What are the ongoing expenses of a convenience store? How do you reduce your expenses in a convenience store business? Here is everything you need to know.
Convenience stores are characterized by their late hours, which is convenient for customers who may be passing through the area as they come home from work. Note that these stores vary in size, ranging from small kiosks to deluxe convenience stores.
However, irrespective of the size and what is sold on the inside of the store, many convenience stores rely heavily on selling gasoline as a source of revenue. The stereotype of convenience store customers is that a good number of them only pop into the store when they need a specific item.
Although these customers are good, they are more sporadic. The preferred convenience store customer is the neighborhood regular who comes in every day or two and sees himself as supporting the neighborhood. As such, he will be both a regular and a friendly customer, which is a great combination.
Convenience stores are known to make money by buying goods and selling those goods to customers. Convenience stores sell things such as snacks, soft drinks, car accessories, lottery tickets, tobacco, and sometimes alcohol.
The ideal profit of these stores is the amount of money you earn after you have subtracted how much you paid for the goods as well as any operational expenses accrued throughout the month. It can cost up to $50,000 to open a convenience store.
This amount includes the cost of leasing an appropriate space, decorating the interior, installing a point-of-sale system and any other technology you may require. Depending on your state, lottery tickets often sell well, but carry an additional equipment cost.
The largest part of your expenses comes from inventory (which some research estimates may be up to 70 percent of your monthly spending) and labor. The exact costs of all of these expenses vary due to location, store size, exact inventory, and how much you choose to pay your employees. Nonetheless, here is a breakdown of the ongoing operating expenses of a convenience store;
Ongoing Operating Expenses of a Convenience Store
Although these operating expenses will vary from store to store, but in most lease agreements, you’ll be expected to provide the first month’s rent plus a security deposit. Many leasors also require the last month’s rent.
Licenses And Tax Deposits
Please note that cities and counties have different regulations and licensing requirements. When running a convenience store, you may have to acquire various licenses or permits to show compliance with local regulations. Licensing costs vary depending on the requirements of your particular location.
Just like other businesses, a convenience store doesn’t need as much direct marketing because much of your traffic will be people who drive up as the need arises. However, putting up billboards in the city or using bright and visible signage around your store can help to get their attention.
In addition, you should embrace social media as a cheap way to engage customers and establish yourself within the community while also letting followers feel like insiders when they hear about deals.
Professional and Employee Services
Generally, this more or less refers to your lawyer and accountant. As businesses go, a convenience store is pretty straightforward. Employees are required to cater to customers during all hours of operation. Your exact coverage will be determined by the size of your store and the hours that you keep.
Just like other licenses and permits, a convenience store needs insurance in order to operate safely and lawfully. Business Insurance protects your store’s financial wellbeing in the event of a covered loss. There are several types of insurance policies created for convenience stores.
If you are unsure of the types of risks that your store may face, begin with General Liability Insurance. This is the most common coverage that convenience stores need, so it is a great place to start for your business.
First, you have to understand that a Convenience Store is inventory intensive. Convenience stores make money by buying goods and selling those goods to customers. Convenience stores sell snacks, soft drinks, car accessories, lottery tickets, tobacco, and sometimes alcohol.
Always note that inventory remains the biggest chunk of your expenses and it may eat up to 70 percent of your monthly spending.