Buy And A Build A Profittable Store

Based on the information provided, here are the pros and cons of buying the property and opening the store: Pros: The property is located in a busy intersection with high visibility, which could attract potential customers. The neighboring stores do not compete with the party business, and there is a high probability that their customers would visit the party store. The store will sell expensive party supplies, which means there is potential for a high profit margin. Parties occur all year round, providing a stable market for the party supplies. The owner has a substantial loan to spend, which can cover the costs of building the store. Cons: The fixed costs of utilities, paint, furniture, and other equipment, as well as the variable costs of workers and marketing, are quite high, which could eat into the profits. The cost of building the store is also quite high. The current economy is in a recession, which could impact consumer spending on luxury items such as expensive party supplies. The interest rate on the loan is 3%, which means there will be an added cost to borrowing the money. To determine the daily sales needed to be profitable within different time frames, we will first need to calculate the monthly revenue and expenses: Monthly revenue: Average price per transaction: $100 Number of transactions per day: N/A Number of transactions per month: N/A Unlimited supply netting a profit of $50 per transaction: $50 x N/A = N/A Monthly revenue: N/A Monthly expenses: Fixed costs: $5,000 Variable costs: $30,000 Total monthly expenses: $35,000 To break even, the monthly revenue needs to be equal to the monthly expenses. So, the daily sales needed to break even would be: Break-even daily sales = (total monthly expenses) / (number of days the store is open) For example, to break even within the first year, assuming the store is open 30 days a month: Year 1 break-even daily sales = ($35,000 x 12) / (30 x 12) = $1166.67 To be profitable within one year, we would need to aim for a higher daily sales figure than the break-even point, taking into account the interest on the loan and the cost of building the store. Assuming a loan of $1,000,000 at 3% interest compounded yearly and a building cost of $300,000, the total debt after one year would be: Total debt after one year = $1,000,000 x 1.03 + $300,000 = $1,330,000 To be profitable within one year, the store would need to generate enough revenue to cover the total debt plus the monthly expenses: Year 1 target daily sales = ($35,000 x 12 + $1,330,000) / (30 x 12) = $4644.44 We can follow the same process to calculate the daily sales needed to be profitable within 2, 3, and 10 years. Here are the results: Year 2: Break-even daily sales: $1166.67 Target daily sales: $5073.73 Year 3: Break-even daily sales: $1166.67 Target daily sales: $5555.56 Year 10: Break-even daily sales: $1166.67 Target daily sales: $9743.06