Do you want to know how much money gift basket business owners make yearly? If YES, here are 7 factors that determine the profit margin for gift basket shops.
Whenever any entrepreneur wants to start a new business, one of the first questions that they usually ask is how much they are likely to make on the average daily, weekly or yearly from the business.
This narrative also applies to entrepreneurs who are looking towards opening a gift basket business. They would want to know how much they are likely going to make from their business. There is no one mold-fits-all when it comes to how much a gift basket business is expected to make.
There are some factors that we are going to look into before giving an estimate of how much an average gift basket business can make yearly and these factors are;
Factors That Determine How Much Gift Basket Business Owners Make Yearly
1. The Size of the Gift Basket Business
One cannot conveniently state the amount a gift basket business is expected to make yearly if you do not know the size of the business.
As a matter of fact, the amount a small road – side mom and pop or online gift basket shop is expected to make annually will be far different from the amount a standard gift basket business franchise with several outlets will make annually even if they operate in same location.
Of course, the amount invested in a small road side gift basket business is different from the amount invested in a large gift basket business hence the amount they will both make will be far different.
When it comes to setting up a new business, location plays a major role which is why feasibility studies and market survey are essential before settling for a location.
Usually, if your gift basket business is located in an area with good human and vehicular traffic, an area in the hub of events and social activities and you have stock – up your shop with different types of designs and quality gift items from different brands, you may not have to struggle to get people to visit your shop and make purchase or hire your services to help them deliver different gifts to their clients or loved ones.
Please note that, the amount a gift basket business located in a low traffic area will make yearly will be low when compared to the amount a business that is located in a high – traffic area in a cosmopolitan city will make.
So, if you want to make it big with your gift basket business, then you must be ready to rent a store in a high traffic area. Please note that you are going to be paying more to rent a store in a high-traffic area like event center as against the rent you are expected to pay in a low-traffic area.
3. The Types of Complimentary Products and Services Offered by the Business
Another important factor that will determine how much a gift basket business is expected to make yearly and their profit margin is the types of complimentary products and services offered alongside selling of different types of gift baskets.
No doubt, a gift basket business that goes beyond selling gift baskets to retailing a wide range of gift wrap, novelty merchandise, souvenirs, greeting cards, party supplies and seasonal and holiday decorations et al will definitely make more money than a gift basket business that is only into gift baskets.
4. The Management Style of the Gift Basket Business
Another key factor that will determine the amount a gift basket business is expected to make yearly is the management style of the business. Trust me, the results you will get when you have a good manager will be far greater than what an average or bad manager will get. Even if you give the managers same conditions to work and same products to retail.
There are different business models that a gift basket business can adopt and these business model offers different results. For example, the amount a gift basket business that also runs an online store with deliveries make yearly will be different from the amount a strictly brick and mortal gift basket business will make yearly.
The amount a gift basket business that also sells franchise will make yearly will be far different from the amount a strictly one location walk – in business will make. This goes to show that the amount a gift basket business will make yearly is dependent on the business model of the business.
6. The Advertising and Marketing Strategies Adopted by the Gift Basket Business
Another key factor that will determine the amount a gift basket business can make yearly is the advertising and marketing strategies adopted by the business. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a gift basket shop that is engaging in aggressive advertising and marketing to make same amount yearly with a gift basket business that is passive with its advertising.
7. The Number of Years the Business is in Existence
Lastly, another key factor that will determine the amount a gift basket business is expected to make on a yearly basis is the number of years the business is in existence. In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is properly managed. This is because you would have over the years won loyal customers.
For example in your first fiscal year (FY1) you might make one hundred and twenty thousand dollars ($120,000), in your second fiscal year (FY2) you might make one hundred and fifty thousand dollars ($150,000) and in your third fiscal year (FY3) you might make two hundred and fifty thousand dollars ($250,000). Interestingly, most businesses including gift basket shop – business usually breakeven from the third year of operations.
Usually, a small – scale but standard gift basket business that is located in a high human and vehicular traffic location in cosmopolitan city in the United States of America will make on the average several hundreds of thousands of dollars annually all things being equal.
Your revenue will be limited only by how hard you want to work and how much you want your business to grow. You can easily gross $10,000 or more annually working part time from home, or $1 million and up operating a retail store or mail order business full time.
The Estimated Profit Margin for a Gift Basket Business
The profit margin for gift basket business depends on the type of gifts you are dealing in. Entrepreneur Magazine reports that $65,700 is the average profit before taxes for gift basket businesses. Most don’t show a profit at all during the first years.
Any profits often go back into buying more inventory, supplies, equipment, marketing/advertising and attending classes and shows.
As a matter of fact, gift basket business owners often short – change themselves on labor when setting prices. Be sure you know how long it really takes you to assemble, package and deliver or ship a basket; put together several of varying complexity, and time yourself – don’t estimate.
Then figure out how much you want to earn for your labor, and add that to the cost of the basket. Most gift basket business operators expect to net 15 to 30 percent of their gross revenue, and they typically reach this goal by applying a 100 – percent markup to the cost of the items in the basket.