Small Grocery Store Business Plan, With a Projection

A small grocery store runs on a thin margin and a lot of volume. A convenience store keeps about half of each dollar; a grocery keeps closer to a third, and then loses some of that to produce that wilts, meat that has to be sold in days, and a deli that throws away what doesn't sell by closing. So the plan works by department, in dollars of sales, with each department's shrink in its cost, and it has to reach enough sales to cover a wall of coolers and a payroll big enough to stay open seven days. In the example below, a grocery in a small Nebraska town opens with $284,500, loses about $2,600 in its first year on $1.1 million of sales, and makes about $4,500 each month at full speed, before the owner's pay. Below is each part of the plan, the first year month by month, the startup budget, and a free template.

The short version

• Describe the store in a paragraph: the town, who shops there, what they can't get closer, the goals.
• Plan sales by department, in dollars: grocery, produce, meat, dairy and frozen, deli and bakery, household, local.
• Cost each department per $100 of sales, with its own shrink: produce and the deli lose the most.
• Fixed costs are rent, wages and refrigeration; they're most of the plan.
• Licenses: a retail food permit, certified scales, a sales tax permit, SNAP authorization, and beer and wine if allowed.
• Budget a full opening inventory, refrigeration, and working cash for the months before break-even.
• TaroStack keeps dates on the perishables, records shrink by reason, and makes the deli's and meat counter's batches from stock. More below.

Part 1: the business description

Loup River Grocery, a made-up grocery store in Ord, Nebraska, I use in these examples, writes:

Loup River Grocery is a 4,500-square-foot grocery store on the town square, open seven days, with fresh produce, a meat counter that cuts and grinds daily, dairy and frozen, a deli and bakery case, household goods and products from farms and makers in the valley. In its first year it aims to reach $110,000 of sales a month and keep produce shrink under 5%.

Part 2: licenses and permits

A grocery needs a retail food permit from the state or local health authority, which inspects the coolers, the meat counter, the deli and how food is stored and labeled. Scales used to sell by weight are registered and inspected by the state's weights and measures office. A sales tax permit covers the taxable items, which in many states don't include most groceries. Accepting SNAP means applying to USDA, and in a small town a good share of customers may pay that way; WIC is run by the state. A meat counter that cuts and grinds for its own customers is generally run under the retail food permit; selling that meat wholesale to restaurants brings in USDA's rules. Beer and wine need their own licenses where the state allows them. The plan budgets $2,500 for licenses and permits. This is general information, not legal advice.

Part 3: what each department earns

Each department is planned per $100 of sales. Its variable cost is what the goods cost, 2.5% card fees, and that department's shrink:

At full speed the store sells $110,000 a month at a 30.8% gross margin and keeps $28,611 after variable costs, 26.0%. The center store brings $10,780 of it on two fifths of the sales; the deli and bakery bring $3,212 on 8%, the best return on each dollar even after throwing away 6%. Produce marks up well and loses the most to wilting, so how much produce is ordered, and how often, matters more than its price. How contribution is worked out is in contribution margin example, and margin against markup in markup vs margin.

Local products are a small department and a reason to come in. What a store asks of a local maker before stocking them is in selling to grocery stores requirements.

Part 4: the first year, month by month

Fixed costs are $24,150 every month: rent ($4,500), wages for a manager, clerks, a meat cutter and deli help ($14,500), utilities and refrigeration ($3,200), insurance ($600), registers, scales and software ($350), and trash, repairs and other costs ($1,000). Sales start at 60% of full speed, as word gets around:

The year's sales are $1,104,300 and the year loses $2,572, before the owner's pay. The store breaks even at about $92,800 of sales a month, which it passes in the seventh month; the first six lose $20,698, which the working cash covers. At full speed, $4,461 each month is 4.1% of sales, and it's where the owner's pay comes from. One point more of produce and deli shrink costs about $220 every month.

Part 5: the startup budget

Refrigeration is the biggest line, and buying it used, or opening in a building whose last grocery left its cases behind, is where the budget shrinks most. The $234,500 spent before working cash doesn't come back quickly from $4,461 each month, which is why small-town groceries are often opened with money the town raises: shares in a community-owned store, a building the town buys and leases at a low rent, or grants and loans for groceries in places without one.

Part 6: running it

Produce and the deli are ordered small and often, from what sold last week, not from what's on the order guide. Meat, dairy and deli food are rotated oldest first, and what's close to its date is marked down before it's thrown away. Shrink is recorded by department and reason, so the month's loss says whether it was wilting, out-of-date milk or theft. The store is counted in sections, perishables weekly. How first-expired-first-out works is in FEFO vs FIFO, and what to do with stock past its date in what is expired stock.

Get the template

Download the small grocery store business plan workbook. Four sheets: your departments, each per $100 of sales with its variable cost and hundreds a month at full speed; the first year, month by month, with sales, profit and cash; your fixed costs; and your startup budget with working cash. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

A plan in departments hides the items: eight thousand of them, produce that changes price every week, a meat counter that turns a side of beef into steaks, roasts and ground beef, and a deli that makes salads and sandwiches from what's on the shelves. A spreadsheet can't say what the ground beef cost after trim, which lot of beef went into Tuesday's grind if a supplier recalls it, or which department's shrink grew this month.

How TaroStack does it

TaroStack keeps dates on the perishables, records shrink by reason, and makes the deli's and meat counter's batches from stock.

The store's own kitchen. The deli's chicken salad and the meat counter's ground beef are recipes: a batch takes the chicken, mayonnaise and celery, or the beef trim, off stock, costs what it used, and gets a lot of its own with a date. If a supplier recalls a lot of beef, one recall report shows which batches it went into and what's still in the case. How lot numbers work is in what is lot tracking.

Dates, oldest first. Meat, dairy and deli food keep their dates, the oldest goes first, and an alert comes before a date runs out, so it's marked down instead of thrown away.

Shrink with a reason. Every adjustment carries its reason, expired, spoiled, damaged or lost, so produce wilting and out-of-date milk are reported by reason, item and site, not lumped into one number.

Recipes, batches, lots, expiry and losses by reason are on every plan, from $49 a month, with no limit on items; TaroStack connects to Square. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

How much does it cost to start a small grocery store?

In the example, $284,500: $90,000 of refrigeration, $70,000 of opening inventory, $30,000 of build-out and $50,000 of working cash are the biggest parts.

How much does a small grocery store make a month?

In the example, $110,000 of sales a month at full speed and $4,461 left before the owner's pay, about 4%.

Is a small grocery store profitable?

Thinly. The example loses about $2,600 in its first year and makes 4.1% of sales at full speed; produce and deli shrink decide much of the difference.

How do you make a small grocery store profitable?

Order produce and deli food small and often, mark down before the date, record shrink by reason, and grow the deli, bakery and local products, which keep more of each dollar.