Saving For Your Store

How Long Does It Take?

When I first started this column, I assumed that the more math-intensive discussions would turn off the casual readers. I expected a mix of existing retailers, legitimate potential retailers, and gamers curious enough to peek behind the curtain. I expected the last group would be the largest.

My logs show that readership is highest for the most math-y columns. Apparently, more of you are serious about opening a game store than I expected. That, or I bored off the curious-but-not-serious readers.

Either way, I plan to fine-tune the column’s focus to be more helpful, especially in the area of financial discussion—but not excluding marketing, store planning, and other content.

How Long Does It Take

Which brings us back to the topic: how long will it take you to save up enough cash to open?

I’m assuming that most people won’t open with pure cash. Saving enough cash to pay all the bills would take longer than most people are willing to wait. Besides, if you take out a loan, you’ll earn money faster than the interest on the loan accrues-—hopefully.

The more cash you start with, the stronger your position, for reasons I’ve stated before. To summarize, cash gives you better credit for the portion that you borrow, cash gives you more flexibility, and cash saves you from having to pay interest. It’s just plain good.

I established a goal of $30,000 for this exercise. That gives you enough cash for a couple of months’ worth of operations in many cases. It can provide money on hand for expenses you might incur before taking out a commercial loan. It’s enough to seed investment capital if you seek private investors.

As with all examples, it might not apply to you. You might need more; you might need less. Work out the spreadsheet I’ve provided to discover your specific needs.

I created 5 scenarios for this comparisons. The sixth is up to you.

Scenario 1

Let’s start with the assumptions and calculations

  • You earn $600 per week.
  • You sock away 10% off the top into one or more interest-earning accounts
  • These accounts earn an average APY of 6%.
  • I did NOT count any increase in wages, although it’s reasonable that your income should continue to climb by at least 2-3% per year.

I know that 6% is high for current rates, but you can get it. I won’t discuss options for where you can find those rates here. Besides, it’s an average over time, and saving rates will rise.

Why start at $600 and not some lower amount? If you’re earning much less, there’s not a whole lot of room for savings. You’re paying the bills. If you want to save money, you need a surplus in your cash flow.

Some people manage to save more on less income. Maybe your spouse earns enough to pay the bills and your full income is available for your personal use. Maybe you live with your parents. Whatever. If that’s you, ignore the income and focus on the savings.

I’m also assuming a single person’s finances. If you have two incomes, things become much more attractive.

The net result is that you reach $30,000 near the end of your 8th year.

Scenario 2

Add $75 per week to the income in Scenario 1. It might be a bonus, or overtime, or something else. You still save 10% of your salary. The only change is the higher salary.

You get your $30,000 at the end of your 7th year. Judging by eye, you’ll shave about eight months versus Scenario 1. Earning a little more money and saving the same percentage of each check has a marginal impact on how quickly you reach your goal.

Scenario 3

Scenario 3 takes the same income as Scenario 2, but instead of saving 10%, you save 10% of your base pay plus the entirety of the increase. Your personal contribution is much higher in this case. You’re less reliant on compounding interest. You depend far more on your consistency in savings.

You reach $30,000 in less than 4 years. That’s getting much better.

Scenario 4

Scenario 4 calculates working a second job for a reasonable hourly rate of $15 an hour for a total 10 hours per week. That’s about the rate I netted as a delivery driver the last time I worked in that capacity, over 10 years ago. Some Toys ‘R Us locations pay bike assemblers that much. I used to earn $15 per hour teaching karate through the community education program in public schools back in the 80s. The point is that the rate is out there, and it’s available in entry-level jobs.

Whatever the source, this scenario assumes that you earn yourself a bonus $150 per week and invest it all. You get to keep all of your base pay in this case. You’ll save much faster, reaching $30,000 in about 3 years and 5 months.

Scenario 5

I’m all for considering all options.

If you continue Scenario 4 for about 20 years, you could live off your interest without having to worry about broken release dates, Internet discounters, trash in the game room, worker’s comp, annual CAM adjustments, and all those other troubles. Start at 20 years old, and retire in your 40s. Spend all your time hanging out in someone else’s store.

Scenario 6

Scenario 6 is all yours.

Set your own goal. Go to this Savings Calculator . Enter your income and the amount you expect to be able to save. If you have a nest egg started, there’s a place for that.