Costs and Capital

Personal Capital

Before investing the time and effort necessary to start a Children’s Resale business, a reality check is in order.

Pros – Resale can be rewarding. Located well and run right, an established children’s buy-outright resale shop should net somewhere between $50,000 and $120,000 each year. It is also personally and professionally gratifying. Customers will repeatedly sing your praises. Recycling is a noble enterprise.

Considerations – At the same time, children’s resale is demanding. It generally takes one to two years to establish the store, and until then–and even beyond if you’ve not learned to train and delegate and don’t have the proper systems, services and support)–the demands on your time and for your attention will be unrelenting.

Projecting Costs

To estimate the amount of capital needed to underwrite operations until the store becomes profitable, you must first project costs. In order to generate accurate and reliable cost projections, you must first identify the store site, the biggest cost-determining factor.

Startup costs depend heavily on your location (rent) and space (size and extent of the required build-out). Nonetheless, it is not only possible but imperative that you generate ballpark projections before expending the time and effort to locate a space and begin your business and financial planning in earnest. You need to estimate whether you have the resources necessary to start and carry the store until revenues begin to cover costs. If you don’t, go no further. Under-capitalized ventures are doomed from the start with decisions driven by what can be afforded, not by what is needed.

Your Costs

Shown below is a high-low estimate of what you would need to start a children’s resale store. If you opt to subscribe to NextGen’s full package (knowledge base, services and support)) add another $4,900; if you opt for franchised support, another $25,000 – $40,000.

Low High
Training Expenses $2,000 $6,000
Lease dep and Improvements $10,000 $30,000
Fixtures $10,000 $30,000
Signs $4,000 $8,000
Computer System $6,000 $18,000
Opening Advertising $2,000 $5,000
Inventory $0.00(consignment) $35,000
Loan Fees $25,000
Business Formation $500 $1,000
Permits $400 $1,000
Supplies, Misc. $3,000 $6,000
Working Capital $20,000 $40,000
Total $57,900 $182,500

* Franchisee cost data was taken from the following legal documents: “Kid to Kid Franchise Disclosure Document,” May 29, 2008; “Once Upon a Child Franchise Disclosure Document,” March 16, 2009; “Children’s Orchard Franchise Disclosure Document”, March 20, 2009. The inventory estimates assume opening as a fully-stocked store with enough off-the-floor stock to refill after the opening rush. Opening with anything less is a customer turnoff and will dampen efforts to grow. Royalty estimates are based on assumed
annual sales of $325,000.

Decision: If you have the necessary personal and financial reserves, it’s time to form the business (NextGen Clients Only), find a good location, and negotiate a workable lease (NextGen Clients Only).