Thinking about opening a brick-and-mortar store?
Inventory, hiring employees, and interior design probably come to mind. But dozens of other hidden expenses can come out of nowhere and hit a new store owner hard.
The good news? There’s nothing unexpected about these expenses. If store owners know what to plan for up front, they can hit the ground running and avoid unpleasant surprises along the way.
Here’s what’s covered:
- The Hidden Cost of Opening a Retail Store
- Parking Lot Maintenance Costs Your Store Needs
- Insurance and Licensing Fees
- Tech & Equipment Costs
- Build Your Budget for Success
The Hidden Costs of Opening a Retail Store
Did you know that opening a storefront can cost nearly $40,000?
According to the US Chamber of Commerce, retail business owners can expect to spend that much (on average) to get started. However, keep in mind this number fluctuates based on location and specific business needs.
Below are some startup costs to account for.
Keep in mind, this list isn’t exhaustive.
- Rent deposit + first month’s rent
- Store build-out and interior fixtures
- Initial inventory purchase
- Signage and branding materials
- Permits and business licenses
…but what about the outside of the store?
Since visitors typically form an opinion about a business before they walk in the door, it’s important to make sure the storefront looks as good as the interior. A cracked parking lot and faded striping convey a message of “This business doesn’t care about the customer experience.”
Parking Lot Maintenance Costs Your Store Needs
Nobody likes this subject until they really need to have it…
The parking lot is probably the first thing customers will see when they pull into the parking area. Faded lines? Large cracks? Weeds growing in the pavement? These are surefire signs to keep the car parked and spend money somewhere else.
Not only do parking lot problems hurt curb appeal, but they can cause safety issues for customers. Slip-and-fall accidents are a leading cause of lawsuits against business owners.
That’s why parking lot inspection services are so important.
These services allow store owners to take a proactive approach to parking lot maintenance. Problems like cracks, drainage issues, and failing sealcoats get identified before they become major (costly) repairs.
But how much do parking lot inspections and routine maintenance cost?
Asphalt Coatings Company provides a helpful breakdown if you’re wondering how much does parking lot maintenance cost for business owners. Budgeting for these costs from day one allows for more accurate business opening budget preparation.
Parking Lot Maintenance Costs Include:
- Sealcoating
- Crack filling
- Line striping
- Drainage repairs
- And resurfacing as needed
A word on maintenance…
Keep in mind that prevention is much less expensive than the alternative. A sealcoating application may cost a couple thousand dollars. However, avoiding that expense eventually forces a full parking lot replacement.
That will cost tens of thousands of dollars. Parking lot maintenance in North America was valued at $16.08 billion in 2023 and will continue to grow.
Insurance and Licensing Costs
As noted above, insurance can help save a business if someone gets hurt on the property. That’s why every physical location needs:
- General liability insurance
- Commercial property insurance
- Workers compensation insurance (if hiring any employees)
- Business interruption insurance
Shop around and compare rates, but expect to pay anywhere from a few hundred dollars to a few thousand per month for the proper coverage.
Lastly, every state has licensing fees for businesses. Plan to spend between $500 – $2,000 on initial licensing/permitting needs. Some trade industries have additional certification costs as well.
Equipment & Technology Investments
Here’s where technology comes into play.
Every storefront needs a point-of-sale (POS) system these days. Some POS systems cost as little as $79 per month, but larger systems with inventory management software can cost upwards of $300+/mo.
Here’s some technology not to forget:
- Credit card processing gear
- Security cameras and alarm systems
- Wi-Fi and networking equipment
- Accounting software
- Employee scheduling programs
Investing in a security system for the store can cost anywhere from a few hundred dollars to $5,000+. The price depends on the equipment chosen as well as monitoring services and alarm systems.
Point-of-sale equipment is also important. Nobody likes waiting around to give their payment information. Not only does this decrease the average transaction value, but it also harms the customer experience.
Utilities and Operating Expenses
Here’s something else that doesn’t stop on day one.
Retail spaces average about $200-$1,000 per month in utilities. This includes electric, water, internet, and phone services. If the space has cooling/heating equipment or large hanging lights, expect to be on the higher end of this estimate.
Plus, rent is another expense that continues month over month. In shopping centers across the US, rent typically ranges from $24-$28 per square foot. Mall locations or high-traffic areas come with even higher prices.
Make sure to budget for:
- Monthly rent
- Utilities
- Maintenance and repairs
- Cleaning
- Waste removal
…and anything else that comes to mind!
How to Build a Budget for Success
Budgeting can be scary, but it doesn’t have to break the bank.
When in doubt, overestimate the costs. Spending less is always an option, but not having money when an unexpected expense comes up is horrible. (And they will come.)
Here’s one tip that makes life easier:
Create a spreadsheet with 3 columns. Label the columns “Expected Cost,” “High Estimate,” and “Actual Cost.” Use this spreadsheet to track every single expense.
Next, open up a savings account for emergencies and pour at least 3 months of operating expenses into it.
The budget is set, the savings are ready. Now what?
Marketing.
The cutest little store in the world won’t sell much if people don’t know it exists. Make sure to leave room in the budget for grand-opening signs, local advertising, and online marketing. These are critical for building brand awareness and attracting new customers.
Bringing It All Together
Congratulations to every entrepreneur about to open a physical storefront.
Just remember, every detail mentioned above costs money. Parking lot maintenance matters, but so does the point-of-sale system and monthly utilities.
Here’s the final budgeting checklist:
- Expect to pay at least $40k to open the doors
- Parking lot inspections help avoid expensive resurfacing projects down the road
- Have enough cash on hand to cover at least 3 months of operating expenses
- Take care of the parking lot and customers will take notice
- Don’t overlook the costs of technology and exterior maintenance
Now get out there and crush it!
