It might be more than you think.
Running your own jail commissary should be the most profitable way to do it, right? Not always. Many of the facilities who are running a self-op commissary program think they are getting 50-70% profit by doing it themselves. However, there are many hidden costs, issues, and hassles that cost more than you expect. We have detailed a few of the factors that often are overlooked when running your own commissary.
Technology & Accounting Costs:
Technology, software, and many other things just to run your commissary may be more expensive than you initially planned. There is an accounting cost to tracking inventory and inmate balances, especially if you are using software designed to assist with these functions. As we all know, technology isn’t cheap. You have to pay for the systems, software, and any other technology needed to run your commissary up front. This can be a larger investment than some plan for and can set them off on the wrong foot from the beginning.
Generally, you can estimate $4.00 per inmate per month for accounting supplies and 3% for inventory shrinkage.
Have you thought about the storage needs for your commissary? How are you storing your goods? When running your own commissary, you need adequate space for both dry goods and food storage. If the space you have allocated is too small you may not be able to offer everything that you were hoping which would cut into your profit margin. Food storage comes with another hiccup many people don’t initially think about. Your storage must meet the proper requirements that are mandated by the Federal Government. The space to store everything will ultimately take away from something else. Do you have space allocated to store everything? Is it enough space to store everything you want to offer?
Add another $5.00 per sq. ft. of space for facility cost and $4.00 per inmate for commissary supplies.
Inventory, processing inmate orders, supply ordering or store purchasing time, all of these things take time and time costs money. Do you have enough of a profit margin to sustain and make the commissary as successful as it can be? There will be staffing needs to process everything and manage it. Dealing with vendors also takes time.
Depending on what you are wanting to offer you could be dealing with over 15+ suppliers or having your commissary officers running all around town to stock the commissary supplies. It will take a lot of time and a good system to manage them all and make sure that everything gets handled accordingly.
Add transportation costs and staff labor hours to purchase goods to the bottom line.
Maintaining Equipment and Space:
During the course of running your commissary, you will need to update and possibly replace the technology and systems that run your commissary. Your storage needs will also have maintenance and replacement costs due to normal wear and tear. Have you planned for this ongoing expense? It can add up and take a big chunk out of your commissary’s bottom line. Not only will it take money to keep it all updated and compliant, but when you have to make the changes/repairs that will also cost time and staff resources as well. It can add up quickly if you aren’t prepared.
Add in maintenance costs for the facility and computer systems.
There is a lot that goes into running your own commissary that many don’t stop to think about before they are in the thick of it. Little things here and there will add up in the end and may hurt your overall sales and profit margin. Added storage needs, staffing needs, higher overhead, technology, maintenance, loss of product due to damage, and many more can be things that will add up over time and hurt your profit margins. Have you thought about all of the different facets of your commissary? Are you REALLY getting the profit margin you think you are?
Here is a quick overview of calculating your costs:
Monthly Cost of Commissary Products $________
Add 3% for Inventory Shrinkage $________
Add $4.00/inmate for Accounting Supplies $________
Add $5.00/sq. ft. for Facility cost $________
Add $4.00/inmate for Commissary Supplies $________
Add Transportation cost and staff hours to go purchase goods: Add Computer Maintenance Costs per year $________
Total Monthly Cost $________
Total Annual Cost (X12) $________