How many months does it take to get your investment back when you open a shop today? Information that entrepreneurs need to know!

The starting point for many people opening a restaurant or beverage shop is Passion And it often ends with the word “failure” or exhaustion but no profit. Passion gradually disappears and becomes suffering instead. That’s because running a restaurant is not enough to just have passion. You must also have a mission in order to have a chance of success. Especially the first step before investing, entrepreneurs must first assess that: Is it worth investing in this shop to make a profit and get a return on your investment? Which many people also do not do this, which means that it is an investment without knowing the future. But if the entrepreneur has done a financial feasibility analysis or Financial Feasibility This will allow you to assess the possibility of a return on your investment and provide a preliminary answer on whether or not you should invest in opening a shop. The first thing to know is where the funds are used.

The first set of data that prospective entrepreneurs need to use to conduct a financial feasibility analysis is: Sources of capital use: What are the available funds used for? What proportions are they used for? As follows

When we know where the investment money will be spent, we will have the initial budget to use for further analysis to see what the shop we will invest in will be like.

Is there an opportunity to make sales worth the investment? The data to be used for analysis comes from Study of the market feasibility of How much revenue can this store generate? Estimated cost information For example, raw material costs, operating expenses. When we get this set of information, we add them together by subtracting estimated income from estimated expenses, which will result in net profit, which is not yet a real profit figure because net profit is accounting profit. In this sense, profit may be in the form of assets such as buildings and equipment. Another figure that we need to find is net cash flow, which is actual income and actual expenses, to know how much net cash flow we have each day. All of this information will help us know how much investment the shop we are going to invest in has, how much income we will get back each day, each month, each year, and how long it will take to get net cash equal to the total amount we invested. The most important thing in doing this assessment is that the data used in the analysis must be real data, not guesswork. 

The goal of financial feasibility analysis is to provide us with four possible returns:

Let's delve into the details of the investment budget to see what needs to be done to set this budget and manage it so that it doesn't go over budget. First of all, we need to know what kind of shop we're going to open, what the shop's concept is, who the target customers are, what the shop's size is, and how much investment is needed. This is basic information first, then we will look at the details such as: Deposit If it is a rental place, how much is the rent? How much is the deposit? Most often, we forget to consider the deposit, which causes us to miscalculate the investment. For example, we have prepared 100,000 baht in capital to open a shop, but the lessor asks for a deposit in advance for 4 months, 100,000 baht per month, totaling 400,000 baht. Problems arise immediately because we did not prepare this money. Therefore, do not forget to check the rental conditions carefully. Design and decoration costs

The design budget should be set according to the purpose of the shop design. Set the investment budget for design and decoration in 2 budget ranges: the minimum estimate and the maximum estimate so that we have room to adjust the budget as appropriate.

Cost of kitchen equipment, various service equipment

It is necessary to specify the details of what items are required. We can discuss our requirements with the interior designer or architect so that they know the budget we have set. They will be able to design according to the budget and based on our requirements.

Advertising costs

This is another point that is often missed and not thought about from the beginning of budget determination, but often thought about later, causing the budget to be increased. This part must be clearly clarified from the beginning, such as what type of advertising media will be used, in what proportion, what the storefront sign will look like, etc.

Cost of raw materials for opening a shop

This is also the case. Most SMEs will pay for it later, not in the initial investment budget. It must be clearly stated how much money is needed to pay for raw materials to open a shop, so that they can plan to manage raw materials appropriately.

Other costs of opening a shop, such as various licenses

Although it may not be a large amount, it is still considered one of the investment items that must be included in the investment budget.

Employee costs before opening a store

Many people may wonder, is there such a thing? Why do we have to pay employees even though the shop is not open? Don't forget that we have to recruit and select employees to train them first to prepare them for opening the shop, so we have to pay them wages.

Utility costs, material costs

For example, water bills, electricity bills, meter deposits, paper, pens, and other miscellaneous expenses must be collected.

Reserve Fund

You should also prepare this part in case you are opening a new shop, there are no customers yet, no income yet, but expenses occur every day. You must have reserve funds to pay for various expenses so that the shop can open for a period of time. At least you should have this money set aside for at least 3 months.

Example of calculating the rate of return on an investment (ROI)

Now that we know the details of investment analysis and what items need to be considered, let's try to give an example to help visualize it. Suppose that from the various data analyzed, this shop has invested a total of 9,000,000 baht. From the marketing data collection, it was found that this shop will have 3,000 customers per month or 100 customers per day and has an average income per person of 400 baht, which means that this shop will have income per month of 1,200,000 baht. The restaurant's food cost is 35%, which is equal to 420,000 Baht There are other total expenses such as salary, rent, water and electricity bills, which are approximately 500,000 baht.

Monthly sales 1,200,000 baht
Food costs per month: 420,000 baht
Total monthly expenses: 500,000 baht
= Monthly profit 280,000 baht
If it is annual profit = 3,360,000 baht
This information is used to calculate the return on investment (ROI) as follows:

Calculation formula = Net profit divided by Investment multiplied by 100
3,360,000 / 9,000,000
= 0.3733 x 100
= 37.33% per year

The question is 37.33% per year. Is it a lot or a little? Let's think about it. If we deposit 9,000,000 baht in a bank at the current interest rate or invest it in other businesses, will we get an annual return of 37.33% or not?

And if you want to know how long it will take to get your investment back, calculate as follows:

Payback period calculation formula = Investment amount divided by net profit

Shop investment 9,000,000 / 280,000 = 32.14 months or 2.68 years

If we think that with an investment of 9 million baht, it takes more than 2 years to get the investment back, it is acceptable, then we can invest. But if we think it is too long and we want the investment back to be faster, one way is to go back and review the investment to see how much it can be reduced, etc.

There are also other important details that those who are thinking of investing in opening a restaurant should know about many issues. Every issue affects the investment decision and the adjustment of the investment format to be appropriate and return the investment in the desired period of time. All details can be learned from the Restaurant Business Feasibility Study Course. Interested in learning for free, click.

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