How to Build-Out Your Business’s New Retail Space!
Wouldn’t it be amazing if you found the absolute perfect location for the new brick-and-mortar location for your new business, and it was perfectly designed for your needs, fit your brand’s aesthetic, and didn’t require any kind of face-lift at all?
Yeah, it sure would. But, that kind of thing rarely ever happens. Most small businesses when they move into a new place need to do at least a small amount of renovation in order to customize the place for their needs. This could be as minimal as a fresh coat of paint or as extensive as ripping out flooring and putting new plumbing and wiring in.
We talked with Kari DeGraff, founder of Scoot! Cold Brew, a coffee company in Cleveland, Ohio, and Honeycomb alum about the buildout project she took on in opening her business. Scoot! raised $49,000 with Honeycomb, which helped scale the operation, purchase working capital, and supplement the buildout.
How much does a buildout typically cost?
A retail buildout can cost anywhere from $50 to $200 per square foot. This, of course, depends on a variety of factors, including location, the scope of your project, your timeline, and what kind of business you’re running.
If you’re opening a business in a place that had a similar business in it before, chances are your buildout costs won’t be as expensive. If you’re a restaurant moving into a space that was a restaurant before, you won’t have to build a kitchen from scratch, yay! So, previous use of the space is definitely an important factor in picking a location if you want to keep your costs down.
The building Scoot! is in now was previously a staffing office, and had old carpeting and lighting that was not up to Kari’s standards. So, ripping out the carpet, replacing the flooring, changing the lighting, and running new plumbing all became part of the process of transforming the space from a dingy office to a warm and inviting cold brew taproom.
What do I need to know before I start my buildout?
There are three major things you need to know before starting your buildout: what you’re allowed to do in the space, your design requirements, and finally that you’re going to spend more than you think.
Types of buildouts
Some landlords offer what are called turn-key buildouts, where they renovate and prepare the space for you so that it’ll be ready as soon as you’re ready to inhabit it. This might sound convenient, but sometimes landlords will use shoddy materials and workmanship in these cases, and often turnkey buildouts don’t always meet the needs of tenants.
Another form of buildout is the tenant-controlled build-out. That’s pretty much what it sounds like - you’ve got creative control in designing and implementing the build-out, but you also have all of the responsibility. It might be more expensive and more of a hassle than a turnkey (or not, if you budget well!), but it will ultimately be your call and you can make it what you want.
If you opt for a tenant-controlled buildout, be sure to talk to your landlord about tenant improvement allowances. This is often a dollar amount that the landlord pays for the buildout as the tenant is technically improving their property. A tenant improvement allowance can be used for virtually anything related to the buildout, including labor, but it can’t be used for things like furniture or moving/startup costs.
With this in mind, the second thing you need to have planned before starting your buildout is to have your design requirements ready in as much detail as possible. While there are some things you won’t know until you’ve got a space, there are also things you can plan for. Will you need a kitchen? A locker room? One thing that many businesses underestimate is the amount of storage they’ll need, so be sure you’re taking that into consideration.
Scoot!’s buildout is an example of a business having flexibility with the design and function of the space. They originally only planned to use the new building as a garage space for their delivery truck. But, they realized they could use the space for bottling. And since they were already bottling, why not design a taproom area to go with it?
Eventually, the design grew to include the bottling area, taproom, and a conference room for guests who might want to host meetings. While they weren’t originally planning for these to be part of the first buildout, all these additions were designed with the intention that fit with the company’s business model.
“We wanted to create a space that was inviting, like going over to a friend's house, but also functional, where you could operate there meaningfully,” says Kari.
The truck that began Kari’s search for a space to build-out
Finally, the third thing you need to keep in mind before starting your buildout is that it is almost certainly going to cost more than you expect it to. This is why it’s important to overestimate rather than underestimate your budget.
“I had a budget, then it kind of got tossed out the window, or otherwise different expenses kind of seeped in,” says Kari. “You don’t think you’re spending as much as you are, but then you look back and notice an extra couple hundred bucks spent on a nicer-looking floor, the unknown cost of running an extra wire that wasn’t anticipated. It kind of stacked up.”
How can I keep costs down?
As we’ve established, a retail buildout can be pretty pricey. Also, buildout costs have risen 2% in the past year, most likely due to the pandemic. While this shouldn’t deter you from building, it is also something to consider and maybe cause for you to consider padding your budget for rising costs and implement some strategies to keep costs down.
Be a DIY queen
One way that Kari was able to save money on her store’s buildout was by being a DIY queen. Kari and her team did much of the demolition themselves and did the painting and simpler projects by hand.
An impressive project they did was making the countertops and bars from scratch. Instead of hiring someone to do it, they built forms by watching YouTube tutorials, filled them with epoxy, and they were good to go! Kari says they probably spent about $1,000 doing it by hand when a professional would have cost five times as much.
“I had a lot of friends helping too, it was definitely a community effort,” says Kari.
Thrift your furniture and equipment
Another strategy that the Scoot! team used to lower the buildout costs was to use previously-loved items to furnish their store. This fits in with their business’s values, which are all about minimizing waste and doing good for the environment. They were also able to get some used equipment such as a commercial refrigerator for less money by scouring Craigslist and Facebook Marketplace.
Prioritize the essentials and put the rest on hold
A final way you can keep costs down on your first buildout is by thinking on what aspects of the build you can prioritize now, and what ones you can put on hold for a bit until you’ve generated more revenue.
It might make sense to skimp on materials now in order to save money, but consider whether you can complete your buildout in phases with good materials instead.
This also applies to renovation projects that require more technical expertise. Unless you’re a trained electrician or plumber, for example, that would be something you don’t want to be stingy with or try to do yourself, or else you might have to face the consequences, like shorted circuits or leaky pipes.
We also recommend, especially if you’re not into DIY, hiring an architect to help you design and build your space. They have a better grasp on the nuts and bolts of building, the different building codes you need to navigate, and they will be able to translate your vision into a reality in a more polished manner.
This still seems like a lot… How can I fund this buildout?
There are a few different options you can fund your buildout. A lot of entrepreneurs use their savings or revenue generated from pop-ups or online sales to make the next step into opening a brick-and-mortar.
Other business owners look to traditional forms of lending, such as banks or small business administrations. However, if you’ve been in business for less than two years, good luck getting a bank loan, and if you’re a restaurant owner, even more luck to you.
Crowdfunding is another great option for funding the buildout of your business’s retail space.
Honeycomb Credit crowdfunded loans often fill the gap between restaurants with capital needs caused by their buildouts and banks who won’t fund their projects. We understand what small business owners are going through when starting out on new ventures, and we work to not only fulfill capital needs but also strengthen relationships between small businesses and their customers, guaranteeing a loyal customer base before the doors have even opened!
Small business owners from coffee shops like Scoot to established neighborhood staples such as Kiin Lao and Thai Eatery and Square Cafe in Pittsburgh have run successful Honeycomb crowdfunding campaigns to build out or rebrand their new spaces. Square Cafe raised $250,000 in record time, allowing them to make a move to a space three times the size of their original space in the middle of the pandemic!
What is it about crowdfunding that’s different from getting a bank loan? Well, for starters, even start-up businesses can pursue a crowdfunded loan, you don’t need to have been in business for years and years. Tonic Coffee, one of our most recent campaigns, is a brand-new coffee concept moving into Pittsburgh’s Lawrenceville neighborhood, and they were able to fund their build-out with a $30,000 Honeycomb campaign.
A Honeycomb Credit crowdfunding campaign can get you the funds you need fast, so you can get started on your build-out - even while the campaign is still in progress! As soon as you hit your minimum goal, the money is yours to work with, so you can work on physically building out your space ASAP.
Another reason to consider crowdfunding is that by inspiring your fans and neighbors to invest in your build-out, you can guarantee that they’ll be the first ones in line for your grand opening.
Investing in your Honeycomb campaign deepens your customer’s relationship with your brand, turning them from regular customers into brand advocates. Meaning, they’re more likely to give you their business and encourage their friends to check you out, too!
We’ve seen that this model increases revenue up to 33%, because crowdfunding not only unlocks the capital you need for your buildout, but it also boosts your business’s visibility and status in the community since the community has invested in it.
Grow with your neighbors, not a Big Bank
Honeycomb Credit loans can help you build out your retail space with community capital and build your customer relationships in the process. This gets you the capital you need fast, improves your bonds with your customers, and leads to increased capital, launching your business into its next step. Sounds cool, right?
Sign up here to learn more about Honeycomb crowdfunded loans for small businesses: