILLUSTRATION PUPOSES ONLY |
| MANAGER/ OWNER SALARY | $20,000 | $20,000 |
| HEALTH | $100, ANY SIZE | $1,200 |
| INSURANCE | $1,200-$1,600 | $1,400 |
| ELECTRIC | $1,300-$1,600 | $1,450 |
| TELEPHONE/DATA | $700-$1400 | $1200 |
| RENT*** | $9,000-$15,000 | $12,000 |
| SUPPLIES | $600-1,000 | $800 |
| ADVERTISING**** | $1,000-$1,800 | $1,400 |
| DEPRECIATION | $3,000-$5,800 | $4,400 |
| OTHER EXPENSES | $100-$300 | $300 |
| TOTAL EST. FIXED | $44,550 |
CLICK HERE TO GET THE FINANCIAL WORKSHEET
(requires Microsoft Excel).
NOTE: The financial performance of each and every store is dependent upon many variables including location, population, average income of customers, merchandising habits, management experience, etc.
