There’s a lot more to opening a retail store than meets the eye- especially in today’s competitive market. In order to be successful, you must have a business plan and legal structure for your business, have an ideal location, startup funding, products, and a team of employees.
In this blog, we’ll outline 13 simple steps to start your retail business.
Create a business plan
This is critical for any business because it gives you a path to follow, ensures you’ve done your market research, and sets you up for success. According to the SBA, there are two types of business plans: traditional start-up and lean start-up. You will want to do a traditional start-up business plan. This will give you something to show potential investors and lenders.
There are 9 things to include:
This seems like a lot but keep each section short and to the point so readers can get the “why” behind your “how” for starting your retail business.
Determine Niche & Choose Products
Finding your niche will set you apart from every other business on the market. A niche is a small group of consumers with a specific, common interest. The narrower, the easier you will be able to become the “go-to” for that product. Find your niche in 3 steps:
Research potential for that niche
Research potential profits
Once you have your niche, you need to find a supplier. When choosing, you need to understand your options:
Research a few options and order samples from 2 to 5 suppliers. Test the products to see which ones are best. Then, build vendor relations by communicating and paying on time. Eventually, you may be able to negotiate discounts- especially on large orders.
Start by researching your target audience and find out what they like. Then, narrow it down to your niche. Some effective market research tactics:
Send out surveys
Conduct consumer panels/focus groups
Keep group small
Choose contributors wisely
Gather contact info before beginning
Begin with general questions
Give everyone time to talk
Develop Your Brand
Products are just part of the picture. Your customers also connect with your brand. A brand is important because it brings in new customers and builds strong relationships. You may only get 7 seconds to make an impression- but you need 7 impressions to create awareness. Elements include:
Choose Legal Structure
This is important because it determines how you collect and report taxes, as well as how you’ll be paid from your business and your personal liability. The three most common types are:
If you don’t choose one, your retail business is automatically a sole proprietorship.
No matter what your retail business legal structure is, you need to keep your business and personal financials separate. This makes it easier to track business expenses, keeping you on track. Plus, it’ll make it easier to do your taxes.
Launch Online Store
Even if your primary goal is to open a brick-and-mortar retail store, you may also want to consider opening an online store. In 2020, online sales were over $350 billion. Experts predict that by 2023, multichannel sales will make up almost ½ of all e-commerce sales.
Opening a retail business requires a lot of money up front. In fact, on average, the cost is around $100,000 or more. Ideally, you will personally have a lot of this saved up- but there are some other options:
Small business loans
IRA/401(k) retirement account
Choose Location for Your Retail Business
This step can be overwhelming. You will want to start by narrowing down your options based on practicality/convenience. Consider how much foot traffic you would have in each area and how likely you would be to succeed in each location.
Design Interior of Retail Business
Once you have your location, you’ll want to plan the interior. This is important because it has an effect on your sales. A well-designed floor plan welcomes shoppers, makes them comfortable, and directs them to specific products.
Choose Layout Structure
Choose the type of floor plan you want. There are three layout categories for retail business:
A well-placed checkout will open up space to display products and encourage shoppers to explore more of your store. Ideally, you should put it on the left because research shows that when shoppers enter a store, they automatically veer left.
Bring in Fixtures/Displays
Once you’ve determined your floor plan and where you will put your checkout, it’s time to consider fixtures/displays. You will need to choose counters, lighting, fixed shelving, and possibly dressing rooms. These will be permanent, so invest in something high-quality.
Position Products for Success
How you sell your products will depend on the type of retail business you have and your floor plan. However, there are a few ways you can position products for success in any environment:
Eye level = buy level
Seasonal products/new arrivals front and center
Impulse products near checkout
Keep it comfy and cozy
Choose/Install POS System
This is a major step in opening a retail business. A POS is a software program that brings all of your tasks together: sales, retail transactions, business management, and inventory tools. It’s everything you need to manage your business on one platform. Some of the things to consider when evaluating your options are:
Ease of use
Choose Credit Card/Payment Processor
Next, you need to choose a credit card processing company or merchant services provider. Your POS may have one or you may need a third party. The two most important things to consider are price and POS compatibility.
Fees (price) are an important part of this equation. There are three types of structures for credit card processing fees:
Some companies charge a monthly fee as well. Some have a longer application process and some require a contract and will charge early termination fees. Read the fine print before signing up with any of them.
Next is compatibility. Consider whether the payment processor will integrate with your POS system. This is critical because it will prevent human errors in transactions and ensure inventory and sales data match with reality.
Finally, you will need to bring on a wonderful staff to serve your business. If you haven’t hired before, this can be intimidating. However, it’s really not that difficult. You will need an EIN and you will need to register for state/local taxes, and more.
Build Marketing Plan
At this point, you are ready to build a marketing strategy for your retail business. This will be your blueprint for your pre-launch, launch, and post-launch activities to help make sure you are attracting a good mix of new and repeat customers. Here’s what you need to do:
Plan your Grand Opening
Market in advance
Partner with other businesses
Check Your Compliance
The last step in opening a retail business is to check your compliance. Make sure that you are complying with local laws/regulations, including:
Federal tax ID/EIN
Certificate of occupancy
Safety/health info bulletins
Local COVID-19 mandates
If you’re not sure where to begin or you want to make sure you’re not missing anything, check with your local chamber of commerce or town hall/municipal center.
Opening a retail business takes a lot of planning. However, putting in the time to make a plan and execute it will set you up for success. If you have any questions or need help starting a retail business, contact Ideal Financial Group. We will be happy to offer guidance.