Ice Cream Shop Failure Rate and How To Beat It

Every business faces challenges, especially during its beginning year. A fun ice cream shop can be a struggling business when done incorrectly. Despite its well-established popularity and demand, it is not a fail-proof enterprise. Do you want to know its failure rate and how to beat it? Check this article to find out.

The Bureau of Labor Statistics reported that 20% of small-scale businesses fail within their first year and another 50% fail during the first 5 years from their inception year. But you can beat failure through excellent management, sufficient startup capital, and an understanding of profit margin and how it works. 

Although there’s no accurate guidebook to a successful ice cream business, there are tips and available information from experts and experienced entrepreneurs to help you with your new ice cream shop. 

Excellent Management

In any business, poor management is the most common cause of failure. People think that running an ice cream business is as simple as hiring a minimum-wage employee to run the business. This is where things start to spiral.

An entrepreneur should know that excellent business management starts from planning, procurement, execution, and learning from everyday trial and error. Hence, entrepreneurs should give time to focus on the business. Even a simple business like an ice cream shop requires expertise and experience.

Your business needs a team of collaborative staff that works harmoniously. Start by hiring skilled and experienced staff especially if you’re new in the business. This way, you will learn from them as you go along. Listen to your team, be teachable, and take care of your employees the same way you take care of your business. 

Always follow government policies, conduct auditing and inventory regularly, maintain the sanitation of your shop, and advertise your business. You can manage your shop while working a full-time job. Just make sure to render adequate time to man your business, observe, and help in the daily operation. It’s also an effective way to build rapport with customers if they see the owner doing the tasks first-hand. This makes them feel special and that you’re serious about your business.

2. Sufficient Startup Capital

Yes, an ice cream shop requires minimal start-up capital, but you need to have sufficient funds to keep the business running especially during the first few months. Don’t expect that your business will immediately find its momentum as soon as you open. It takes time to establish your presence, create a name in your local market, and start generating profit. 

Don’t get trapped by the idea that your startup capital only includes your operating expenses when creating your business. It should include overhead expenses and on top of that, you should have emergency funds in case your business starts losing money for the first 6 months. The key to a successful business is to keep operating even during tough times. How are you going to do that if you don’t have money to keep it going?

But hey, don’t lose hope. You can still pursue your dream business even with low capital. You can either wait a little longer and save up more money or change your business plan. You can shift your business concept, finance your equipment or purchase durable used machines. 

Remember, every business needs adequate time and money to prosper. Not having both increases your chance of failing. 

Ice Cream Trucks are This Profitable 

3. Understand Profit Margin and How it Works

Understanding profit margin is one of the keys to a successful business. In the ice cream business, the profit margin is high. Depending on your chosen concept and the demographics of your local market, your profit margin can range between 15%-50%. This is considerably high, but the problem is, the operating cost is almost the same as with restaurants but the volume of sales per customer is limited. 

What most entrepreneurs fail to understand is that ice cream shops have significantly high fixed and variable costs. These costs shouldn’t be taken lightly and should be budgeted accordingly because that’s where the shop gets its daily operating expenses. 

To be able to sustain the operating expenses and generate profit, you need to think about your profit margin from the get-go. It’s okay to compromise, but do not bend just to beat the competition. Remember, you are running a business and you need to generate profit at the end of the day. You can reach out to suppliers, and ask for bulk or wholesale prices, especially the basic ingredients. It’s also vital to create harmonious relationships with suppliers so you’ll easily get access to bulk prices once you’re ready to scale. 

All these may sound complicated but proper planning, a solid business plan, significant marketing research, and listening to other people’s advice and experience can help you understand the nature of the business. Lastly, know when to let go of the product when the numbers don’t add up. 

Conclusion

Business is always a risky endeavor and the chance of failure is imminent. As an entrepreneur, you need to acknowledge the risks and reasons why ice cream shops fail for you to avoid committing them. Bureau of Labor Statistics data indicates that 20% of small businesses fail during the first year and 50% fail within the first 5 years of their operation. However, you can prevent yours from failing by ensuring correct and excellent business management right from the get-go, having sufficient starting capital, and understanding the concept of profit margin and how it works. 

You need to protect your business. The best way to do this is to plan not to fail by knowing the causes of failed ice cream shop businesses. Experience is the best teacher so use other people’s experience and these recommendations as an inspiration and guide to avoid failure.

The Day Of The Week When The Most Ice Cream Is Sold

Frequently Asked Questions

To learn more on how to start your own ice cream/gelato business check out my startup documents here

This blog post is provided for informational purposes only. The information contained is not intended to constitute legal advice or to substitute for obtaining legal advice from a qualified attorney.