Gauntlet
5,000+ posts
bulletproof
That's a really bad idea if you ask me. There's a lot more that goes into running a successful business than just reading books and learning about car audio. Let's run through some of the expenses you'd have:
1) You'll need a shop, so you will have to take a lease out on a building. Right off the bat that's a very high fixed cost you'll have for a minimum of a year. That doesn't include upkeep of the shop, maintenance, utilities, keeping the store in line with all the building codes, etc.
2) Now that you have a store, you'll need to make it look good. You'll have to hire a contractor and a construction crew. You'll need displays and cases put up, having signs created and installed, getting the install bay set up, etc.
3) Now that you've got the store looking good, you need stuff in there. You'll need a lot of money in order to buy your equipment in bulk, and remember when buying in bulk, the products will usually be shipped freight, which costs more money. Since you'd be running a new business with no reputation, you'll have to start off selling equipment below market price if you want any chance of gaining and keeping customers, but you'll have to sell enough products in order to cover your fixed and variable costs. That's not easy to do.
4) So now you've got your shop setup and ready to go, next you'll need employees. You'll need a manager, an install person, a salesman, a clerk, and a secretary. And unless you want to overwork your employees, you'll need more than one of each of these people.
5) So now everything is in order. What's left? You have to make at least an operating profit, in order to cover all of your fixed costs. You'll also need to make enough money in order to cover the loan you took out from the bank. So what happens if you can't do this (which is a very, very real possibility)? You're fuc*ed. The lease on the building is set in stone, those are fixed payments you'll have to make. The loan is also set in stone, more payments you have to make. All the money you spent on the building has gone down the drain, all the money you spent on equipment and employees has gone down the train, and you're basically fuc*ed. Big-time. And for a long time.
1) You'll need a shop, so you will have to take a lease out on a building. Right off the bat that's a very high fixed cost you'll have for a minimum of a year. That doesn't include upkeep of the shop, maintenance, utilities, keeping the store in line with all the building codes, etc.
2) Now that you have a store, you'll need to make it look good. You'll have to hire a contractor and a construction crew. You'll need displays and cases put up, having signs created and installed, getting the install bay set up, etc.
3) Now that you've got the store looking good, you need stuff in there. You'll need a lot of money in order to buy your equipment in bulk, and remember when buying in bulk, the products will usually be shipped freight, which costs more money. Since you'd be running a new business with no reputation, you'll have to start off selling equipment below market price if you want any chance of gaining and keeping customers, but you'll have to sell enough products in order to cover your fixed and variable costs. That's not easy to do.
4) So now you've got your shop setup and ready to go, next you'll need employees. You'll need a manager, an install person, a salesman, a clerk, and a secretary. And unless you want to overwork your employees, you'll need more than one of each of these people.
5) So now everything is in order. What's left? You have to make at least an operating profit, in order to cover all of your fixed costs. You'll also need to make enough money in order to cover the loan you took out from the bank. So what happens if you can't do this (which is a very, very real possibility)? You're fuc*ed. The lease on the building is set in stone, those are fixed payments you'll have to make. The loan is also set in stone, more payments you have to make. All the money you spent on the building has gone down the drain, all the money you spent on equipment and employees has gone down the train, and you're basically fuc*ed. Big-time. And for a long time.
Gauntlet
5,000+ posts
bulletproof
Oh yeah, plus there's marketing and advertising, and also the possibility of a demo car to show off at competitions and help get your name out there. Even more money.
DBfan187
5,000+ posts
Supa's mom was here!
BiaBia - you've just been schooled! j/k
Guantlet makes a great point though! #1 thing before starting a business is a "Start-Up Capitol"$$$$$$$$$$
Guantlet makes a great point though! #1 thing before starting a business is a "Start-Up Capitol"$$$$$$$$$$
- Thread Starter
- #5
I have access to money, thats not a huge problem.
I really just want to do something I love doing, which is car audio. For the advertising and marketing, I have plenty of help there as well.
The only thing i'll have a problem doing is getting started. What should I do to get started. I'll be going to college to get a business degree, maybe I should wait //content.invisioncic.com/y282845/emoticons/frown.gif.a3531fa0534503350665a1e957861287.gif
I really just want to do something I love doing, which is car audio. For the advertising and marketing, I have plenty of help there as well.
The only thing i'll have a problem doing is getting started. What should I do to get started. I'll be going to college to get a business degree, maybe I should wait //content.invisioncic.com/y282845/emoticons/frown.gif.a3531fa0534503350665a1e957861287.gif
Gauntlet
5,000+ posts
bulletproof
If you're a 17 year old who has access to at least 100k without taking out a loan or having to pay any of it back....well then, I dunno what to say. Don't be an idiot and blow it all.
- Thread Starter
- #7
I was talking with my mother, she told me it shouldn't take more than 50k to get started.
You had me thinking it would be taking a whole lot more than that, scared me //content.invisioncic.com/y282845/emoticons/frown.gif.a3531fa0534503350665a1e957861287.gif
You had me thinking it would be taking a whole lot more than that, scared me //content.invisioncic.com/y282845/emoticons/frown.gif.a3531fa0534503350665a1e957861287.gif
Gauntlet
5,000+ posts
bulletproof
It will....perhaps 50k in sunk costs, but with variable costs, you're gonna be getting way up there. I mean, let's say you take out a one year lease on a building, and you want to stay in business for at least that one year, regardless of how things are going. If you had a mere five employees making an incredibly small 10k a year, that's 50k right there. If you wanted to turn this into a long-lasting, legitimate business, you'd probably need a minimum of 10 employees, making at bare minimum 25k a year....****, for the sake of argument, let's say they make 20k a year, which is an incredibly low amount. That's 200k right there out of your pocket just on employees. But, once again, if you were serious about this, you'd want to hire the best people you can, and I guarantee you you won't find a good manager or installer (and you're gonna need more than one installer) to work for 25k a year, I'd say a minimum of 50k a year for the important people. That's even more money, and the employees have to be paid. You will need to make enough money to cover the expenses of your workers, otherwise they'll leave, and they can sue you in court for the money you owe them. Then factor in the lease on the building, upkeep of the store, utilities, constant advertising, etc., thats a shitload of money you'll have to be able to make just to cover your fixed costs. That in of itself is incredibly hard, considering what type of business this is. It will be even harder to turn a profit......there's a reason why something like 90% of all new businesses fail within their first year. And I'm sure that when you divulge into a specialty businesses, the percentage jumps up.
You have to spend money in order to make money, and if you're attempting to own and operate a store with a limited market base, it takes much more than spending money in order to turn a profit. You could do everything absolutely perfectly and still lose money, that's the nature of running a business. I would highly, highly suggest not doing this. Go to college, get your degree. Then get some real-world experience before you even think about taking this on. Become a manager at a car audio shop or something to see what it's like, to get an idea of the work you have to put in, and to get a feel for how much money it will cost. Don't blindly just take on this huge business venture just because you like car audio.
You have to spend money in order to make money, and if you're attempting to own and operate a store with a limited market base, it takes much more than spending money in order to turn a profit. You could do everything absolutely perfectly and still lose money, that's the nature of running a business. I would highly, highly suggest not doing this. Go to college, get your degree. Then get some real-world experience before you even think about taking this on. Become a manager at a car audio shop or something to see what it's like, to get an idea of the work you have to put in, and to get a feel for how much money it will cost. Don't blindly just take on this huge business venture just because you like car audio.
- Thread Starter
- #9
Wow, excellent point with the employees man.
I'd still like to own my own shop. It'll take a lot of work and I know that.
There's a problem with getting into it though. Tere are no shops around where I live that I know of (West Palm Beach, FL area)
I'll look and ask around though.
I'd still like to own my own shop. It'll take a lot of work and I know that.
There's a problem with getting into it though. Tere are no shops around where I live that I know of (West Palm Beach, FL area)
I'll look and ask around though.
DBfan187
5,000+ posts
Supa's mom was here!
BiaBia, you've just been schooled again! You really should listen to Gauntlet, he'll learn you something! IT'S ALL TRUE!
WeDgE
10+ year member
B00st Wh0re
Not to mention you'll probably have to be working more than 40 hours a week at your own store...you can't expect someone else to make the same decisions as you would, nevermind the correct ones.
Gauntlet
5,000+ posts
bulletproof
Ok, it's nearly 6AM, and I can't sleep, so I'll do a little possible variable expense chart for you.
Let's say you have 10 employees: a manager, an assistant manager, a secretary, one installer, one installer who can build boxes, an installer who can build boxes and fiberglass, and four people to work the register and be salesmen. We'll say these are their respective salaries per year:
Manager - 50k
Assistant Manager - 45k
Secretary - 40k
Installer who can do boxes/fiberglass - 50k
Installer who can do boxes - 45k
Installer - 40k
Four salespeople - 30k each
Total for salaries - $390,000 per year
Now let's focus on some other variable costs:
Lease - we'll say this is $1000 per month, or $12,000 per year
Utilities (phone, water, electrical, internet, alarm, etc.) - $250 a month, or $3000 per year
Insurance - you've got a lot of valuable equipment, you need to cover it. First, you've got a lot of electrical work going on, so you'll need fire insurance, let's say thats $200 a month. And since you live in Florida and hurricans can happen, we'll say you need flood insurance, and that's another $200 per month. That's a total of $4800 per year on isurance
Total for building upkeep - $19,800 per year
Now what are you gonna do for the waiting room? Are you gonna have people waiting on their cars staring at the wall? No. Let's say you get a subscription to a car audio maganize, People, Newsweek, and Sports Illustarted. At $50 a year per magazine, that's another $200 per year.
What about a TV in the waiting room? Cable is another $40 per month, or $480 per year.
Are you going to have a coffee stand set up? Let's say you spend $50 a month on coffee beans, cups, stirrers, sugar, etc. That's another $600 per year
Total spent on customer satisfaction - $1280 per year
So what about the install bay? All your experienced installers are going to need tools and materials. Electrical tape, solder, wire connectors, terminals, heat shielding, speaker wire, drills, drill bits, screwdrivers, etc. etc. etc. For the sake of arguing we'll say you spend $100 a month replacing supplies your workers need, so that's another $1200 per year.
What about employee dress code? Maybe you'll want the salespeople to have custom printed shirts with your companys logo, but since you get the cheap ones and they fade, you need to replace them every 6 months. Maybe that's another $500 per year.
What about an employee lounge? Do you have a pop machine in there? A microwave? A fridge? Do you give them paper plates and utensils? Do you supply condiments for them? All that could cost another $500 per year.
Total spent on employees - $2200
What about advertising and marketing? Do you have any TV ads? Do you have pamphlets and brochures? Do you put ads in the Yellow Pages and local papers? All that could cost another $500 per year.
So far, you're looking at a total $413,780 a year just in variable costs. You will have to sell $1134 worth of goods/services per day just to get by. If you do that, the business will run, but you will make no profit at all. But you're the owner, right? You can't do all this hard work for nothing, and you certainly have to make more than your employees, so you set a goal for yourself of 100k per year. This brings your total up $513,780. Do the math, and if you wanted the business to run successfully so every variable cost is covered and you make 100k profit per year, you will to sell $1407 worth of equipment/install services per day. Per day. You will need one hell of a market base to reach this plateau. Is there even a steady demand for car audio to reach this level? It's very doubtful.
This just goes to show how quick that 50k your mom said can skyrocket. And you wonder why car audio shops charge so much. //content.invisioncic.com/y282845/emoticons/wink.gif.608e3ea05f1a9f98611af0861652f8fb.gif//content.invisioncic.com/y282845/emoticons/banghead.gif.8606515f668c74f6de0281deb475b6fd.gif
Let's say you have 10 employees: a manager, an assistant manager, a secretary, one installer, one installer who can build boxes, an installer who can build boxes and fiberglass, and four people to work the register and be salesmen. We'll say these are their respective salaries per year:
Manager - 50k
Assistant Manager - 45k
Secretary - 40k
Installer who can do boxes/fiberglass - 50k
Installer who can do boxes - 45k
Installer - 40k
Four salespeople - 30k each
Total for salaries - $390,000 per year
Now let's focus on some other variable costs:
Lease - we'll say this is $1000 per month, or $12,000 per year
Utilities (phone, water, electrical, internet, alarm, etc.) - $250 a month, or $3000 per year
Insurance - you've got a lot of valuable equipment, you need to cover it. First, you've got a lot of electrical work going on, so you'll need fire insurance, let's say thats $200 a month. And since you live in Florida and hurricans can happen, we'll say you need flood insurance, and that's another $200 per month. That's a total of $4800 per year on isurance
Total for building upkeep - $19,800 per year
Now what are you gonna do for the waiting room? Are you gonna have people waiting on their cars staring at the wall? No. Let's say you get a subscription to a car audio maganize, People, Newsweek, and Sports Illustarted. At $50 a year per magazine, that's another $200 per year.
What about a TV in the waiting room? Cable is another $40 per month, or $480 per year.
Are you going to have a coffee stand set up? Let's say you spend $50 a month on coffee beans, cups, stirrers, sugar, etc. That's another $600 per year
Total spent on customer satisfaction - $1280 per year
So what about the install bay? All your experienced installers are going to need tools and materials. Electrical tape, solder, wire connectors, terminals, heat shielding, speaker wire, drills, drill bits, screwdrivers, etc. etc. etc. For the sake of arguing we'll say you spend $100 a month replacing supplies your workers need, so that's another $1200 per year.
What about employee dress code? Maybe you'll want the salespeople to have custom printed shirts with your companys logo, but since you get the cheap ones and they fade, you need to replace them every 6 months. Maybe that's another $500 per year.
What about an employee lounge? Do you have a pop machine in there? A microwave? A fridge? Do you give them paper plates and utensils? Do you supply condiments for them? All that could cost another $500 per year.
Total spent on employees - $2200
What about advertising and marketing? Do you have any TV ads? Do you have pamphlets and brochures? Do you put ads in the Yellow Pages and local papers? All that could cost another $500 per year.
So far, you're looking at a total $413,780 a year just in variable costs. You will have to sell $1134 worth of goods/services per day just to get by. If you do that, the business will run, but you will make no profit at all. But you're the owner, right? You can't do all this hard work for nothing, and you certainly have to make more than your employees, so you set a goal for yourself of 100k per year. This brings your total up $513,780. Do the math, and if you wanted the business to run successfully so every variable cost is covered and you make 100k profit per year, you will to sell $1407 worth of equipment/install services per day. Per day. You will need one hell of a market base to reach this plateau. Is there even a steady demand for car audio to reach this level? It's very doubtful.
This just goes to show how quick that 50k your mom said can skyrocket. And you wonder why car audio shops charge so much. //content.invisioncic.com/y282845/emoticons/wink.gif.608e3ea05f1a9f98611af0861652f8fb.gif//content.invisioncic.com/y282845/emoticons/banghead.gif.8606515f668c74f6de0281deb475b6fd.gif
Gauntlet
5,000+ posts
bulletproof
Hm, 6:30. Still no sleep. Back to work!
My last post just covered variable costs, now lets cover fixed costs; we'll say in your first year, your goal is cover all the total costs (variable and fixed) and to make 100k in profit. So what are your fixed costs?
Down payment on the building - that could be $5000
Most companies have a minimum monetary order amount in order for you to be considered a dealer, so we'll say you have a 5k initial purchase from 10 different manufacturers - $50,000
Contractrors/construction crew - $20,000 (you'd be suprised at how incredbily expensive this can get)
Signs, brochures, business cards, phamplets, etc. - $2500
Computers and accessories - $2500
Fridge, microwave, toaster, etc. - $1000
Tools (jigsaw, table saw, router, soldering iron, dremel, some palettes of MDF, wood glue, a wratchet set, etc. etc.) - $5000
So fixed costs add $86,000 onto your finances. Add that on to that $513,780 from above, and the total is a whopping $599,780. So if you wanted to reach the goal of covering your variable costs, paying off your fixed costs, and making 100k in profit, you'll have to sell $1644 worth of goods/services per day. Every day of the year.
This is no easy task.....especially for a 17 year old. //content.invisioncic.com/y282845/emoticons/wink.gif.608e3ea05f1a9f98611af0861652f8fb.gif
My last post just covered variable costs, now lets cover fixed costs; we'll say in your first year, your goal is cover all the total costs (variable and fixed) and to make 100k in profit. So what are your fixed costs?
Down payment on the building - that could be $5000
Most companies have a minimum monetary order amount in order for you to be considered a dealer, so we'll say you have a 5k initial purchase from 10 different manufacturers - $50,000
Contractrors/construction crew - $20,000 (you'd be suprised at how incredbily expensive this can get)
Signs, brochures, business cards, phamplets, etc. - $2500
Computers and accessories - $2500
Fridge, microwave, toaster, etc. - $1000
Tools (jigsaw, table saw, router, soldering iron, dremel, some palettes of MDF, wood glue, a wratchet set, etc. etc.) - $5000
So fixed costs add $86,000 onto your finances. Add that on to that $513,780 from above, and the total is a whopping $599,780. So if you wanted to reach the goal of covering your variable costs, paying off your fixed costs, and making 100k in profit, you'll have to sell $1644 worth of goods/services per day. Every day of the year.
This is no easy task.....especially for a 17 year old. //content.invisioncic.com/y282845/emoticons/wink.gif.608e3ea05f1a9f98611af0861652f8fb.gif
jbl_marshall21
10+ year member
important person
it looks really hard, i think i'll go to college.
- Thread Starter
- #15
I have access to that kind of cash easily, but it doesn't seem too stable to start that soon.
I'll definately look into starting my own business though //content.invisioncic.com/y282845/emoticons/wink.gif.608e3ea05f1a9f98611af0861652f8fb.gif
I'll definately look into starting my own business though //content.invisioncic.com/y282845/emoticons/wink.gif.608e3ea05f1a9f98611af0861652f8fb.gif
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