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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.

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