Here are things to think about when considering opening up your doors
Owning and running a retail business is much more involved than you might think. Just because you have great taste in clothing or interior design does not mean you will be able to run a company in the business of selling clothing or furniture. You may have a great eye, but do you know how to find customers for your store, do you understand how to manage inventory, know how to buy months in advance and have the cash flow that will allow for that? Owning a store is time-consuming. First, you have to man the store for 7 to 9 hours a day (or supervise the staff that does) and then you have to manage behind the scenes, get the bookkeeping done, keep ordering and controlling inventory, training employees, etc. You may have incredible taste and style, but how well do you manage employees, understand financial statements, know how to manage your cash flow? You are going to need some help from people you have experience in the retail business.
Plan and Think Ahead
Before you open your doors, you need to know what your average profit margin will be: what will be the markup of the inventory you buy and what average daily sales do you need to pay the rent, utilities, employees and have profit left over to pay yourself? A business plan is really essential.
Crunch the Numbers
You need to run a bunch of numbers. How much inventory will I own on a daily basis? That amount of money will be tied up in inventory until you sell it. So you need to know what projected sales will be, what is the gross profit on those sales and will that gross profit margin and a reasonable expectation of daily sales keep the doors open. Planning for the best, but knowing what the worst could be is important in financial projections so you can determine if you can survive the worst case scenario long enough for things to turn around. And what will you strategy be if the worst case scenario presents itself? Without a business plan that forces you to consider all of the other challenges of running a retail business besides selecting fabulous things to sell.
You will need Employees, Operational Procedures and Technology
How will you find and hire good, trustworthy employees? What controls will you have in place to limit theft and loss of cash or merchandise? You need operational procedures from the start. You need technology that can combine controls, a point of sale system and an inventory tracking feature so you know when and what to order. You will want good reporting so you know what is selling, what has the best profit margin, when should things go on sale, how do I use my store square footage to its best potential.
Marketing will be key
What is your marketing plan? How will you reach them and how well do you compete with others in the marketplace? How will you track customers so you can target people that have already been in your store and get them to buy from you again? Good systems that track customers, what they bought, etc will help you reach out to them and build loyalty. Who will run your website, how will you get great SEO, how will it drive sales. Marketing is a multi-faceted full contact sport these days….you need time to build or someone to do that for you while you run the store.
Seek Advice…No one is an expert on all things
Don’t rush to lease that space, open your website for online orders. Get advice from people who know how to run a successful retail business. Build a team of people that can help you navigate the pitfalls. You need people with a background in business (retail specifically if you can find it). You need strong accounting help, people who can help you keep the bookkeeping current and accurate so you know your financial situation and can make timely decisions before your situation becomes too challenging to dig you way out of. You cannot run a retail business without timely financial information.
There are consultants that can assist you in all the aspects of creating your brand, opening you doors and doing it with a mindset for success with good planning. If you do not feel comfortable writing a business plan, get your accounting team together and ask them to help you. They will ask the right questions and if you answer them in detail, your business plan will write itself. That is really the start, really understand what it takes to first open and then run a retail business. A business plan is the best way to accomplish that and you will save yourself sooooo much time, effort, frustration and failure if you take the time to do your homework before you jump in.
Our blog has a series of posts on how to write a business plan. We are business consultants and business coaches with 37 years of finance and accounting behind us and CPA behind my name. We can help and we love retail clients.
