My wife and I are in the process of starting our own chocolate/confectionery shop and would love some advice from other business owners about which direction we should go.
Background info: I (M,28) have professionally been in the industry for over 10 years now, I started out by working at a large and well known chocolate company in my home town and climbed the ranks to running their large production kitchen, before moving away to run a retail candy store in a tourist town. My wife has a degree in accounting and banking experience so she would handle that side of the business. We have been running the tourist town candy store together for over 5 years and we work for an owner who lets us run it however we want it, and is very hands off. So we have had a lot of time to learn and We have grown the business quite well, but we are tired of living here and want to return to our hometown and start our own shop. We own a house in our current town and will be selling and buying a house in our (more expensive) hometown. We don’t have any debt, other than the mortgage, and have excellent credit.
We have the business plan done, bank accounts set up, registered with the state, and are working on developing the products and packaging. We have been planning on going right into opening a retail store around Fall of next year. Opening the store would cost around $125,000 (fixtures, equipment, ingredients, consumables, and 3 months of operating capital.) We would use $40,000 of our own money, $40,000 in loans from friends and family, and hopefully the rest from a bank or other lender. We are looking at an area where there are no similar competitors, and the market could support our store. I’m worried that we won’t initially make enough in sales to pay back the loans and still allow us to live. Our products will have good margins, but my wife and I would work there full time and need to make enough to pay our bills before our savings runs out. We would be the only employees until we grow more.
Our other option is to start small by doing a licensed home kitchen and sell at local farmers markets, having our products in other retail stores, as well as selling on our website to establish ourselves and grow before we move into a retail store. We would fund this ourselves from our savings before using the business proceeds so we wouldn’t have to go into debt to start our retail store down the road. My wife would work full time at some other job and I would work part time while working the rest of the time on this business. I don’t want to wait and miss a good time to open a retail store. With the pandemic, I’m assuming that retail spaces will become more available and that customers will welcome new businesses when they open. Hopefully restrictions will be lifting by the time we are ready to open, so please wear your masks!
We would love to hear what others think of this situation. We don’t want to lose everything and be homeless by starting big, but we also know we can do it and have tried to do our due diligence.
Sorry if this post was all over the place, it seems to be a complex issue to me and I wanted to include as much info as I could to give a clear picture. If you need more info, I’ll answer any questions in the comments. Thank you for any advice.
TL;DR: Should I go into debt to start a retail store, or start small and grow into a retail space?
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