Do you want to know how much ice cream shops make in a year? If YES, here are factors that determine how much money ice cream shops make.
Whenever any entrepreneur wants to start a new business, one of the first questions that they usually ask or rather one of the first info that they try to get is to know how profitable the business is. This narrative also applies to entrepreneurs who are looking towards starting an ice cream business.
They would want to know how much they are likely going to make from their ice cream shop on a daily, weekly, monthly basis and annually from the business.
The truth is that there is no one mold-fits-all when it comes to how much an ice cream shop is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average ice cream shop make yearly.
Factors That Affect How Much An Average Ice Cream Shop Can Make Yearly
The Size of the Ice Cream Shop
One cannot conveniently state the amount an ice cream shop is expected to make yearly if you do not know the size of the ice cream shop.
As a matter of fact, the amount a mom and pop ice cream shop is expected to make annually will be far different from the amount a standard ice cream shop franchise with several outlets will make annually even if they operate in same location.
The Location of the Ice Cream Shop
When it comes to setting up a new business, location plays a major role which is why feasibility studies and market survey are essential.
For example, the amount an ice cream shop that is located in a low traffic area will make yearly will be far low compared to the amount an ice cream shop that is located in a high – traffic area in a cosmopolitan city will make.
The Type of Ice Cream and other Products Retailed in the Shop
Another important factor that will determine how much an ice cream shop is expected to make yearly is the type of ice creams and other related products retailed in the shop. You will agree that there are ice cream shops that are into the retailing of vanilla, chocolate, Cookies N’ Cream, Mint Chocolate Chip and Chocolate Chip Cookie Dough et al.
The profits you are expected to make selling these different flavors of ice cream and other related dessert will sure be different when compared to the amount an ice cream shop that sells only one flavor is expected to make.
Other Related Products and Services Offered by the Shop
Aside from retailing different types of flavors of ice cream, retailing other products such as chocolate, cupcakes, soft drinks and water will surely boost the amount you are expected to make from your ice cream shop. So also, if you offer delivery services, it will definitely help you make more money.
The Management Style of the Ice Cream Shop
Another key factor that will determine the amount an ice cream shop is expected to make yearly is the management style of the ice cream shop. Trust me, the results you will get when you have a good manager of a business will definitely be obvious and different.
The Business Model of the Ice Cream Shop
There are different business models that an ice cream shop can adopt and these business model offers different results. For example, the amount an ice cream shop that also runs an online ice cream shop with deliveries make yearly will be different from the amount a strictly brick and mortar ice cream shop/drive through ice cream shop will make yearly.
The amount an ice cream shop that also sells franchise will make yearly will be far different from the amount a strictly one location walk-in ice cream shop will make. This goes to show that the amount an ice cream shop will make yearly is dependent on the business model of the ice cream shop.
The Advertising and Marketing Strategies Adopted by the Ice cream shop
Another key factor that will determine the amount an ice cream shop can make yearly is the advertising and marketing strategies adopted by the ice cream shop.
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.
The Number of Years the Business is in Existence
Lastly, another key factor that will determine the amount an ice cream shop 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.
For example in your first fiscal year (FY1) you might make a hundred and twenty thousand dollars ($120,000), in your second fiscal year (FY2) you might make two hundred and twenty thousand dollars ($220,000).
And in your third fiscal year (FY3) you might make three hundred and twenty thousand dollars ($320,000). Interestingly, most businesses including ice cream shop usually breakeven from the third year of operations.
In conclusion, a small – scale but standard ice cream shop that is located in a high – prone human and vehicular traffic location in cosmopolitan city in the United States of America can make on the average between $100,000 to $600,000 annually all things being equal.
Please note that a normal summer day can drive $200 to $500 in sales, and you can effectively halve the gross for an average estimated daily net profit. If you sell $300 in product, five days per week, that leads to a $1,500 gross profit or $750 net each week.
Profit Margin from an Ice Cream Shop
In order to calculate the profit margin from a standard ice cream shop, then you should be able to place a figure on the recurring and ongoing costs of running the ice cream shop.
Recurring Costs are the consistent expenses you will be seeing as your business grows. These are your day to day, month to month, and year to year costs of normal business operations. You can’t avoid them, so make sure to take the applicable ones into consideration.
Mortgage or Lease Payments
Whether you rent or buy, you will have a monthly payment to keep the doors open. Costs will vary greatly, but make sure to factor them into the budget.
Insurance is typically calculated in annual premiums, though you may be able to split the payments by month. The average cost is $300 to $700 per year. As the owner, another potential factor is the provision of health insurance.
Although rarely offered for sales boys and sales girls, you will have to factor this in if you want to provide your employees with this benefit.
Compliance permits often have renewal fees. Be sure to check with your council office for specifics.
Depending on your business model, you may be paying a salary to each of your field sales girls and sales boys. You could very well operate on a commission-based model. This cost will range according to your employee payment structure. Also keep in mind that you, the owner, should be taking a salary too.
Payroll Taxes Or Self-Employment Taxes
These fees accompany your wage expenses and will also vary according to your business model. Make sure you consider your employees’ particular situation, as well as your own, to determine the taxes you will owe. Keep in mind, these taxes often need to be paid quarterly. Self-employment taxes will amount to around 7.6 percent of individual sales.
Equipment Lease Payments
Electric, gas and water bills will vary by the kind of equipment your ice cream shop is running. Expect $640 to $4,000 per month here.
The high end more accurately reflects ice cream shop with multiple big screen TVs, lighted decor and various other energy-guzzling pieces of equipment. Most ice cream shops find their utilities costs fall on the lower end of that spectrum.
Credit Card Processing Fees
Here’s a potentially sneaky expense. As a modern business, you will want to accept credit card payments. Standard industry base rates for processing fees range from 1.5 percent to 2 percent. But many ice cream shops end up paying more than 3 percent, so be careful and shop around for your provider.
Repairs and Maintenance
Normal wear and tear takes its toll and equipment often breaks. You will need to factor in the costs of routine maintenance. Expect up to $500 per month.
You will need to get the word out about your operation to drum up clientele. There are a number of avenues you can take (print, broadcast, web, social advertising), all with different price tags. You could spend as little as $20 for an email marketing solution or upwards of $4,100 for more robust advertising campaigns.
Legal and Professional Fees
This is a fluctuating expense, as it depends on your particular business model. Just keep in mind that professional services such as accounting or legal typically run about $200 an hour.
You never know what problems may arise. It is always a smart idea to budget in some funds for miscellaneous expenses. We suggest at least $500 per month.
Generally speaking, an ice cream shop can make a profit margin of about a 30% – 60% gross margin (profit before labor and overhead costs) if careful planning is done when developing the recipes.