How much profit would you say your average mom and pop small business makes? After rent wages, everything. I was being generous with 10%. You can't possibly thing the pizzeria around the corner is doubling their money every year. I'd really like for you to explain how what I said is incorrect. I've been involved in business for a while, so I know I'm right. Econ degree, Stock broker, hedge fund, my own business, which as a small business, after all costs are accounted for makes around 10%. If I were talking about BestBuy I would say their margins are between 1-3%, but I didn't cause I'm talking about a hypothetical pizza place.
Edit: Gross Income:
$5,000 per week average for first year. $10,000 per week average 2nd, 3rd and 4th years. $15,000 per week 5th year.
Breakdown:
Assumptions: Store is open 12 hours per day (11 am – 11 pm) 7 days a week, average order is $20, 50/50 delivery/carryout split, average delivery is 2.5 miles.
Friday and Saturday bring in 1/2 of the total gross income. The rest is spread out evenly among the other days.
Costs:
Labor:
108 cook hours – 50 owner hours = 58 cook hours.
(1 insider Sunday - Thursday, 2 insiders Friday and Saturday)
84 driver hours.
(1 driver all week)
58 * $9.00 / hour = $522
84 * $7.25 / hour = $609
Labor before taxes: $1131
$1131 * .0765 = $86.52
$1131 * .015 = $16.97
Worker’s Comp: $250 per month/ 4
$62.50 per week
Fifty percent health insurance for 2 full-time employees:
.5 * $300 * 2 = $300/month /4
$75 per week.
($5,000/ $20 per order )*.50 = 125 deliveries per week
125 deliveries/week * 2.5 miles * .55 cents per mile = $171.88 in mileage
Total Labor: $1543.87 per week.
*Keep in mind this is an extremely conservative estimate and it is assuming that the owner will work every day of the week and that he can hire some tremendously productive staff.
Food Costs:
This I am not all that familiar with but reading around I’ve seen 10% mentioned so I will go with that. If anyone has any better insight please let me know and I’ll adjust.
$5,000 * .3 = $1500 per week.
Rent
This may still be a little low but I would assume starting a new business you would want to keep rent expense low and with the low volume having a strip mall location probably wouldn't be a bad idea.
$2,500 per month (rent + CAM)/4
$625 per week.
Utilities
According to
https://www.northernpizzaequipment.com/v/vspfiles/pdf/ mmps360.pdf a Middleby Marshall oven uses 135,000 BTU per hour per rack. In my town 1 million natural gas BTUs cost $8.624.
135,000 * 7 days * 12 hours per day = 11,340,000 BTU per week
11,340,000/1,000,000 BTU * $8.624 = $97.80 per week for gas. Figure another $300 per month for heating and cooling + lights.
$172.80 per week for utilities.
Insurance
This one I am having trouble even taking a guess at. I’m guessing that since you are only purchasing liability that it isn’t that expensive. I’m going to call it $200 per month.
$200/4 = $50 per week for insurance
CC Machine / Transaction Fees (Assume ¼ of orders)
$5,000 / 4 = $1250
$1250 * .02 = $25 per week
Advertising
$5,000 * .05 = $250 per week
One time costs:
(1) Used oven - $16,000 – 10 years
(2) Pans/Dishes - $1000 – 5 years
(3) Computer + Software - $1,000 – 5 years
(4) Make line - $6000 – 15 years
(5) Walk in - $5000 – 10 years
(6) Hood - $5000 – 10 years
(7) Cut table - $1000 – 15 years
(
Dough Table - $1000 – 15 years
(9) Phone counter - $1000 – 15 years
(10) Hot Rack - $1000 – 10 years
(11) Hot bags - $500 – 5 years
(12) Shelving - $3000 – 15 years
(13) Signage - $5000 – 20 years
(14) Phone System - $1500 – 5 years
(15) 3 Compartment Sink - $500 – 15 years
5 year - $16.67 per week
10 year - $56.25 per week
15 year - $17.36 per week
20 year - $5.21 per week
One time costs: $95.49 per week
Incidentals (office supplies/cleaning supplies/etc)
$200 per month / 4 = $50 per week
Maintenance
$700 per month / 4
$175 per week
Phones
$200 per month / 4
$50 per week
Accounting and Legal
$100 per month (went with low estimate because starting out it is probably easy enough to do accounting with QuickBooks).
$25 per week
Pest Control
$40 per month / 4
$10 per week
Garbage
$100 per month / 4
$25 per week
Total Costs of Operation Per Week: $4603.16.
Profit: $396.84
After at least 35% aggregate taxes:
$396.84 * .65 = $257.95 per week.
With an average of $5,000 gross sales per week the owner of this store could expect to make $12,381.60 his first year of ownership. This would equate to a net profit margin of approximately 5%.
I told you I was being generous.
Edit 2: HAHAHAH I just realized, Game, Set, and match is from tennis. You tried to insult me with a chess joke, after being wrong on both; your premise, the 10% profit margin you focused on to draw attention away from the fact that credit card companies charge fees, and if those fees are 5%, and the profit a store makes on each sale is 10%. 10% of $100 is $10. 5% of $100, is $5. 10-5= 10/2. Half.
Or if they make 25% profit, and pay a 5% fee, they make 25, pay 5, profit is now 20. This owner increases his profit by 20% by using bitcoin instead of credit cards. That's [1-(20/25)]*100.
Dumb shit.
