Starting a Retail Business

Map your path to profit before opening your doors
By Tom Nutile, Principal, TN Communications Group Going into business for yourself is rarely easy, no matter what line of work you choose, but retail is among the toughest of small business categories to enter. You will likely need to deal with returns, wholesalers, troublesome customers and inventory. Before deciding to go into retail, ask yourself the following questions:

1. Do I have an extensive knowledge of the product I intend to sell – or can I gain that knowledge quickly?
2. Do I enjoy selling and dealing with customers?
3. Am I willing to put in long hours with little vacation time until my business gains traction?
4. Can I handle, both financially and emotionally, the ramp-up period when I do not have a steady income?

 

Write a business plan

Do this before launching your retail business. A thorough plan will help you map your path to profit and will also calculate how much money you need before you can open your doors or begin selling product online. If you don’t know how much you’ll need in advance of launching, you’re bound to fail. A good plan should also map out how to differentiate yourself in the face of competition.
Try: Find free sample retail business plans at this About.com page. Purchase advanced business plan software at BusinessPro.com, a business plan template at BusinessPlanSuccess, or consulting help at MyBusinessAnalyst.com or MasterPlans.com

Obtain the proper licenses and identifications

A retailer must have a Tax ID, also known as an Employer Identification Number, or EIN, before opening for business, getting a business checking account or applying for credit from suppliers. In most states, to purchase products for resale without paying any sales tax requires a resale license, or state tax license, as well.
Try: Go to this Internal Revenue Service site to obtain an EIN. Learn what is required of businesses in your state at BusinessInfoGuide.com. For information on other legal requirements for starting a business, consult the National Federation of Independent Business (NFIB) compliance guides. 

You can get it wholesale

Even if you’re building the product you sell, you need to find one or more wholesale suppliers and establish an account with them. Margins in the retail business can be thin, and a few cents per product could make a big difference, so it makes sense to find a vendor with a good price who will deliver a sufficient amount of quality product on time.
Try: Find vendors by attending trade shows in your industry.  How to find those trade shows? Visit The Trade Show Network, The Vending Connection, or BizTradeShows. Or find vendors through a listing of suppliers in your industry at Wholesale411.

Pick your price points carefully

How you price your product can determine whether you succeed or fail. Offering a competitive price could drive sales to your company, but don’t be lured into thinking that merely offering a lower price point than your competitors will guarantee success.
Try: Find a synopsis of pricing formulae and methods for products and services from the SBA [PDF link] or get help from pricing software such as Price Director. Learn how to use a cost-plus formula for pricing at this Answers.com site. Or review pricing methods and use Bankrate.com’s profit margin calculator  

Don’t re-invent the wheel

Trying to figure out how to track inventory? The best way to keep up employee morale in your store or stores? When to hold sales? Trial and error is fine, if you have the time and money to experiment. If you want to cut to the chase, learn about best practices through retail publications or Web sites.
Try: Reading Stores or DSN Retailing Today magazines, the Retail Net Web site or the Retail Store Blog.

Choose a location

Yes, location matters. You can have a great business plan and a product that is sorely needed and be tremendous at execution, but if your location is lousy, you’ve got trouble.
Try: Use an office space calculator from OfficeSpaceSearchUSA to determine the size you need. Get an idea of your costs by using a cost-comparison calculator at OfficeFinder.com. Find a real estate professional who knows your industry and understands small business needs through either the Society of Industrial and Office REALTORS® or the CCIM Institute.

Find retail equipment and supplies

You’ll need some supplies and basic equipment to get started, most likely including retail fixtures and displays, point-of-sale (POS) systems and cash registers.
Try: Find displays and fixtures at major retail suppliers such as Nu-Era or American Retail Supply. Find POS solutions at POS Software & Systems Group. Barcode software, scanners and printers are available through BarCodesInc.com. Get started in purchasing supplies at Specialty Store Services.

• Plan a launch event or initial advertising or public relations blitz. Unless you already have a customer base, you should do something to announce your arrival in the marketplace.
• Join a business networking group, such as the local chamber of commerce or Rotary, to meet businesspeople who may have need for your product.
• Interview retailers in your business to learn how they launched. Do this with retailers outside your immediate selling area or specific niche, so they don’t perceive you as direct competition.
• Consider both clicks and bricks. If you launch a store, think about selling online as your next step. If you start online, weigh opening a store or stores later on.