I was messing around in Excel, thinking about how many employees a store could reasonably expect to have at various sizes. My store is in the reasonable range of staffing, but I have mostly part time people I would love to transition into full time. They don't quite fit this model as California minimum wage is 45% higher than the national rate (plus they tend to make over even that). Still, I wanted a model that would fit the nation.
Below is what I came up, a model that's more something you would find in a player's handbook than a business plan. It's not exactly how a business would operate, but it's a baseline. It assumes some things:
12-15% labor costs. As a percentage of gross sales, a range of 12-15% is optimal so I included both 12% and 15%. I tend to skew lower.
Manager salary of $40,000 a year. That is a pretty low number, but this is a low earning trade, so I went with this number at the bottom of the curve. For California, a non exempt employee would make around $44K salary, so it's even higher here.
Note that at $200K-$300K, the manager can't even earn $40K without taking profits, which assumes these stores are always owner-operated buy-a-jobs. This model also assumes a multi million dollar store is still paying managers $40K, which probably won't happen, as we see a stratified management structure.
FTE Compensation. This assumes a full time minimum wage salary of $15,080 a year. Again, not an ideal compensation rate and in California it would be $22,880, but it's a place to start.
1:8 Manager Ratio. Another number from the retail trade which may not track exactly with what we're doing is having one manager for every eight line employees. For the vast majority of stores, this will never be a problem, as it kicks in at well over a million dollars a year in revenue (perhaps 5% of stores).
Profit Margin. Ask the general public what they think a retail store nets and they'll be wildly optimistic. When I made a post showing how my 10% net profit broke down across my business, the response was willful disbelief. Game stores make in the 5-10% net profit range. One year I mentioned in a trade show presentation I had an 11% net the year before and the audience broke out into applause. This number is only useful for imagining total compensation (below).
Total Compensation. Assuming the owner is also the (first) manager, you can figure out what a business owner is likely making by adding that $40K salary to profit. Pew Research says the range for middle class tops out at $125K, which could be a king's ransom in the Midwest but is pinching pennies in a big coastal city. You can play games with this, such as realizing a store owner needs to make $1.25 million dollars a year with an average (7%) net profit rate to break the middle class ceiling. Good luck with that. I think the average store nationwide is probably in the $350K range, which is just barely middle class, which means half of store owners are likely living in poverty.
Feel free to nitpick. It's a model. Remember that level 10 game store owners need to seek out and challenge the Master of the Broken Wind in mortal combat to proceed to level 11.
Post a Comment