Before you start a retail store, answer these questions:
- Are you “a merchant”? THE key to success in retailing is your ability to select a broad assortment of merchandise customers will buy.
- Do you have retail experience? To operate a retail business you should have experience in merchandising, operations (managing the business day to day) and marketing. Believing you can learn as you go is a recipe for failure.
- Will your idea will be a financial success? Complete a 12-month cash flow model using SCORE’s free Cash Flow template
- Do you know how much money you need to start your business? Use Startup cost template.
- Where will you get financing? From you, your family, banks, and investors?
- A bank or credit union will require you to contribute about one-third of the amount you want to borrow plus pledge assets in the amount you want to borrow
- Get a loan from family or friends
- Have someone personally guarantee the loan
- Borrow on your credit card
Grants are not available for a “for-profit” business. Venture capital is not a source of funding for start-ups; “Shark Tank” gives a false impression about the availability of venture capital and its terms. Watch “The Profit”. It will help you learn how to operate a business.
- Do you understand “retail math”? Understanding and using financial reports are key to your success. If you don't know your numbers you don't know your business.
- Are you a “people person” with an outgoing personality? Objectively evaluate your strengths and weaknesses and understand the challenges you'll be facing.
SCORE counselors are available to help you develop your cash flow model, your business plan and evaluate options for financing.
Planning retail store includes:
- Identifying your “niche”. Do you know your target customer and her wants and needs? This will determine the products you offer and your marketing plan.
- Planning your Merchandise. Create a 12-month sales and inventory plan by season, merchandise classification, turnover, and markdowns.
- Choosing a business name. What does it mean to your target customers?
- Building your team. It should include an attorney, a CPA, and an insurance agent.
- Obtaining the permits and licenses to operate your store.
- Designing the layout of your store.
- Ordering shipping supplies.
- Evaluating shipping services. Can you afford to offer free shipping? Next day “free” delivery by Amazon Prime is tough competition.
- Selecting a point of sale or POS system. Consult with your CPA before buying the system to determine which system is best.
- Choosing a credit card processor and the types of credit cards you will accept.
- Establishing a “Policies and Procedures” manual for customers and employees.
- Developing your pricing strategy. This should be done by merchandise classification. Decide how long will you offer merchandise at regular price before marking it down and figure out how will you dispose of merchandise that does not sell.
- Developing your marketing plan. It must be implemented before you open. The day you open you must have customers. Use social media to continuously communicate with your customers and prospects.Many companies are using customer analytics and social media to enhance their relationship with their customers. How will you compete with well-funded companies who have a team of people working on these and other technologies?
The risk of starting a retail store is that no one knows what the future looks like and the world is changing faster and faster. A great strategy and a solid business plan today might fail tomorrow.
If you choose to go ahead and start your business, don’t cut corners in planning and don’t start unless you are well capitalized.
SCORE has counselors with lifelong experience in the retail industry. If you come to SCORE make sure you work with an experienced retail specialist. Use SCORE as a resource as long as you operate your business.
Contact the Author: firstname.lastname@example.org