A. It used to be that the option of running a store was the main venue selected by people. Now even this option has become more complicated. There are ‘traditional brick and mortar’ stores, franchise set ups and internet/mail order operations.

A1. The traditional ‘Brick and Mortar’ store may be one of the most difficult to manage and ensure longevity. Selecting the right city is the first set. The manager/owner must be willing to relocate in order to select the best city. For a long time cities with a military base or a college were good and one with both was ideal. Still today, those factors have to be considered but a store cannot become dependant of the clientele offered by those establishments. Both are transitional with the population base living there for only a limited time (a few years).

In association with the city is the location. Initially the location has to be highly visible. Walk through traffic is important but may be offset by high cost of rent. It is not unusual for an established store to relocate to a less high traffic (lower rent) building. Initially this will not be a problem, as the established customers will follow. But in the long run this may be an error as it will be more difficult to attract new customers. Once the ‘old’ customers move there tends top be a decline in sales.

The analysis of overhead costs will be crucial. And every factor must be considered. Even incidentals can add up to be expensive over a year. Overhead expenses should be classified in one of several categories including One Time, Monthly, Annual and As Needed. The basic One Time overhead considerations are Deposits whether they are for the building or utilities, renovations, repairs, store fixtures, and banking costs including credit card set up. Monthly expenses include payment of taxes, rent, utilities, banking fees and vehicle payments if needed. Annual costs include payment to accountants, income tax bills and annual maintenance costs expected with some building contracts. As Needed overhead includes advertising, labor wages, operational supplies, donations, gasoline, vehicle maintenance and building maintenance/upgrades.

The next item is determining the type of stock to carry and the level that you expect to need. The initial stock purchase may be the most difficult, since you do not have a sales history. Later restock purchases should be geared to the sales history. You must be careful not to be enticed to expand into a new area without serious consideration on how it may affect the ability to restock proven sellers. The pressure will come from sales representatives but may also come from the customers. Since many companies have minimum order amounts, it will be good to determine if you have enough ‘sure sales’ to justify the order. It is difficult when you have to order $100 worth of product just to satisfy a single customer’s need for $15 or $20 worth of sales. Stocking based on impulse can lead to a large amount of poor selling ‘dead stock’.

An often overlooked issue is that of building cleanliness. This is key to building and maintaining a good community reputation. You do not want to be regarded as a place to be avoided. Parents need to feel safe allowing their children to go to your store to either buy or play games.

Provide extra customer service if applicable and possible. Upon an inquiry as to a product, do not simply state that you do not have it. Be able to give referrals, as it will be appreciated and remembered. If selling remote control and train products, be able to offer a repair service. Some stores vary their rates based on where the product is bought. A higher fee is often charged for items bought at another company such or via the internet. This has proved to be a very profitable service for many stores.

A2. Franchise set up option.

The most common company offering this option is the HobbyTown USA franchise. For someone just getting into the business, this option is very attractive. There is a high initial investment cost which includes site preparation (carpet, signs and most fixtures) operation support (bags, computers, cash registers, etc) and stock.

There are several advantages to this concept. The parent company can provide you with accounting assistance. The company can provide product support in those areas which you may be weak. This will help to train you and your staff with the nomenclature and maintenance of the product area. Some disadvantages include limited products in some areas. The franchise may not carry an extensive assortment of certain ranges. Such as in miniatures, they may not carry some requested brands. However in many cases the parent franchise headquarters will allow you to add new ‘independent’ lines as long as they get their transaction fee. So in many cases, there is a percentage transaction fee but this is often offset by the higher than normal product discount given to chain stores. Other considerations include having to account for already issued protected store zones and the increased overhead due to the headquarters preferring that you set up in a high traffic flow area and additional advertising costs. These are often locations that you may not have selected on your own.

Again this would be considered a good option for someone who is only familiar with a specific area of the trade. But upon you investigation of the various Franchise options, it will be best to spend a little more for a franchise name that is stable and well known.

A3. The internet store option is one of the newest of the store options. Many have begun within the past fifteen years. Some just adjusted their focus from a mail order service to the internet service with a wider potential customer base. This is often an option rushed into without the business plan being thoroughly researched. Many established stores have increased their market by starting these in conjunction with a ‘Brick and Mortar’ store. That is outside of the limits of this article which addresses initial businesses.

Here are some of the pros and cons of internet businesses. In some cases manufacturers will not consider you a legitimate company without a storefront. A similar problem for internet stores located at the home is that is may be difficult to obtain a local business license either because you live in the wrong housing zone or they do not feel that you can generate enough local sales to pay sales taxes. These problems can be solved. A storefront can be established by conducting operations in a location without heavy foot traffic. The low traffic ‘warehouse’ storefront will incur some monthly overhead costs which are higher than conducting business at home but are lower than strip mall and other high traffic locations. Storing your product may be a disadvantage if you are located in a ‘professional building or at home. But this can easily be solved by renting a self storage building.

Another advantage to the low traffic ‘warehouse’ location is a tax consideration. Yes you can deduct part of your house use as a business cost. But in many states such deductions ‘red flag’ your tax return for review by auditors. In Alabama only one occupation is higher on the auditor review list than using part of your house as a business deduction. So it may be good to check with your accountant before doing so or open a ‘warehouse’ location.

A4. The ebay store option will have many of the same considerations as an internet store. However, ebay operations have some unique problems. Items sold as enhanced (painting services) are not discussed here. They are addressed in the Painting Service section. Ebay sales attempts need to be examined as a whole operation and not by the profit or loss in a single sale. Some items you will get the amount requested, some items will sale for more and others will not sell at all.

An ebay operation can be expensive. The low fees add up over the long term or if a large number of items are posted at once. Such fees unless in a separate budget category should be regarded as advertising. Since that is what it basically amounts to conducting a world wide advertising campaign. They need to be monitored and even restricted to a certain amount per month in order to control your expenses. A seller will not see a large profit margin on ebay sales. Ebay needs to be regarded as a method for selling ‘dead’ stock, liquidating a discontinued line or getting you investment back from an expansion adventure with poor results.

An area that can end up costing you money is shipping. If you list shipping costs and they are more, then you pay the difference. This can happen most often if a customer wins multiple auctions and you ship as a single item. Take the time to go to the Post office and check the costs. The delay is short and you profit margin is slim on ebay sales anyway. Also do not overcharge a customer. Spend the extra effort to find the best shipping method and rate. Do not rely on charts.

One item that may present the biggest obstacle is obtaining stock for ebay. If you are selling enhanced products, then your profit is in the labor and you have some listing lead-way. If you are selling mainly new product, then the profit margin is slim. You have to pay a high restock costs from the source (Unless it is a clearance item). Due to shipping costs, many ebay bidders will halt their bids to account for shipping.

Do You Really Want to Get Into The Hobby Business?

Introduction
Running a Store
Painting Service
Ebay Store
Game and Figure Design
Running a Hobby-related Webpage
Something I Haven’t Mentioned
Running a Distributorship
Becoming a Producer (Manufacturer)