How Does it Cost To Start and Operate A Shaved Ice Business?

January 10, 2019

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If you ever wondered do those little snow cone shacks, push carts, or trucks have any revenue potential, the answer is simply – yes. Shaved ice business is a small but profitable niche market. In this article, we will break down some factors that go into determining annual shaved ice business costs and potential profits.

Since there are many different types of shaved ice businesses, the overall investment you’ll need to make can vary widely. On the low end, you can get started for as little as $500 for a mobile-style popup shave ice business serving shaved ice at parties and various events. On the high end, the sky is really the limit – you can easily spend over $500,ooo to build out a very high end shave ice shop in a high rent area. The actual amount you’ll need to invest will depend on the style of shaved ice business you’re looking to start.

Is the shave ice business the right choice for you?

Before even starting shaved ice business you should start looking inwards to be sure if this is something you should invest your money in. On one hand, it’s easy to look at long shaved ice lines and the money you could make from this business. On the other hand, remember that as with any business there will be a lot of challenges too. This is something that you will need to be honest with yourself about.

If you enjoy being sociable, talking to people, and working at fun events, it’s a great business to get into. At the end of the day, if you enjoy and are passionate about what you do, it’s going to make it much easier to get through any tough times.

Be aware that this business model can be highly weather dependent. That means if you have rainy weather, you’ll have a decrease in sales. If you have an unseasonably wet summer, it can really hurt your yearly profit. The same goes for selecting events to vend at. If you pick the wrong events, you won’t be able to generate as much compared to someone who had selected an event that was well attended and had nice weather.

And nice weather or not, if you don’t live in a place with year round warm weather a shave ice business is always going to be highly seasonal. For this reason, many shave ice businesses close during winter months in places with cool winters. People aren’t likely to want a cool shave ice after they shovel the snow out of their driveway.

The truth is that many shaved ice businesses don’t generate anywhere near 6 figures in annual revenue. Many people start shaved ice business as a way to make a little money on the side during the warmer summer months. That way, a business may only generate between $1000 – $1,500 in total profits each month. However, you can easily pay off your equipment within just a few months of operating a business at this level.

Even if you start out by having shaved ice business that only operates on holidays or weekends, it doesn’t mean that you need to operate as a small business forever.

Different Types of Shaved Ice Businesses

Stationary shaved ice business

A stationary (AKA brick and mortar) location will require the most overhead out of all business models for selling snow cones or shaved ice. On the other hand, this model offers the best opportunity to get the top line revenue since you’re always in a fixed location. Unless you’re planning to close for a portion of the year (while still presumably paying rent) having a brick and mortar shave ice shop is probably only viable in warmer climates.

Shaved ice truck

If you plan to operate form shaved ice truck or a step-van, you will not have to pay monthly rent, but many of the other costs will be the same.

One additional expense you should add to your shaved ice business plan is the cost of shaved ice truck or step van. The cost can range anywhere from about $10,000 – $100,000 depending on whether you want a truck versus step van, used or new vehicle, and depending on what type of customizations you would like to have. The other added expense you’ll need consider is regular maintenance of a vehicle and of course, gasoline.

A Shaved ice truck may be a good option in areas with cooler winters, since the truck can be stored for the winter months. If you have a brick and mortar shave ice shop, you won’t have this benefit. You’ll still ben paying rent – even if you close for the winter.

Pop-up Stand or Kiosk

Having a pop-up stand or buying a little push-cart is the lowest cost path to start a shaved ice business. For your initial investment, you can get everything you need from equipment to supplies or permits for under $5,000. Given the fact that the shaved ice stand entry cost is so low, you are in a position to regain the investment quickly, within just a few months of running the part time business. This, of course, is provided that you find a good profitable location. From there you can either expand the business by opening additional kiosks or simply keep the additional cash to improve the quality of your life.

Best of all, by starting out with a simple pop-up stand you can vend at places like farmer’s markets, special events, fundraisers, birthday parties, school events, festivals, and more which is a good way to “test out” if you like running this model of business without big financial risk.

Below are the rough but indicative figures of the annual cost of a shaved ice stand business

Shaved Ice/Snow Cone Machine – $1,000 – $3,000
Straws – $200
Flavor Syrups (Initial Inventory) – $500.00
Cups – $400
Permits / Licenses – $500
Prep Tables – $1,000
Banner & Tent – $2,000
Uniforms – $300
Total Estimated Cost: $6,900

Shaved ice business profit- potential case study

And now, let’s look at one example of shaved ice business profit to get a sense of the overall potential of running a shaved ice business.

Bahama Bucks are a franchise opportunity with stores in many parts of the United States including California, Nevada, Texas, and many others. They refer to themselves as the Original Shaved Ice Company. Their core product is shaved ice, but this franchise diversifies its product offerings to include coffee and smoothies.

If you take a look at the franchise disclosure document for Bahama Buck’s, a document required and reviewed by the Federal Trade Commission, you’ll notice that average sales were $463,387 annually in 2015. The top 25% of franchisee’s generated over $600,000 in reported top-line revenue. That’s a lot of snow cones and shaved ice sold in only a year!

What is the average cost to open a shaved ice business?

Labor and rent expenses

Despite the exceptional margins on a snow cone, two variable costs can prevent you from realizes your businesses profit potential: the rent and the labor.

If you have the overhead of a high-priced space, you’ll need to sell a lot more product on a regular to balance books. If you have a higher rent with a large volume of traffic, then the monthly payments can be 100% worth the investment, so it would be necessary to consider before signing up papers on a 1-year rental agreement.

Sales for a typical shaved ice business will average anywhere from $100 to $2,000 a day, depending on your competition, location, and the length of your season. The process of setting up your shaved ice business includes making a decision about your business location which should be preferably a high-traffic area with convenient access. Once you’ve found the ideal spot, rent will be one of your initial costs.

Rent prices may range from $100 to $500 a month, depending on the location and your arrangement with the property owner. Search for the best price and have the terms of your agreement clearly spelled out in writing. Based on our experience, we suggest getting at least a one-year lease with the option of rent renewal for one additional year. This allows you to get accustomed to a particular location before committing to a long-term lease.

Labor is the second big cost that can get your business out of control. If you are planning to run the shaved ice business yourself, you can completely wipe this expense off of your books.

There are a couple of factors that will determine your labor expenses. First, is where you plan to locate your business. If you operate the shaved ice stand in some parts of California you may need to pay $15.00 an hour for a trustworthy employee. If you live in rural Tennessee, you may only need to pay $10.00 an hour. You can also help employees supplement their hourly wage by putting out a tip jar.

At the end of the day, if you want to grow and make real money from this venture, supervising labor expenses is going to be one of the critical parts of operating the business.

Perchance, you will not be running your shaved ice or snow cone business just by yourself. Therefore, labor will possibly be your biggest expense and you should be aware of the potential costs.

For instance, during the sunny weather, we would recommend having at least two employees at the stand. However, in gloomy weather, you will have to send one of the employees’ home. This way, you can keep labor costs down and save hundreds of dollars.

Insurance

Insurance is an extremely important factor for any business, as it helps you stay prepared for any unexpected conditions. There are four types of insurance that you will need, and your insurance agent or attorney can help you determine what will work best for your business budget and needs.

1. General Liability – Protects you if a visitor to your business is harmed or injured in any way

2. Product Liability – Protects you if your products harm a customer

3. Property Insurance – Protects you in case of fire, theft or another type of damage to your business or equipment

4. Worker Compensation – Protects your employees, as well as the company, if they are injured while at work; usually required by the state and may or may not cover the owner of the business

Vehicle expenses

If you operate a mobile shaved ice stand or purchase supplies using your personal vehicle, you may be able to take as a tax deduction on your yearly tax returns. Keep a logbook of any mileage used for business in your car, as proof for the IRS, come tax time. A legal or accounting professional can help you figure this out.

Printing and advertising

In the end, be aware that in order to grow your business you should do some serious marketing efforts. Once your business is operating, the next step is getting as many customers as possible! In order to do that, you need to invest in printing customer loyalty cards, professional displays/signage, and coupons. You can also run a radio or newspaper adds ads and these tend to be expensive. When it comes to marketing your shaved ice business, social media can be an excellent and affordable way to promote it.

Strategies to Boost Your Shaved Ice Shop Brand Awareness and Create Your Corporate Identity

Listed below are the platforms you can leverage on to boost your brand awareness and create the corporate identity for your shave ice shop business:

• Place adverts in both print and online magazines

• Sponsor relevant community-based events

• Leverage the social media platforms like Facebook, Instagram, Twitter, YouTube, Google + to promote your shave ice shop business

• Install billboards in strategic spots all around your city

• Distribute your fliers in target areas

• Contact key stakeholders in the city where your shave ice shop is located informing them about your shave ice shop business and the flavors of shave ice and ice desserts you sell throughout the city

• List your shave ice shop business in local directories

• Advertise your shave ice shop business via your official website and employ strategies that will help you pull traffic to the site

• Ensure that all of your staff members wear your branded uniforms or shirts and all your vehicles are well branded with your company logo.

If your intention is to grow the business beyond the location where you are going to be operating from, then you must be ready to spend more money on advertisement and promotion of your brand.

No matter the industry you belong to, the truth is that the market is dynamic, and it’s necessary to create consistent brand awareness and to boost promotion to continue to appeal to your target market.

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