How To Manage Your Music Store Overheads: 8-Step Guide

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To turn a profit in any retail business, you need to responsibly manage your overhead cost.

This is especially true in the music retail industry, where individual instruments can carry heavy price tags. Even if your music store is quickly turning inventory over, you’ll struggle to turn a profit if you can’t keep your overhead costs to a responsible level. And if overhead costs get out of control, debt piles up — and that can sink your business.

In this blog, we’ll walk through the eight-step process of managing music store overheads — including creating a budget, managing inventory and suppliers, and more. By following these best practices, you can keep your store profitable and sustainable for years to come.

Step 1: Understand Your Expenses

Whether you’re starting a new music store or your business has been up and running for a while, understanding your expenses is essential. If you’re hoping to start up a music store, do thorough research on what your expenses will be. These can vary widely based on how big your store will be, where it’ll be located, and which musical instruments you’ll sell.

Consider each of the following expenses as you do your research:

Building rental.
Building utilities.
Store fixtures and decor.
Musical instrument inventory.
Employee salaries.
Advertising and promotion.
Website development and maintenance.
POS system.
Licenses and permits.
Insurance.

If your music store is already up and running, look over all of these expenses to see if you’re overspending and if you can make strategic spending cuts. Categorize all of your expenses, so you don’t lose track of any and you can determine whether each one is essential to your business.

Step 2: Create a Budget

Creating a budget allows you to pave a path to profitability for your retail music business. When you create a budget, include all your expenses and your expected income to determine how much profit you can expect to make. You’ll likely have to do some estimating, but a well-researched budget helps you ensure your investment is worthwhile.

A budget serves as a financial blueprint that guides your decisions as a business owner. Do your best to stick to your budget and only adjust it when necessary. At times, events outside of your control change your budget, like rent or inventory cost increasing. Make sure to account for these changes and be disciplined with the parts of the budget you can control — like how much inventory to order and advertising expenses.

Sticking to your budget helps you stay financially stable. If you need additional help with your budget, you can find a variety of software online devoted to helping you calculate and stick to your budget.

Step 3: Regularly Review Your Budget

If you create your budget and then set it aside, it isn’t worth having. Regularly review your finances to make sure you’re following your budget, but keep your budget flexible so you can respond to changing market conditions. If your expenses go up, you may need to raise your prices to remain profitable. Schedule regular budget reviews so you can identify issues with your budget and address them.

To make informed decisions about your budget, you need accurate and comprehensive financial reporting. Modern point of sale (POS) systems are equipped with customizable financial reports, including data on costs, sales, profit, and other significant metrics. Implementing a cloud-based POS system gives you instant access to these metrics so you can adjust your budget accordingly.

Step 4: Negotiate Supplier Terms

Working with suppliers is key to managing your music store’s overhead costs. Build strong relationships with suppliers by making responsible purchase orders and keeping your word on payment. When suppliers view your business as reliable and trustworthy, you can negotiate better terms, including lower prices.

Work with suppliers to negotiate bulk discounts and quick delivery schedules. These help you reduce costs and speed up inventory turnover. If you’re having issues with certain suppliers, it may be time to look for a new one. Investigate multiple options to ensure you’re getting the lowest prices and best service possible.

Step 5: Secure Funding

You can better manage overhead costs if you have sufficient funding. While some individuals can personally fund their own businesses, others need to acquire outside funding. Common sources of outside funding for small businesses include loans and investors.

Remember: To qualify for a loan, you need good credit. Loans need to be paid back in full, usually with interest, while investors sometimes negotiate equity in a business rather than a loan repayment.

To secure funding, potential investors need to believe your business can succeed. Create a written business plan you can use to pitch your business, outlining what your business is, who your target market is, and your entire financial plan. Even if you’re turned down by an investor, take note of the feedback they give you so you can improve your business plan.

Step 6: Minimize Utility Costs

Utilities are another area where you can strategically reduce costs. Implement energy-saving practices like energy-efficient LED lighting and programmable thermostats that reduce the temperature when your music store is empty. Evaluate other technology used at your store, like phones, computer systems, and Wi-Fi to see if you can get a better deal.

While these may seem like small details, saving money in these areas can free up funds that can be used for other business expenses. Adopt these cost-conscious habits yourself and train employees to do the same.

Step 7: Optimize Music Inventory Management

The cost of purchasing inventory is one of the most significant music store overheads. You can reduce this cost by making the best possible use of the inventory you have. An effective inventory management system helps you accurately predict how much of each item you’ll sell, so you can purchase the correct amount — this prevents overstocking and stockouts.

Effective inventory control reduces the need for excess storage and keeps your inventory turning over. POS systems offer robust inventory management systems, allowing you to keep track of your inventory counts every step of the way.

You can further reduce overhead costs by offering consignment options. Consignment is when a customer brings in an item for you to sell at your music store in exchange for a commission. Because your store doesn’t need to purchase the item, this is a cheap way to generate additional revenue.

Step 8: Evaluate Staff Costs

You can save additional money by optimizing labor costs. Look at your staffing needs and employee schedules. Are there any time periods with more employees working than are necessary? If so, make necessary changes to make staffing more efficient.

Consider cross-training an employee to act in multiple roles to reduce hiring needs. The more each employee understands about the business, the more value they can create. Remember: It’s cheaper to give one employee a raise than to hire a new one. An added benefit of cross-training is that when issues arise, they’ll be more confident in addressing them independently.

Hiring temporary employees during peak periods can also help you keep payroll costs down. The beginning of a new school year tends to be a peak period for music stores, especially if you offer affordable instrument rentals to students. You might hire an employee on a temporary basis for a month or two around this time to help you manage demand.

How To Manage Music Store Overheads With Music Shop 360

To effectively manage your music store, you need to pay close attention to your overhead costs. Every business has expenses, but businesses that understand, forecast, and can afford these expenses are the ones that succeed. Remember to do your research, create a financially sound budget, and be disciplined in your spending. Pay attention to changes in market conditions and adjust your budget accordingly.

Implementing these strategies to manage music store overheads will help your business stay financially stable and continually grow. To put these processes in place, you need a POS system.

Music Shop 360 is an all-in-one POS solution designed specifically for music stores. With inventory management tools, detailed sales reporting, and access to the best music suppliers in the business, you can optimize your operations and increase profits.

To see what Music Shop 360 can do for your music store, schedule a demo today!