Small retailers make up about 98% of all retail businesses in the US. Choosing to open up your store is an exciting and scary challenge, but you’re not in it alone. NorthOne is here to guide you through the process of how to start a retail business and lead you to your financial goals.
The Benefits of Starting a Retail Business
Starting a retail business comes with its own set of challenges, but in all, it can be a vibrant and thriving industry. As with any new venture, making yourself aware of the challenges and the benefits is the first step. Creating a plan to overcome potential pitfalls and navigate new territory is your best bet. While it is wise to focus on what may go wrong, also take time to remind yourself why you would enjoy owning your own business, to begin with. Remind yourself of all the amazing benefits that come with owning a business and allow that to help guide you along the way. Here are some of the benefits:
- Being your own boss: You set your hours and decide exactly how to manage your business. This comes with a lot of responsibility, but a lot of satisfaction as well.
- Being part of the community: Community storefronts garner the ability to be the fabric of one’s community. Your business has the ability to elicit change and allow new opportunities for those in your community, through jobs, but also as means of support.
- Pursuing your passion: Owning your own business is truly a labor of love. Find what form of retail fits your desires and take your passion to the community.
- Working with people: As a retail business owner, you’ll possess the unique ability to impact your community through connection. Your retail business may be the new supporter of the local school band, girl scout troop, or simply go from startup business to a community staple. This is achieved through working with other businesses in the community and providing quality service to its patrons.
How Much Does It Cost to Start a Retail Business?
The cost of a start-up business varies depending on several factors. To gain perspective on what your specific startup retail business will cost consider the following:
- Rent: better locations will cost more, but provide more foot traffic
- Utilities: lights, electricity, air conditioning, and heating
- Improvements: the location you choose might need to be modified, so you’ll need to factor this in
- Purchasing inventory and supplies: negotiate with your vendors so you can increase your profit
- Marketing costs: signs, logos, and business cards can help let the public know about your business
- Other expenses: don’t forget employee payroll, computers and networking, cleaning and security fees, and more.
By understanding the ballpark costs of running your retail business, you’ll get a better sense of how much money you’ll need on hand to get started. It’s better to overestimate how much everything is going to cost, so you have enough to cover any surprises.
How Much Money Can You Make Starting a Retail Business?
Starting a small business comes with the understanding that gaining capital takes time. A business typically starts to garner profit after the first year of operation.
Your overall profit margin will depend on the type of retail store you choose to open and the customer base you establish. For example, grocery stores generate more profit because they offer a variety of items that cater to both needs and wants.
What Are The Types of Retail Businesses You Can Start?
When it comes to the type of retail business you wish to start, truly the sky’s the limit. The best way to be successful at your business is to invest in a business that piques your interest. You will naturally be more invested.
Keep in mind that a successful retail business will also be in areas that demand the service you are offering. The top-performing retail stores are as follows:
- Grocery Stores
- Bookstores
- Gift shops
- Cosmetic Stores
- Mobile/Tech Stores
- Children’s Clothing/Toy Stores
- Sports Apparel and Gear
- Thrift Shops
- Automotive Parts
- Organic/Whole Foods
- Recreational shops (ice cream, cigar, party, liquor)
- Antique Store
- Pet Store
- Florist
- Pharmacy
The list is endless. Learn the area that you wish to pursue a business in and determine which type of store fits the needs of the population. Determine if there are businesses that would offer competition and navigate the ways your business will differ.
The 6 steps to Start a Retail Business
Starting a retail business may seem overwhelming. It is easy to get caught in the logistics of planning, preparing, and making a pitch for a business loan, and working through the fear of “what if it doesn’t work”. Starting a retail business doesn’t have to be complicated. Take your time and consult with professionals who have experience helping new startups navigate an otherwise treacherous process. Here are a few tips to get you started:
1. Decide on what type of business to open
Deciding on what type of business to open can be one of the most difficult parts of the process. You may feel that the area should occupy several different forms of business and you are not certain which one would garner the most profit. In this case, utilize not only data from local businesses but the people of the community. Ask their advice and determine what your future customers would like to see.
2. Make a Business Plan and Portfolio
A business plan allows you and those you want to invest in your business to see a structured outline of how you intend to utilize a potential loan and how you will make revenue. Seeing your ideas on paper can often help you find potential flaws beforehand and help make the loan process more seamless. Here’s how to write a business plan.
In your portfolio you want to be sure to add a description of your business, market analysis and data, a general idea of how you intend on managing your company, describe the goods and services you want to offer, how you will market your business, and what you anticipate to earn in revenue the first, second and third year.
3. Secure Financing
Once you have a well-made portfolio, it is time to go to banks to find potential investors for your business. Be prepared to pitch your idea verbally to loan officers. Seeing you confident in not only yourself but your potential business can help reassure them of their decision to give you a loan. Do your research to better understand the different types of business loans available. Know what works best for you and your budding business when it comes to interest rates and payback time frames. If you have a preferred lender in mind, utilize a search of their business loan procedures so you will be adequately prepared.
- Traditional Commercial Loan – these are common and can be obtained from the bank. You’ll need a solid business plan to put before the bank if they’re going to approve you for a commercial loan. You’ll also need a good credit history and collateral.
- Business Line of Credit – This works like a credit card in that it gives you a pool of money to use on business expenses but only accumulates interest as you use it.
- Small Business Loan – You have the option to take a small business loan out with the bank but many business owners prefer to get their loan through the SBA (Small Business Association). SBA guidelines are set up to protect both the lender and small business owners.
- Investors – If you have a really strong idea for a restaurant you may be able to get investors on board. Investors will help you with the initial costs of the business in return for part ownership. Investors can be anyone willing to take a risk on your business including friends and family members.
4. Open a Business Bank Account with NorthOne
Businesses like Northone utilize a streamlined method for small business owners. They make daily tasks like depositing daily money and paying vendors easy. Having an account with NorthOne means that you never have to leave your business to go to the bank again. They make everything available to you at the push of a button, meaning you can get back to your business with little to no interruptions. Â
5. Find Your Perfect Business Space
When you have established the type of business you would like to pursue, the second most important thing to consider is where that business will be. There are many factors to consider when it comes to choosing a location. For instance, if you choose to open a grocery store, you would need to have ample parking available. If you choose to open a cigar shop, you would need proper ventilation and filtration. Each type of business comes with specific criteria that are necessary in order for it to thrive.
Utilize the opportunity to scope out commercial real estate in the community you wish to have your business in. Attempt to find pre-established buildings that would need little to no alterations to save money. In some cases, you could utilize a previous residential home and repurpose it for your retail business. Check with local ordinances to ensure there are no limitations on businesses in residential areas.
6. Gather all the Necessary Licenses and Permits
Once you have decided on your business type and model, secured financing, and found your perfect spot, you will need to obtain licensures and permits. The type of license or permit you will need will depend on the exact type of service or goods you intend to offer. For example, you will need a specific permit and license to sell alcohol or tobacco. Because license and permit requirements differ from state to state and town to town, it is best to check your state and local website to obtain the information necessary to fill out the required license and permit documentation.
Opening a retail store of your own can be harrowing. However, it doesn’t have to be. There are resources available to help you every step of the way. Now more than ever small business owners can make a huge impact on their local community and beyond. With technological advancements and ever-growing social media platforms, the world is changing how we see small businesses, and that is a beautiful thing.
