Researching the Business
Decide whether a small business is for you. Sure, running a small business seems like a great thing. You get to put your own ideas to work. You get to make decisions and work independently, meaning you’re the boss. And you get the satisfaction of building something lasting. But it isn’t for everyone. In fact, operating a small business will be stressful and probably more work than you imagine. Think carefully before deciding that it’s for you. Do you like challenges, for example? Do you thrive in difficult circumstances? Are you comfortable making big decisions? In that case, starting a small business may be for you. On the other hand, are you risk averse? Do you distrust your gut instinct? Do you avoid stress and big decisions? You might want to rethink your plan, since all of these – risk, stress, and decision-making – are a big part of small-business ownership.
Decide on a business model. OK, you have chosen to go ahead. The next thing to do is to decide what sort of ice cream shop you want to start. You have some options. For example, do you want to buy or invest in an up-and-coming shop, start your own, or perhaps buy into a franchise? Consider, as each carries with it certain risks and certain opportunities. Read up on the benefits of franchising your business. Working with a parent company like Cold Stone Creameries or Baskin Robbins, you’ll have help in starting up. They will guide you in décor, the materials and food ingredients used to make the products, and employee training. Franchise costs can run high, though. The average start-up cost for a Cold Stone Creamery franchise is between $261,000 to $405,000. Starting your own shop is another choice. It may be less expensive to go it yourself – for instance, it is not uncommon to buy an existing or closed ice cream shop for $50,000 or less – but you will have much less support. Unlike a franchisee, you will have to do everything on your own.
Research, research, research. Get as detailed an idea as you can of what your business will look like and how it will operate. Do this by studying other ice cream stores in the area, as well as frozen yogurt and gelato parlors. What do they sell? How do they market their products? How do they advertise? You will also need to do serious research into the ice cream industry. Do market research. That is, look at your demographics, your competition, and the logistics of operating an ice cream shop. What group of customers are you targeting? Kids, maybe, or young professionals? How much business can you expect to do in your area? How will you price the ice cream? Sales and pricing might vary for a number of reasons, including season, your location, the presence of competitors, and supply. You will also need to find proper suppliers for your needs. Cones, napkins, toppings, and the ice cream itself will all have to be bought from wholesalers or suppliers. Try starting your research at a place like the United States Securities and Exchange Commission website at https://www.sec.gov/. There you can find statistics on the industry, most of which are coded as 5810 or 5812 (eating places – retail).
Planning the Business
Get fully licensed and certified. Your legal requirements will depend on your city or state. For example, you may need a business license. For example, in the city of Toronto you need a license either to have an eatery or a food vending truck and need to submit a background check, proof of work status, and copy of a lease agreement. You may also be asked to provide proof of insurance. The fee for such an application is about $680. In starting an eatery, you’ll probably also have to contact your local health department, state sales tax agency, and state employment department for an employer tax ID number (if you plan to hire). Don’t forget to contact the IRS, as well, to obtain a federal tax ID number. As you can see, there is a lot of legal red tape in starting a small business. You may want to consider consulting a lawyer who specializes in business for help.
Figure out what equipment and supplies you need – and how much it will cost. You will have to have all the proper equipment and supplies for your grand opening. Depending on the location or type of store, this may range from one or two sinks, a small ice cream cabinet, and dry storage to several soft-serve machines and ice-cream cabinets, computer and cooling systems, backup generators, and dry-thru windows. Don’t forget that on top of the equipment you’ll need day-to-day supplies like ice cream, cones, plastic spoons, bowls, and otherwise.
Set a location for your business. Decide on a strategic and viable location for your business. You’ll want to place it near a ready source of customers, like close to malls, parks, in the city center, or near other retail businesses. Accessibility and convenience is key. Keep in things like car and foot traffic, but also whether there are existing ice cream parlors nearby who might be stiff competition. Your shop may be quite small or large, anywhere from 400 to 4,000 square feet. Remember that you will need space for ice cream storage in addition to retail space.
Write a formal business plan. Take what you have learned in your research and planning and, now, put it on paper. A business plan will map the financial and practical success of your shop. It can also convince a bank or investor to help finance you. Your plan should outline how much you plan to sell, projecting your sales minus your operating costs, for a number of years, usually 3 to 5. Base your data on the market research you did: the size of your local market, your competition, your pricing, your marketing and operations plans, and trends in the overall industry. Include your projected costs for supplies, lease or rental agreement, wages, business insurance, and other things. Business plans usually follow a set format. They should begin with a short summary (called an executive summary), and then your business strategy and plans for growth, your marketing strategy, your operation plans, human resources plan, a financial projection, and an analysis of strengths, weaknesses, and possible threats (called a SWOT analysis). You can check your format on a website like the Canadian Business Network website at http://www.canadabusiness.ca/eng/page/2753/.
Getting Started
Structure the business. As part of starting a new business, you’ll need to do what’s called structuring. This means that you are forming a legal company – structuring is the shape that you decide to give it, which can impact things like how much you pay in tax or personal liability, the amount of paper work you have to do, and how you can raise money. Sole proprietorship is the most common business structure. You can form on easily and it gives you, as the owner and operator, full control. However, you also will have to assume full liability for all of the business’ costs. Partnerships apply if you are going into business with another person. This arrangement splits the costs and profits. Some businesses take the form of corporations. Unlike the first two kinds, a corporation is a legally separate entity from the people that founded it. It is taxed separately and can be held legally responsible in court, just like a person. The biggest advantage of a corporation is that you avoid legal liability in case something goes wrong. The biggest disadvantage is that this structure is expensive and takes a lot of record keeping.
Buy or lease a viable location. Find a real estate broker who specializes in commercial sales to help you find and acquire a suitable location for your new business. Based on your initial research, you should already have a good idea of where you want to be. Now is the time to do even more research. Try to be as unbiased about sites as possible, even if you’ve formed ideas. With a broker, look into the local Chamber of Commerce to see future development plans. You may find that a part of town will have new projects that you weren’t aware of. Check traffic counts, as well. Talk to other business owners. Ask them what they find important in a location. Is it closeness to a tourist area, for example, a school, or a park? Don’t forget to include accessibility, including access to parking or mass transit, in your thinking.
Set up shop and buy supplies. You have a shop – you are getting closer to opening. Now you need to get all the necessary supplies. Meet with equipment suppliers and contractors in your area and ask for referrals and quotes on things like ice cream cabinets, freezers, or any other items you require. Ask other business owners who designed their stores to get the right décor. Or, visit other stores and take notes. See what you like, write it down, and use it in your own floor plan. Get your ice cream supplies, as well. Try to shop around for the best prices, comparing wholesale ice cream and stocking a variety of flavors to accommodate customer’s different tastes. You may also need toppings, sundae dishes, soda glasses, and other goods. Find suitable suppliers for those, as well.
Hire staff. If you don’t want to run the operation entirely on your own, you’ll have to hire staff. But where to start? You can try several things in order to find good staff. You might try going to a recruitment service, which will vet candidates for you through their own networks but will also charge a fee. You can also try advertising on the internet, in the classified section, at campus/job fairs, or with do-it-yourself advertising. Hiring takes more than just finding the right person. Keep in mind that you’ll have to put them on your payroll and keep records of all their earnings for tax purposes, withhold Social Security and other taxes, and report these numbers every year. You may have other legal obligations to employees in areas like labor standards, health care, and taxation. Make sure that you are in full compliance with the law to avoid problems. It is best to talk to a business lawyer in order to know your duties and rights.
Consider joining a trade association. There is at least one national trade association for the ice cream industry in the United States, the NICRA. Joining such an organization can be beneficial for you as a small business owner. For one thing, it will plug you into a network of ice cream retailers and also sometimes suppliers of cones, toppings, nuts, flavorings, and equipment. Trade associations are often usually involved in lobbying. NICRA offers benefits to its members, including, but not limited to, monthly bulletins, participation in an annual convention, ice cream quality testing, insurance programs, and scholarship opportunities.
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