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Guys i need help

my godfather and i are thinking of starting a hobby store in Greenville NC. This place will sell mostly model trains but other things as well. i believe that running a hobby store would give me an opportunity to build the train layouts i have wanted for 20 years now. plus my model railroading hobby could actually make some money which may change my parents view on trains. Plus it would help sharpen my social skills interacting with different people.

my question is how would i start this business and have it be successful in the digital age

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A lot of things are going to come into play. You WILL need an internet presence. Startup will include a lot of variables. Where and renting or owning the location. Then there is utilities. Then there is all the unseen and unheard, Accounting software, Some sort of cash register or software equipped computer to do sales, Office supplies. Who is manning the store and what times and days, and lets not forget INVENTORY. This is just a few of the things needed. FIRST would be a Business Plan on paper!

if you are doing this for fun, or to increase your train footprint (I just made this up)……then you are somewhat doomed from the start……you need to be doing this for profit, for dollars…….same idea, nobody plans to fail, but many fail to plan…….a bank may loan you money if your plan is good, I do not think you will get a loan based on fun.

on the other hand, the completion is slowly disappearing

You have to get up every morning and think, "What must I do today to succeed?"  And then do it . A small business is not a hobby.  As stated above, pay an accountant to generate a pro forma Profit & Loss statement and a balance sheet after one year, two years and five years at $500,000, one million and five million gross sales  Look at the gross sales required and decide how YOU will reach that level.  Anything short of this you are kidding yourself. John

Last edited by rattler21

Start by making a spread sheet of all the things that you know you will need. Assign a value in dollars to each one. Add them up. Then add the things that you forgot or didn't know about yet.

Rent or purchase a place?  Renovate to your specifications for a store:  electrical, plumbing, shelves, flooring, ceiling, HVAC, $100,000.

Inventory? $100,000.

First year's payroll (includes accounting fees, taxes, benefits, business license, etc) $50,000

Website, signage, print ads, flyers, postage, credit card set-up, inventory software, POS system, utilities, insurance, credit line... $100,000.

How does one become a dealer for the major manufacturers? There must be some minimum inventory that you need to commit to.

Do you have a quarter mil handy? If you do, probably a better place to put it is in T-bills and use the interest to buy yourself some trains. If you are planning to teach your parents a lesson, this is the wrong way to do it. Invite your friends over to help build the layout. That will help with social skills.

Like many other business ideas: "How do you make a small fortune selling (fill in the blank)?"  "Start with a large fortune."

Paigetrain, there were a few things mentioned in your opening post that caught my attention. 

- going into business with your grandfather.   How is his health and physical capacity to support this business in the longterm.

- it seems your parents are somewhat opposed to your interest in trains as a hobby (observation from your past posts).  Opening a train business would certainly be easier with some or total buy in from your parents.

- you've listed building a layout as the first benefit and the chance to possibly make money as a second benefit.  If you don't have a solid business plan to make a lot of money (high percentage profit), I would be very concerned.   Unexpected problems are certain to decrease your planned profits, such as covid, supply chain, or a financial recession.   The toy train hobby has seen several experienced, previously profitable hobby shops close in high numbers over the past ten years.  I would concentrate on understanding why those shops closed and what you will be doing differently to avoid those problems.

- I would suggest watching some reality shows about start up businesses like Shark Tank or The Profit.  Learn from the criticisms that the  "experts"  are expressing and the weaknesses they see.

-I didn't see anything in your post about plans for repair and service after the sale.  You will probably need to address that aspect as a prime factor in your business.

As mentioned above you will need lots of money and of course expert advice from Mike.

Start by making a spread sheet of all the things that you know you will need. Assign a value in dollars to each one. Add them up. Then add the things that you forgot or didn't know about yet.

Rent or purchase a place?  Renovate to your specifications for a store:  electrical, plumbing, shelves, flooring, ceiling, HVAC, $100,000.

Inventory? $100,000.

First year's payroll (includes accounting fees, taxes, benefits, business license, etc) $50,000

Website, signage, print ads, flyers, postage, credit card set-up, inventory software, POS system, utilities, insurance, credit line... $100,000.

How does one become a dealer for the major manufacturers? There must be some minimum inventory that you need to commit to.

Do you have a quarter mil handy?

Very conservative estimate; left out the cost of rental or purchase; figure $25 and up per sq. foot.  Payroll of $50k -- that's not even 1 person.  Double up to 1/2 a mill.

Another reality check option - check in with the NMRA Division in that area to see what other hobby shops are thriving or just surviving or dying off.  You'll get good feedback on customer interest.

A few things from people I know that ran their own business.

When you run your own business, the boss may be a tyrant.

3 things of a successful business, Net profit, cash flow and return on investment.  (they seem the same but are different)

Great service and doing quality work are required for return customers.

What I see from the successful hobby stores here, you will need to be into RC fairly heavily also.  Cars and planes. 

When I was in High School, I worked in a pharmacy.  Private one owner, one pharmacist business.  Even his son who was a pharmacist in one of the big pharmacies in the area didn't understand how he survived.  He had gone banckrupt twice and had 0 credit, but he did well.  How?  First low inventory, little cash tied up on sales.  He would sell all day and get the money.   If he didn't have enough product he would partially fill the order and we would deliver at night.  Average 20-30% of his daily sells were delivered after he had the cash.    Also he carried very little over the counter stuff.  He stated it was a sink hole in his business.   Why did it work?  His net profit was similar to others, but the ratio of money on the shelf vs. how often he sold or turned the inventory was much better than all the others.   Building footprint was small compared to customer traffic.  Cash flow was good, he had cash for the inventory and he used it to pay for daily resupply.  He had a simple system that took 20 minutes a day to re-order.   His wife was the accountant. 

Things that worked for the pharmacy.  Daily supply that was quick.  Low inventory, high turn over of inventory.  Had money to pay the bills, even if it was day to day.   High customer loyalty, he answered questions and treated all well.  Even when he was having a  bad day.

Other ideas.   How much inventory can you carry and  pay as you sell?  IE you are the warehouse for the product?

Investigate how other successful hobby stores work.   We had one here that lasted over 50 years.  Until the owner retired.   She started as a single mom as I understand in the 1940's.   In the not so rich area of town.  When you entered you saw fun.  Treating everyone well made the business.  Christmas Lay-a-way plans, they even had a catalog and mail order sales when only "Sears" did such things.  Innovation. 

How are you going to get customers to know you are there.  How are you going to get them to look at you online or enter the store?  What will have them buy from you vs. anyone else.   How do you get consumer trust.

Simple right?

You could spend a fraction of what was stated above, and buy a building to run your trains in. Sounds to me like you are more interested in having a large layout to display and run your trains on, than owning and running a profitable (hopefully), store.

I wish you all the best but definitely consult some experts before you dive in.

My experience is confined to ebay and train show set-ups.  My problems there was having /getting good inventory.  But three/oops four small shops in Columbus,  Ohio, l used to stop at (need to check and see if another out of way shop is still viable) , have joined the dinosaurs.My flea market experience was inventory...you have to have something to sell.  Two of those shops had empty shelves, before closing, after "built-to-order". Sure looked like they couldn't get inventory!  What l would wish to do is make trains not offered ... guess what a large flammable pile of lira that would take, not to mention youth, stamina, and perseverance?  And then look at the "Amazon" effect and COVID effect:.  People have had to go to mail order to get anything...chicken and egg...shops closed...mail order..now, mail competition before you could open shop..and l just posted thoughts on staffing/labor problem..COVID?entry people left . Restaurants closed....small business closed...no labor...not enough hours in day to be a one-man band

True story: In early 2007 I bought a relatively complex piece of equipment (a special type of scanner).  At the time it was a new technology that not too many people had access to and which required a fair amount of technical knowledge to operate, but I had one in a spare upstairs bedroom and it was in demand.  I originally bought the machine for my own use but quickly figured out I could make a little extra money on the side running jobs for others.  I referred to it as "my expensive hobby" at the time because I was still working for someone else full time, until one day I sold a large contract that let me quit my day job and run that machine for six months straight -- enough time to line up the next big project.

Today, I have 30 employees and what most folks would consider to be a very successful small business.  However, I don't run the machines myself anymore.  :-)  I was fortunate to have one of my interests intersect with an industry which will always need related services.  I also have a very supportive spouse who could have shielded me from the "what if this doesn't work out?" scenarios if one of those had come to pass -- at least until I found another day job.  And of course, I had a bit of luck.  So yes, you can take something that you're incredibly passionate about and turn it into a business, but it's a ton of work.  Also, I had specialization on my side -- focusing on providing one type of niche service that's in demand, and doing it better than anyone else -- and still do.

What would make yet another hobby shop different from all of the others?  I get a dozen emails every day (at least) from various online train retailers.  Besides lowest price, if I can get the same box from any of them, what makes me buy from them?  Support?  Reputation?  Their website?  Etc.  Retailing is ultra-competitive.  I'm certainly not saying that it can't be done, but it takes a ton of planning.

I'd echo what others have said above -- it's a lot cheaper to buy or build a building and fill it with trains for your personal use than to try to build a successful hobby retail business with some display layouts in it.  Probably a lot more fun, too.

I have a great friend that opened a shop 25 years ago in Myerstown Pa and it is really a full time job even after all these years. Advertising and promoting is a big part. Inventory is another. You must know what is going to sell and what isn’t. That takes a while to figure out and that comes through trial and error and it constantly changes. Have a website and that also takes time and money. Establish hours and keep them posted on your site. When you change hours update your site. Your idea is great but it’s going to be a lot more work then just putting a sign up and putting inventory on the shelf. Good luck.

Without knowing your age and level of education, (but...you've been thinking about this for 20 years) and your comment about changing your parents' view on trains, leads me to do some math, and respectfully ask some personal questions:

If you are 20+ years old, why is your parents' opinion about trains important to your business decision?  Do you have a job now? Do you pay your own rent and utilities where you live? Do you have money ($250,000 or a credit line or a potential inheritance) put away for a venture like this?  If not, where's the seed money coming from?  A "Go Fund Me" ain't gonna cut it.  Life throws curve balls all the time.  If you had to choose between fixing the broken pipe in your store vs buying food for your kids, what would be your decision?

It's a nice romantic idea to have a train store.  A store, mainly O scale, if not exclusive, that has coffee available for customers, who like to hang around and meet.  Maybe have group workshop sessions/presentations.  And, also have a big in-store layout.  I think a lot of us would love that.

Then reality hits us.  Startup capital, expenses, warranty repairs, accounting, online-presence a must, competitive pricing, low-income, long hours...

If your godfather is bankrolling this operation and is not too concerned about making money,  as opposed to having fun, and he is an experienced retail person, you're going to be OK. If he is concerned about the money (i.e., it's necessary for his day to day living expenses,  or retirement funds), this would be a bad idea. If he has no retail experience and you don't either, this would be a bad idea.  These are the two key points, disposable funds that aren't needed for something else, and will not be a problem if the business doesn't work,  and that one of you having significant retail experience.  Absent these, I wouldn't even consider this a sensible path forward, as many have said.  If it's his desire to spend his discretionary savings and income on supporting you, and this business is his way of doing so, godspeed.

Hi Cody,

Lots of good advice in the previous responses.  I agree that opening a hobby shop requires a lot of upfront money.  Here's a few ideas that aren't so capital intensive in no particular order.

Start an online only store.  E-bay, Facebook Marketplace, etc. 

Sell at train shows / swap meets.  Here in So. California, we typically have at least two Great Train Shows each year.  I've met several sellers who travel around the West Coast selling trains and accessories at various shows.  They acquire inventory from people they meet at the shows who are looking to sell collections quickly. 

Watching the OGR wanted-to-buy / wanted-to-sell forums will give you a pretty good idea of what people want and what they are willing to pay.  I met a seller at a train show who inherited his brother's extensive train collection.  Unfortunately, he had an over inflated idea of the value of those trains.  I rarely saw anyone buying anything from him.  Yet he still showed up at all the shows.

Look for a good book (lots of 5-star reviews) on how to start a business. 

As someone mentioned previously, get some experience working at a retail store (doesn't have to be a hobby shop) and ask about managing inventory, cash flow, staffing, etc.  You'll get a real education.

If what you're really after is meeting some like-minded train people, then look for a club where you could get together occasionally to run trains and socialize. 

Good Luck!

John

I was hoping that someone would make the “Online Only” point, and CA John just did. In this day and age, there is no reason to invest in a brick and mortar store. Your business is not going to come from the community you are located in. That era is over.

You could get started in an “Online E-Business” with a comparatively small investment. You don’t need a fancy store front in the high-rent commercial district. All you need is a small warehouse that could be anywhere. However, it takes a special set of technical and marketing skills to be successful in this business model.

Other things that come to mind…

  • You’ll have to qualify to become a dealer for all the various manufacturers, and not just O scale.
  • You will have to develop a solid relationship with a local bank, because you are going to need their help.
  • Do you have a sufficient credit rating to qualify for bank loan? You are going to need thousands of dollars of start-up cash.
  • You and your Godfather will have to sign personally to guarantee the loans. Is he willing to do that?
  • You’ll have to get set up to accept credit cards online.

This is just a partial punch list of items you’ll need to do.

You will need someone with a great deal of technical expertise to design your web store. It has to be as easy as Amazon to make a purchase, or it won’t work. It also has to look good, or it won’t work. It will take at least $10,000 to build a GOOD online presence.

Once you have your dealer status established with the manufacturers and the web store up and running, you have to start to make some noise in the market to get attention. Instead of running ads in the local newspaper, you will need to run ads in OGR magazine and the OGR Online Forum (yay!) plus Facebook and other social media sites. (ugh!) You’ll have to spend a lot of time  “flying your flag” online and getting the word out. And you’ve got to have plan for developing your stores’ online “personality.” This is not easy, and it demands a full-time, 80 hours a week effort to get started.

There is another aspect of this that has not been mentioned yet in this thread. If your goal is just to build a layout and make some money, you are sure to fail. Your effort must be driven by a passion for the hobby, not just a desire to make money. Marcus Lemonis, host of the TV show ”The Profit”, is one of the most successful businessmen in the country. He makes this point over and over again in his show. You must have a passion for whatever business you are in to be successful. If your goal is just to “make some money,” your business is doomed to fail.

Last edited by Rich Melvin

All great points Rich.

I'm a licensed electrician and ran my own contracting business for several years. I did it while my wife still worked and we were on her companies' benefit plan. Once she left her job and we started a family, I had to start paying the price of admission for health ins, retirement, etc., it became quickly apparent that this was not going to last long. Not that I wasn't successful. I had a solid and growing client base, but when you have to start paying for EVERYTHING, it gets even more expensive, fast!

So it was time to find a full-time gig with benefits, which I did. Now over 25 years later in my current career, I'm glad I made the switch when I did.

Bob

I agree with Rich. You have to have a passion for the business, whatever business it is that you own. I believe this is why Richard Kughn was so successful in breathing new life into Lionel 30+ years ago when he bought the company. Yes, he had money to buy the company, but his passion for the hobby was, in my opinion, the driving force.

If I were you, I'd also consider whether or not you really want to turn the hobby you love into a business that will demand your full attention, and then some, if it is to succeed. Many years ago, we had a boat dealer who was so miserable to be around that we stopped doing business with him. He loved boating when it was his hobby, but it didn't take long for his hobby-turned-into-a-business to become a millstone around his neck, and he stopped enjoying life, or so it appeared, by the way he treated his customers.

I love toy trains, but there is no way I would want to make it my vocation. Instead, I am a 30-year insurance agent who is passionate about the insurance biz, and trains are my escape.

Just my $.02.....



John

I agree with Rich. You have to have a passion for the business, whatever business it is that you own. I believe this is why Richard Kughn was so successful in breathing new life into Lionel 30+ years ago when he bought the company. Yes, he had money to buy the company, but his passion for the hobby was, in my opinion, the driving force.

If I were you, I'd also consider whether or not you really want to turn the hobby you love into a business that will demand your full attention, and then some, if it is to succeed. Many years ago, we had a boat dealer who was so miserable to be around that we stopped doing business with him. He loved boating when it was his hobby, but it didn't take long for his hobby-turned-into-a-business to become a millstone around his neck, and he stopped enjoying life, or so it appeared, by the way he treated his customers.

I love toy trains, but there is no way I would want to make it my vocation. Instead, I am a 30-year insurance agent who is passionate about the insurance biz, and trains are my escape.

Just my $.02.....



John

Thats was an existing mfgr, not  hobby  shop!

In your previous post you  posted this..

     

Sorry guys no train this year

i was wrong about getting a train this year my godfather changed his mind and said no

I posted this..

         

If I was you... I get a 2 foot my 1 foot  plywood get some plaster and make a scenery with outside dried up twigs  rocks etc put some saw dust green paint and make a small cardboard house , Or any idea you can think of.. (he would like)

Make it the best you can and bring it over to your Godfather .. I sure he would say . gee this need to have a train by it''....



DID  you  get him to change his mine ... from doing what I said!  ??



  good luck...

sorry it took so long but i had to tell my god father about some of the most common things you guys brought up i'm beginning to think opening up a hobby store is not the best option. this was actually mostly his idea and he probably doesn't understand the magnitude of a project like this and neither did i at first

i am a 26 year old college student that already has 18 grand in debt with no legal or business experience under my belt although my god father has some.

the thing about making money with trains is i have always loved trains especially toy trains and my real dad and stepmom HATE ME HAVING THEM they were really nasty about it too growing up. unfortunately my dad still has court ordered guardianship over me because of my autism, depression and cerebral palsey probably until he dies. i feel like if i was actually doing something "productive" with toy trains my parents would change their views

honestly my WHOLE family is against my having a keen prolonged interest in anything whether it be trains , ships , nerf guns etc. if it looks to them like i have a keen interest they take it away.

and Hotwater i am sorry if i anger you or any other member. i really have trouble with responses and forming them

but it seems to me from what i have read the possible option would be to start an o gauge club possibly in our new church building . my godfather is a pastor and he owned a business once years ago so he has more experience although i have experience  with film somewhat.

Hang in there Cody,

You have received a lot of good advice that cautions you starting a new business. Your business experience is non-existent, your financial resources are very limited and the marketplace for a storefront hobby shop is poor right now.

The good news, you got heart and it involves trains. There is a place for you, and it is possible you will get some ideas on from the guys on this forum.

Lots of items and services that support this hobby can be made or performed with small overhead at home; I believe the term is cottage industry. Today I was looking at 20 scale Pacemaker boxcars I own and thinking "I wonder where I could find someone to weather these for me". I would encourage you to think micro vs macro. Find some service you enjoy and research, practice then hang out your shingle. Maybe make parts or assemble structures.

Off the top of my head, I don't have any great suggestions, but I bet some of the others on the forum do. Remember if you love what you're doing you will do a good job and you sure seem to enjoy this stuff. So again, hang in there just think smaller to start.

k

@Fast Mail posted:

Hang in there Cody,

You have received a lot of good advice that cautions you starting a new business. Your business experience is non-existent, your financial resources are very limited and the marketplace for a storefront hobby shop is poor right now.

The good news, you got heart and it involves trains. There is a place for you, and it is possible you will get some ideas on from the guys on this forum.

Lots of items and services that support this hobby can be made or performed with small overhead at home; I believe the term is cottage industry. Today I was looking at 20 scale Pacemaker boxcars I own and thinking "I wonder where I could find someone to weather these for me". I would encourage you to think micro vs macro. Find some service you enjoy and research, practice then hang out your shingle. Maybe make parts or assemble structures.

Off the top of my head, I don't have any great suggestions, but I bet some of the others on the forum do. Remember if you love what you're doing you will do a good job and you sure seem to enjoy this stuff. So again, hang in there just think smaller to start.

k

i don't think i can do repair work because of my lack of cordnation and dextarity

i one time took a locomotive apart and ended up breaking it because of my lack of skill and cordnation plus i have no idea what i'm doing

i also fear a sodering iron because the heat

its because of these things that i feel helpless

although i am good at running trains that are not DCS / LEGACY

Tinplate is my favorite trains like marklin o gauge and prewar lionel and american flyer o gauge

especially european tinplate like marklin or ace and others has really grown on me in recent years to the point where i have often thought of making it my main focus and operation on my layout

Last edited by paigetrain

Cody,

It is good that you are reaching out. You appear to be looking for constructive and positive feedback. I think there is a good chance you will get some, however you may want to consider giving the forum something to work with.

Tell us what you want to do or could do, that is also within your abilities. Give us some scope of possibilities, maybe then others here could give you some guidance. You seem to have the most important ingredients, a desire and love for the hobby.

For example, you have computer skills. Maybe for a small percentage fee you want to become a search engine. You could find someone else's quest and then ask for a small finder's fee.  This is only a random example, a shot in the dark; I am only trying to illustrate there may be opportunities that you haven't thought of that are realistic.

Members of the forum always seem to have many creative solutions once they know the parameters, in your case, your abilities, knowledge and resources for starters. No matter, hang in there.

kevin

Greenville and Spartanburg had 2 great train stores that also sold bicycles and other hobby items.  The Great Escape I believe was the name.  Pretty sure they have both been out of biz for quite a few years.  Here in Hendersonville, about 40 miles away, there is a hobby shop, and the owner was trying to sell it for a couple years with no takers.  The plus to it is that the owner owns the building and the land, is basically retired, and running it for something to do, so any income is just extra cash to him.  He has been in biz for over 50 years, and says getting inventory is almost impossible now, plus having to compete with online sales, which he also participates in and is the larger money maker for him.  One of the big hobby store killers back in the 70's was the invention of the toll free 800 number.  I believe MTH started that way, he didn't really have a store, but a storage building with a great inventory of off the shelf stuff, and an 800 number to call.  Might be confused on that issue, would have to dig out some old Model Railroader magazines from the era, but thought I recall full page ads with hundreds of items listed with 'Mike's Train House' at the top of the page.  I also recall that brick and board shops complained to all the suppliers about not being able to sell their inventory, people would come in, look at things in person, and then go buy it via the toll free call.  The suppliers tried to help by offering a more generous wholesale discount only to brick and board stores, but apparently it was not enough when it came to selling trains and supplies.

Years ago a friend and I considered buying an existing full functioning high end hobby shop in Florida, a top notch high quality home owned store. The cost was so much and the annual profit was just not worthy of the time involved. Yes, it would be fun to own a good hobby shop, but it would become a beast and possibly cause one to get sick of the hobby. We were told if we wanted to become millionaires, invest 2 million into the store and after a year, we might be worth a million. So, we decided to just enjoy this great hobby by simply building our home layouts. As an on the road Hardware salesman, (23 years with a large company) calling on many retail businesses, I saw many struggle to make so to speak “buckle and tongue meet”. Owning a retail business is a seriously large responsibility, it could be very profitable, but it would be a very up hill battle. Let’s be happy with our trains. Happy Railroading Everyone

@paigetrain posted:

i don't think i can do repair work because of my lack of cordnation and dextarity

i one time took a locomotive apart and ended up breaking it because of my lack of skill and cordnation plus i have no idea what i'm doing

i also fear a sodering iron because the heat

its because of these things that i feel helpless

although i am good at running trains that are not DCS / LEGACY

Tinplate is my favorite trains like marklin o gauge and prewar lionel and american flyer o gauge

especially european tinplate like marklin or ace and others has really grown on me in recent years to the point where i have often thought of making it my main focus and operation on my layout

Cody, I am 62 years old. Last year I learned two CAD programs, slicing software, webpage design, and operation of a laser engraver and two 3D printers. You MUST overcome your fear and think outside the box.

Your hobby will cease to be your hobby. Being in business is a different mindset.

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