where to find inventory for new furniture store

[BrayB]

Hey, its been a few months. Business is going well so far, I have a very steady stream of inventory coming out of NC. Im looking to make the jump from warehouse to retail any day soon. I know it varies market to market but what price range for a lease would you suggest I stay in? Im hoping for anywhere from 8-15k square feet. I don't want to start too small and I want to make a good investment into a building to actually build our brand and start eating up some market share, but I also don't want to go signing a lease for 20 grand a month for a humongous building. It seems like a lot of the decent buildings around here float around 10-15k a month (triple net of course, but it is what it is). Im comfortable around 10, but I'm smart enough to know that after hiring a couple floor salesman, my overhead is going to jump to 20k a month, maybe more. Do those numbers sound right? I know there are so many variables and so many differences depending on the market, I'm just doing my best to get everything modeled out before making the jump, cause its a pretty massive jump.

[drcollie]

Good for you.

I learned the furniture business from one of the greats, the founder of Hancock & Moore, Jack Glasheen (since retired). Jack would always tell me "The key as a retailer is to control your debt service. Stay small enough so you can keep your arms around the business. Own the property, don't lease it. Pay cash for everything and pay your bills on time. Eliminate unnecessary expenses. Take Care of your Customers." Jack followed that advice himself to a "t", The main Hancock and Moore Plant 1 was a converted chicken farm. The entire time Jack owned that business (with Jimmy Moore) there was never a sign on the building that said "Hancock & Moore". Truth. I asked jack about that and he said "Signs cost money, Duane".

So I have never leased a property other than my small storage warehouse. I have owned the building I am in since 1987 (5,000 s.f) and that has saved me millions of dollars in 37 years vs leasing. And now, at the end of my run and retiring, I have sold that building and that money from the sale funds my retirement nicely. When you own your commercial property, you are not subject to the whims of a Landlord in raising your rent, or worse yet - not renewing your lease and you have to move. It also lets you have an asset that you can sell at some future time. If you own your building, then when tough times arrive (and they will) you can survive them. The 2007/2008 Recession wiped out at least 50% of all retail furniture stores, they could not service their debt obligations and went bankrupt.

A mistake I see new dealers make is they get their buildings (lease or buy) based on projected trends and anticipated income. They plan based on trends and the sinks most all of them because trends don't last, but fixed expenses do. When 09/11 happened in 2001, my business was sailing along until those planes flew into the towers. Then it absolutely died off for almost 1 year. You can't plan on that happening, it just does. Had I had a high debt load then, I would have gone under.

I am very conservative. When I need a new delivery truck for the business I pay cash for it (school of Jack Glasheen) or do without it. I have never had many employees, they are costly. I unload the frieght trucks and clean the bathrooms in the store. Not saying that is the only way to go, but for me, it worked. You won't grow as big and fast with no debt and paying cash, but you will be strong when you do. Good luck on whatever you decide.

[BrayB]

Followed your advice to the tee and wholeheartedly agree with it. I found a nice 5000 square foot building that used to be a cabinet store and we are closing in two weeks. Going to have to do a tiny bit of renovations to build it out into a furniture store but it was a good deal overall. I'm starting to move closer and closer to the medium end market ($1500-$3500 pieces) and it is drastically reducing workload, stress, and hassle. Whole different caliber of customers that are much more enjoyable to work with. Since that store is smaller, I'm also hoping to run pretty lean staff-wise. Maybe one hybrid salesman/furniture assembler and then one other part time furniture salesman and that should carry us for quite some time, all of our deliveries are outsourced at the moment. Every day the vision gets a bit clearer and clearer, the growth will just be a product of time. You have definitely helped us every major step of the way despite me just being a random name on the internet and I can't tell you how appreciative I am.

[drcollie]

Glad to help!

With 5,000 SF, you will be a niche store and here's the best hint of all. Go upscale. Why? First of all, you don't have the space to complete with the 50,000 sf stores. Let them have the low end market, even the middle range if your region will tolerate upscale. Be a specialist, not everything to everyone. You will make more money with less work. Here's what I mean by that.

A 85" sofa is a 85" sofa no matter what the price point. It takes up the same amount of space on a truck, warehouse or a showroom. It cost the same to ship and same to deliver. Lets say your gross profit margin is 1.58 for example

If you sell $ 995 sofas, you are paying $ 630 for the merchandise and shipping. Your Gross Profit (GPM) is $ $ 365.
If you sell $ 1,999 sofas you are paying $ 1,265 for the product and shipping. Your Gross Profit is $ 734
If you sell $ 5,799 sofas you are paying $ 3,670 for the item and transport. Your Gross Profit is $ 2,129

You have to move (6) low end sofas to take the same amount of cash to the bank as one high end sofa. Your GPM is the same, however look at your cash flow! Plus, you have 6 times the handling, 6 times the recordkeeping and 6 times the delivery work.

Added benefits: Cheap stuff falls apart quickly. Do you really want to deal with all the flak a couple years after the sale when those people come back angry (and they will). The higher the build quality is, the more satisfied the client and the more likelihood of getting return customers. You will also have more returns with cheap product.

The Negative of High End: It requires you and your staff (if any) to up your game, you MUST be knowledgeable and be able to explain to customers what their benefits are. Hanging a price tag on something and sitting at a desk reading a newspaper won't cut it like in the low end stores. People want quality, however you have to be able to explain to them what they are getting for their money.

My store was only 5,000 sf. I went high end and half of my business has been outside of my region. The demand is there to do that if you are willing to do the work.