Main St. Math

“Let’s do a little bit of Main Street Math. Follow with me. This should be fun,” reports IOwnDowntown.com. “The average downtown retail space in America is about 2000 sq. ft.

The average downtown rent in America is about $16.40 per sq. ft.

That means that the normal downtown retailer is paying about $32,800 a year in rent.

So, with out standard market up of 50%, the retailer needs to sell $65,600 worth of product just to break even. for rent. alone.

Okay, a little more math. Let’s get slightly more complicated now. Did I mention my mom taught math in high school?
Ok, back to class.

You need lights and heat.- Average monthly bill of $674.09 x 12= 8089.08

Need to sell another $16,178.16

Insurance- $1458.00

Phone, Fax, Internet- $218.00 x 12= $2616.00

Security- $54.18 x 12= $650.16

Window Washer- $12 x 24= $288.00

Cash Register Tape, Shopping Bags, Toilet Paper, etc= $28.68 x 12= $344.16

Total of $5,356.32

Need to sell another $10,712.64

Grand total of $92,490.80 simply to exist.

WAIT!!! So, if you process credit cards, it will cost you an additional $2034.79 to process all those payments.
$96,560.40

But people should make money, even a little money, right? So let’s add in the average starting salary for a teacher in the lowest paying state in the Union, Montana.
$26,734

$150,028.40

At this rate, a downtown business needs to sell $577.03 every single day that it is open.

Every single day, simply to be compensated the same as America’s lowest paid teachers. And this is all in a perfect vacuum. This assumes that every product you buy, you sell. There are no sales. Nothing is shoplifted. Nothing is scratched, dented, rotten or ruined.

The rest of the article is here.

About jeffpelline

Jeff Pelline is a veteran editor and award-winning journalist - in print and online. He is publisher of Sierra FoodWineArt magazine and its website SierraCulture.com. Jeff covered business and technology for The San Francisco Chronicle for years, was a founding editor and Editor of CNET News, and was Editor of The Union, a 145-year-old newspaper in Grass Valley. Jeff has a bachelor's degree from UC Berkeley and a master's from Northwestern University. His hobbies include sailing and trout fishing.
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10 Responses to Main St. Math

  1. stevefrisch says:

    Interesting analysis….mine done in 1998 for my business (2900 square feet) showed I needed to bring in $1014.00 per day to exist (before labor cost, debt service and inventory) Many of these costs are very low by California standards.

    By the way, with the coming rising economy we are going to have a problem with rising rents in downtown core areas again, and many people who started businesses based on low lease costs are going to be shocked to see the balloon provisions starting to kick in. I know people who signed leases at about $1.25 per square foot at the height of the recession from landlords who just wanted to keep the taxes paid who are now looking at provisions that will triple their effective rent over the next three years if the economy continues to recover.

    If most Sierra Nevada downtowns want to maintain stability they are going to need to look at rent stabilization policies, and they should do it BEFORE the frenzy for space sets in.

  2. Chip Wilder says:

    So the cost of doing business has nothing to do with regulations, and everything to do with “the cost of doing business”? Note: Before moving to Texas-

  3. Stephen Wahlstrom says:

    Jeff – this is a great back of the envelope analysis. Many downtown business people follow a passion about their product, service or theme. These numbers display why many small businesses do not survive for long. They have to stop when their passion comes face to face with the reality of staying in business. Yes Chip – small business financials are hardly ever affected by regulation

  4. Ben Emery says:

    When we owned a sandwich/ ice cream/ mini mart in CO we did a similar analysis to the one above but we were so weighted towards summer we figured it out by festival and socked enough away to get through the winters. The difference between the downstairs space and one on street level was about $2,500 a month. That is why we were called the deli downstairs. We catered to the local population. Late nights, music, and a good time.

  5. Stu Wolfson says:

    Hey Jeff, pretty easy, huh. Don’t
    forget all the people that move to paradise and then support the Roseville Galleria and Sacramento, and then wonder why small biz can’t make it..

    • Judith Lowry says:

      First up Stu, Nevada County is not Paradise.
      It’s only one in a number of nice little towns in the foothills, but read the paper and you will see we have plenty of distasteful problems here.

      I say we put a huge ad in the Sac, Roseville, Auburn newspapers proclaiming to the world that Nevada County people refuse to shop outside their town and regularly sneer at the lifestyles and businesses of those who work “down the hill”.
      I wonder how many of their tourists we will get after that.

      Next, check the labels on your clothing or any goods, like Brighton for instance, from the “local” stores and you will see they pretty much all come from Chinese, Indonesian or Bangladeshi factories. Oh, except for the one that recently collapsed due to illegal shoddy construction and killed more than 1200 poorly paid garment workers.

      Thankfully, shopping locally is still a choice, not a mandate quite yet.

      And if I may offer an observation, some of our local stores rely on the same vendors year after year. Therefore a store that does not fit my unique “shopping profile”, in the first place, may remain that way as long as it adheres to the same business model with which it has always been comfortable. In other words, local merchants could work harder and find more creative solutions to attract sales.
      Just a thought.

      • Stu Wolfson says:

        Judith, I though the original post was about the cost of doing business in a small town. I appreciate your concern. That is a fact especially in large big box stores, but if you take a real good look at the clothing in my store, you will see most of my vendors are from the U.S.A, Canada, and Europe. Tell me who makes most of your art supplies?

  6. Judith Lowry says:

    I am well aware of where the materials for art supplies come from, as well as the materials for my home, my car, pretty much everything.
    I just don’t think taking swipes at our friends and neighbors, or neighboring communities is an explanation or a cure for what ails our local economy.

    There are some young folks starting up businesses in town and they may do well from what I see. The new Bistro is very nice and Phoenix is youthful and playful. Many young merchants are plugging into the second hand market and making it work.

    You have an elegant store which is a pleasure to browse, but you do have a rather specific clientele. If you aren’t happy with the amount of business you are doing you might consider some new ideas. I would wish you the best at that, nobody wants to lose Maiden Lane.
    Blaming consumers who find shopping south, for essentials you do not carry, the only way to get by in these rough times?
    That just doesn’t seem fair.
    We don’t need a witch hunt here, we just need to up our game.
    Sorry about that, but if you really think about it you might see my point.

  7. Promoting Thinking Local First is not intended to be an indictment of people who go to Roseville to shop at the Galleria. Think Local First is about making people conscious of choices, not limiting choices. It is intended to be a reminder that many of the things one buys at the Galleria can be bought here, and that the decision to purchase them at the Galleria or on-line has consequences. In its best form Think Local First would also act as a mechanism to convince local merchants to expand product mix, become more price competitive and favor local manufacturers and suppliers. Pointing out that those activities would create a more resilient economy and encourage self-reliance is not ‘blaming consumers who find shopping south……the only way to get by in these rough times”.

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