Good question, Dave. We do have a good base of potential customers in the guests we have been serving for several years here in restaurants. Many of them have come to us, asking when we would be opening our own place, before we even thought of doing so. We have a pretty loyal foodie dining crowd who has trusted us and some have even followed us from place to place. I don’t even think I’d be considering all this if I didn’t have a specific group of customers already in mind.
![[cheers.gif]](/uploads/db3686/original/2X/0/0ff9bfcdb0964982cd3240b6159868fbdf215b1a.gif "cheers"){kind=small}
That’s awesome! Onward and upward! 
Agree with all of the advice in this thread. You do not get ITB to make lots of money - it has to be something you love. My concept has a tasting bar with limited food menu along with retail and online. The bar makes the most margin and allows the other aspects of the business to thrive. You need a constant source of new potential customers while you build your base. If you have a close business relationship with a restaurant, perhaps partnering with one and finding an adjacent space is an option.
The problem I see most often is that people don’t realize how much money they will continually have to put in. Too many people think they can open a store, put however much money into starting inventory, and then sort of coast, letting money roll in and reinvesting. Worse, some think they’ll be able to reclaim a significant portion of that initial outlay while reinvesting the profits. The dynamic of this business does not allow for that kind of thing. I’m not sure any retail business works as perfectly as that, but my experience is with wine/beer/spirits. When it comes down to it, operational costs will pretty much always exceed the budget. Replacing inventory and fleshing out selection will be costly, and a good portion of that cost, especially early on, will have to come from further available funds rather than from business income. Eventually things do even out, but it takes longer, with a lot more “initial” (translate to first couple of years) investment than too many people realize. I know that doesn’t directly answer your question, but I think it is related. I’ve seen too many wine shops end up with dwindling inventory in the first couple of years because the owner(s) didn’t understand the dynamics of wine retail. Once that progression begins, there is usually only one outcome. A lot of money has to stay invested in that business, even more than the initial investment, for long-term success to eventually be realized.
Dan,
In addition to Doug’s spot on overview, there are a number of things to consider:
Tenant Improvement The City of Napa would not accept my plans. In addition to permits, I had to hire an architect to reproduce my plans, an electrical engineer for electric and lighting and a mechanical engineer for heating/cooling. I added ceilings, requiring a certified fire sprinkler engineer/contractor’s plans. Then the cost of inspections.
Refigeration for wine storage is costly as is build out of refrigerated spaces and any repair.
Storage space is never adequate.
Employees They come with a number of additional costs, plus time spent on scheduling, training and payroll.
Insurance can be problematic depending on where you are located and whether you “serve” alcoholic beverages.
Pay Per Click if you are going to do e-tail. You must know how it works before using it. I watched as a new on-line retailer bid $25 per click on a wine. Imagine how quick your competition can bankrupt you. He was done in 4 days.
Earthquake/disaster Who knew. You can’t prepare for when real shit just happens.
This is the tip of the iceberg. You can’t cover it all or make it bullet proof.
Doug and Randy’s excellent posts should be taken to heart. But keep in mind that there will always be something else - I’ve had my shop for 18+ years and there are still surprises. And I’ll add that I wasn’t able to take a penny out of the business for the first three years.
Best of luck!
Maybe it is too late to post on this topic but I haven’t been on the boards in a while…
Hi Joy,
As much as Tom’s sentiments might be good natured, I respectfully disagree. Drumming up $25-$30k for inventory & buying a register is way too short-sided to be “advice.”
First, most businesses fail because they are under-capitalized. What I mean by that is they budget to get open but don’t have access to cash after that. If I were you I would secure $250k. That could be hitting up family & friends, crowd-sourcing, offering smaller investment with a payoff in discounted inventory later, 0% credit card offers, small business loans, whatever you have to do, BUT gain access to cash. Things will always be more than you think. You may open for under $100k (if you are lucky) but what if you have 6-12 months of anemic sales? Then what? Have access to cash, cash, cash.
Second important point: do your due diligence. Write a thorough business plan with good details and with a laser like focus on what you intend to do. Shop at every wine store within 25 miles for weeks. See what their staff does. Check out the inventory they work with. Figure out how to build a better mouse trap.
Third: apprentice or work at a retail shop. I have many friends who like the idea of wine retail but never work in it and have a different idea of what it is. Sometimes it is super boring. Some times it is really fantastic. But don’t be fooled that it is hunky dory all of the time. As your own boss the buck stops with you. So be prepared to change lightbulbs, wash the bathrooms, sweep the floor, figure out who to pay first, deal with lame employees, etc… and then you can get to the “fun” stuff like selling the wine you like & buying from a cool new importer.
The margins are very slim in wine so do it because you love it not because you want to get rich quick. You probably know that already. Generally margins in wine are around 30% unless you are a “discounter” turn-and-burn operation. But it sounds like you want to buy interesting things and “educate” people. That takes time. Be patient. Compare margins in the clothing industry and you will become depressed, 500% +. Crazy.
Sometimes time is your only friend. Have a long term strategy. Fight for a long term lease. If you are locked in to your set expenses not only will it help you, but if you “have” to sell some day, you will be more valuable to someone.
I could go on forever because I am living your dream (and in my 9th year of it), so if you have any other questions or comments let me know, I am happy to share!
Most of all, good luck, you are going to need it!
The first store I built (for myself)
1 $300 cash register -
$800 for shelving, wooden boxes, display tables -
$15,000 worth of inventory -
Doing $550,000 worth of business a year by the end of the second year -
Sold the store for $150,000 four years later for a profit of $130,000+
The only thing that was short-sided was selling the damn store because it was so profitable -
I have built stores over the years with million dollar plus build outs - and smaller stores like the one I just mentioned - both too many to count - which one do you think worked the best?
Sorry Tom, didn’t mean to get your hair standing up. But it is a way different climate now. You were talking pre-recession, and pre-everyone and their brother having a wine shop now. Those were Vin de Pays days! At least that is the current L.A. reality. Maybe where the OP (Joy) will look to open it will be different. The example you list above is quite the “outlier” by today’s standards.
As another example, we opened in 2006 with a shoestring budget (less than $100k) but I would not have been able to keep it going with only a startup of $25-$30k. We just had access to more if we needed.
Red Carpet is bust. Pallet Food & Wine is bust. And I think Vin de Pays didn’t last too far after '08 (and after you sold). A few others have come & gone too. Rent is higher. Competition is fierce. And the online game is creeping in… I’m just trying to give a realistic view of our, albeit bigger city, reality.
Just a short list of things Tom omits:
Finding a good space, rent isn’t cheap, lease plus deposit, City permits, County Health permits, Building & Safety Permits (if construction), Plan check fees, State ABC permits and licensing, construction, materials, consulting, furniture, racking, legal filings, electrical work, plumbing, flooring…
you get my drift. And this is all before you buy all of your “life blood” – your inventory.
Believe me, have as much access to cash as you can. But be frugal too.
Damn Jeff - why didn’t I notice it was you I was being snarky with? I was on the road last week, getting horrible WiFi in my room after long days and it must have gotten to me -
You DID open at the right time -but so much of a store’s success is the person in charge - and you have that unmitigated charm that pretty much assured your success. I often check your website to see what you are up too and just love what you are doing. And, I didn’t know Red Carpet had gone under (or is going under) - they always had a stuck up their arse anyways -
You can put 3 million dollars into a store, put a couple of putz’s in charge and you are going no where. So I am still a firm believer that hands on management and savvy wine buying is the key - at any level of cash spent -
A guy that used to work for me here in the Twin Cities has a shop that might be the messiest damn thing you have ever seen, and by Saturday, the shop is completely wiped out. Come Monday, another $20,000 worth of inventory shows up - and he blows it out as fast as it comes in - very simple website (http://www.brightwines.com/) attaches a PDF file to his weekly e-mail blasts and he just rocks - it’s a one man show all the way - so it can be done -
I have actually been doing some ‘bar-rescue’ type consulting lately aside from my brokerage business, mainly wine shops that are heading downhill, and it is amazing how much you try and help them, and they just look right through you not wanting to believe that THAT is what has to be done. Luckily the last two gave me total control, and the freedom to train in new management - and I must admit - I really, really miss the retail business -
Hope things are going great for you Jeff - keep knocking 'em dead -
No harm, no foul Tom. I really wanted to drive home the idea to the orig poster that it is always good to have backup cash!
Things are good. 9 years in and still growing every year (except 2012, that was a weird one). I’m better now than I ever was (at buying, management & everything else) and we have remained consistent in our search for excellent values and hard to find imports. I did have to expand my domestic picks to keep up with customer demand but that just made us a littler more appealing to the neighborhood.
But best of all, I still love it. Having went from being a musician to working in the music 'biz (as an art director and international sales manager) I always knew there was a chance that once you turn your passion into a biz there is a chance you stop loving it.
Not the case. & still doing the hustle. Hope you are well Tom! And nice to hear you are still hustling too.