Every time I pass a store I wonder “How do they stay in business? How do they make money?” With so many businesses so empty so often you just have to wonder how it all works out. What are their keys to profit? How do they make rent? How do they pay their people? How do they cover their bills? How do the owners take something home at the end of the day?
With the help of Edward Glaeser, a pioneering urban economist at Harvard, New York Magazine profiles a diverse range of New York businesses including a private school, a yoga studio, a drug dealer, a sex shop, a cab driver, a copy shop, a 4-star restaurant, and Goldman Sachs.
Best way to make money as a drug dealer: Sell to many users in small quantities. “It’s like taking a pound of coffee and selling one grain at a time,” says Nick. “If you sell by scoops, you’ll make a couple thousand dollars, but if you break it down into quarter grams and work for a few days, you’ll make tens of thousands.”
Most profitable fares for a cab driver: Low-traffic city trips: “Every time somebody gets out, someone gets in, and I get my $2.50.” Midday airport runs: “At 3 p.m., there’s no traffic, and so many planes are coming in that you get $90 plus tips.”
Most profitable for a copy shop: Restaurant flyers. Those annoying restaurant flyers fuel the photocopy industry. Local restaurants order 1,000 new flyers every three days.
Least profitable diner customers: The elderly. They have a tendency to return food.
It’s enlightening. [via kottke]
JCK
on 05 Jun 07Reminds me of the Onion article “Even CEO Can’t Figure Out How RadioShack Still In Business”
It does make you wonder how some places manage to stay open…
Mrad
on 05 Jun 07Dude, I totally feel ya. I think I’d be the worst business major ever. I just don’t get how most of these businesses make it.
Dan Boland
on 05 Jun 07@JKC: Oh man, that’s funny. I’ve been calling RadioShack “Batteries & Adapters” for years.
ani
on 05 Jun 07Jason, We are yet to hear about the Small Talk session in AIGA. Please update us.
Dave Rau
on 05 Jun 07That article was amazing! One of the most interesting things I’ve read about business in recent memory.
I had no idea how little a pizza place in NYC might make; $18,000 a year PROFIT? That’s crazy.
Great read.
Andrew Paterson
on 05 Jun 07And what’s so interesting is that the web is making it easier for literally millions of people around the world to become “entrepreneurs” themselves – after all, the most profitable BP’s are those “mom & pop” shops afterall…
nexusprime
on 05 Jun 07I walk a lot, so I often find myself rating businesses by how long they’re going to be around, on my walk home from work.
Some things are quite obvious, others not so.
Among my successful predictions were a bar, cafe, and silverware shop (all for pretty much the same reason, location, location). Someone just opened a new bar, and I have the same judgement: They didn’t do their research, they opened an old man’s pub in a predominantly student area.
Among my misses: An antique/pawn/general furniture store that simply keeps chugging along. I think I know why now though, despite appearances, the owner does manage to shift a lot of goods, and must be making a decent margin, based on how much I got offered for him taking something unwanted off my hands (I learned, and now use the local equivalent of eBay).
The other is a tea shop in the middle of nowhere – In between a car park, and an alley. I thought it would never work. Obviously the owner knows their target market though, the place is full 24/7 with Asian students enjoying the (very good) tea and atmosphere.
Seeing how much turnover there is in small businesses though, has hammered home to me how resilient you’re going to have to be personally to make something work.
financial surfer
on 05 Jun 07If you are non of the business categories listed above but just a common credit cardholder, you can make some money out of a wise credit card management, like transfering your balances on lower interest cards. There are still other ways. And you do not need to undertake.
D
on 05 Jun 07That thought has crossed my mind countless times – Looking forward to reading the article
Ian
on 05 Jun 07I just left NYC after 11 years, but in all that time I always wondered how certain bodegas stayed in business … especially the ones in the high rent areas. I always wondered if there were a few really smart bodega owners who bought the buildings many many years ago.
Benjy
on 05 Jun 07I found that to be really interesting, too. But some of the numbers don’t seem appropriate—particularly the “profit” listed for small businesses, like the pizza place or cabbie.
The cabbie supposedly makes $12,000 in profit, but clearly that’s not equal to his take home pay if revenues are $75k and expenses are about $42k. The expenses already cover capital expenses like car replacement and debt servicing of his medallion. So he takes home about $33k a year. How does one differentiate take-home pay from profit? While I understand that the article profiles “businesses” at the one and two man privately held operation level isn’t takehome pay the more relevant number?
anonymous
on 05 Jun 07Meh, making a lot of small deals is a lot of work. You end up dealing with a lot of idiots, a lot of flaky people, a lot of people that want freebies. I think you’re better off being one level up from the guy dealing with end users. You’re not dealing with serious jail-time amounts, you’re not dealing with enough money to be worth robbing, and you’re only making transactions with a few people that you know relatively well and trust.
tapster
on 05 Jun 07I have the same thought almost every day… how the hell are there 6 or 7 hair dressers round the corner from my house… 2 even next door to each other. Obviously they make it work, but it never ceases to amaze me
N
on 05 Jun 07I live in a pretty busy area of Toronto, and know two different stores that are only open three days a week! I feel so confused about how they can make rent, but I’ve talked to the owners of both stores, and they both agree that they lose money on staffing if they’re open Monday-Wednesday, but the weekend handily keeps them afloat.
I keep waiting for the out of business signs to go up, but instead, I find them getting busier and busier, and increasing staff on the days they’re open.
I don’t think I could be a business person. Too much of it seems counterintuitive.
Anonymous Coward
on 05 Jun 07Hi all, thanks for the kind words on “The Profit Calculator.”
Benjy, to address your comment: Pekoh’s annual gasoline cost is $18,000. That figure’s on the magazine page, but initially didn’t make it to the online version of the article. We’ve now corrected it; thanks again for reading so closely.
Dainel Lundqvist
on 07 Jun 07Great post. Keep up the good work.
Daniel Lundqvist http://www.mlm-program.com
This discussion is closed.