The dream of starting a retail business can easily become a reality. It may take a lot of initial work as you start your own business, but with the right planning anyone can achieve their goals. The following steps to starting a retail business should be used as a guide before you open your store.
But before you work through these steps, let me offer one bit of caution or advice. As a retail consultant, I deal with stores every week who are struggling and on the verge of closing.
The number one reason I encounter as to why these stores are closing is a lack of a retailer at the helm. Retail is one of the easier business to open. And for the person dreaming to have his or her own business, it makes sense to try retail. However, retail is much harder than people realize. As much as I respect a person wanting to "own their own business" I advise you to read a book before you decide. It's called the E-Myth. And if, after reading this book, you still want to proceed, then these are your first 15 steps.
1. Choose a Legal Structure for Your Retail Business
Choosing the proper legal organizational structure for your business is one of the most important decisions you will make. While it is possible to change your structure at a later date, it can be a difficult and expensive process. Therefore it's better to make the right decision before you start your own business.
The most common structure is an LLC. While S corps have a lot of traction as well, the LLC is the simplest structure to use.
You will want to incorporate, though, to protect you and your family in the future in case all does not go as planned.
2. Choose a Name
Dreaming up a moniker may come easy for some, but others struggle with the task. Considering the truncated nature of social media and online searches, you want to be careful to select a name that can communicate who you are quickly. Too often, retailers select a name that is clever to them or just a word or their name, but these become difficult for organic search traffic and SEO. The more it takes to explain your name, the more it will cost you to win business online.
Your business name should cleary communicate what you sell. For example, if I were to name my store Hudson's, people would have no idea what I sell or why they should come see me. True you can overcome that, but why pick a name that means you will have to spend lots of time and money "overcoming." It's okay to include the family name in the title if you had a "what." For example, Hudson Tools or Hudson's Hardware. There is some value to a family name, especially in independent retail in smaller communities. Here are some more tips on how to select the right name for your retail business.
3. File for an EIN
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. It is required if you have employees in your retail business. It is easy to acquire and can be done on your own here.
4. Determine Your Products or Services
Picking the right merchandise to sell in your store is the perfect balance of art and science. And all products need services to support them whether its repairs or simply gift wrapping, consider what "extras" your store needs to be successful.
Most likely, the products you are selling are baed on the ones you have a passion for and why you are considering retail in the first place. But remember, buying products is 10 percent "eye" and right fit and 90 percent math. Getting it in your store is easy. Getting it out profitably is the hard part.
5. Determine Your Channels
Each way a customer can do business with you is known as a channel. Will you have an online store as well as your brick and mortar store? Will you do catalogue or phone orders? Will you have a mobile app? Retail is an omnichannel world today. Customers expect to be able to engage and buy from a retailer in multiple ways. You must determine in advance what channels you will have for the customer to engage you and weave a consistent brand and culture and experience through all of the channels.
6. Research and Know the Laws
Understand what business licenses and permits you need to obtain by contacting your city, county and state government offices. Before you start your own business, find out what laws govern your type of retail store.
Consider consulting with both a lawyer and an accountant, as each will help you properly organize your business.
7. Define Your Customer Experience
By far, the most important thing you can do is this step. Millennials are telling us they still prefer to shop in a store (63 percent) rather than online. But they demand an experience that is different than what they can get online. They want the experience to be "worth the drive." Too many retail businesses fail because they skip this step. They focus on products and store design and hiring and forget about the experience for a customer.
Defining what you want the experience to be like goes way beyond customer service. In fact, there are a ton of retailers in the graveyard who said customer service was their differentiator. Touting service and experience and delivering them are too very different things. Defining your customer's experience determines the types of products you must have and the types of services you must offer and the type of store design you need and the type of employee you need to deliver it.
8. Write a Business Plan
Plans fail if they are not in writing. Period. But the importance of writing a business plan is in the way it forces you to consider all angles and all areas of your business. It requires that you do extensive research and planning. This is one step you cannot skip. It will take you the longest time to complete, but there is a definite correlation between the success of the store and a well-written business plan.
Here are the key areas your business plan must address:
- Competitive Analysis (who is already in this business)
- Marketing Plan
- Customer Experience
- Employee Plan (who to recruit and why)
- Management Plan (hours, policies, etc)
- Financial Pro-forma (3-5 year projections of your P&L)
9. Find a Location
Where you choose to locate your retail business will have a major impact on everything your shop does. The difference between selecting the wrong location and the right site could be the difference between business failure and success.
There is an old age in retail — location, location, location. It's meant to connote that picking the right location is critical. You must balance the best location with your budget, though. Don't overspend to be in the perfect spot. Before you sign that lease, consider the second best location first.
10. Establish Vendor Relationships
A successful retail business depends greatly on offering the right product, at the right price, at the right time. Therefore, it is paramount to the success of your business to be able to locate the best sources for those products. As you take this step to starting a retail business and decide what products or product lines you would like to sell, it's then time to find places to buy those items at wholesale.
By establishing relationships, I'm referring to selecting vendors who will partner with you. Selling your products is only part of the relationship. Co-op funds, marketing support, returns, handling defective items, credit, and payments terms and dating are all part of what needs to be considered when choosing the right vendors for your store.
11. Define Your Store Polices
The best time to establish policies and procedures for your retail business is during the planning stages. By anticipating problems before you open your doors, you can choose how you'll handle special situations, as well as the normal day to day operations. This helps avoid making mistakes once you're faced with customers.
Spend lots of time training and role-playing with your employees on these policies. Make them fluent so they can deliver the best experience.
12. Craft Your Marketing
Before you open a retail store, start spreading the word. Create a retail marketing plan, brainstorm sales promotion ideas, begin branding and advertising your retail store. Learn how to use loss leaders, media buys and sales events to the benefit of your retail shop.
Your marketing plan should focus your dollars where your customers dwell. For example, for some businesses, social media or Facebook might be where the marketing dollars should be spent. For others, it could be the newspaper or ROP. Everyone will have a great deal for you. All advertisers will tell you they can get you exposure. But what you need is buyers, and that's why you use mediums that your customers do.
13. Recruit the Best Talent
The only way to deliver on customer experience is to have the right talent. With Millennials now making up the largest part of the workforce, this is an even bigger challenge. Hire people who fit your culture. This may mean they don't have a lot of retail experience of product knowledge, but those are things you can teach. Smiling, being magnanimous and compassionate those are traits you cannot train; they must come with the employee.
14. Soft Open
Before you open your store "officially" to the public, conduct a soft opening. A soft opening is when you are open for business, but without announcement to the public. It gives you and your employees a chance to do a "dress rehearsal" before the big day. I recommend at least a week for a soft opening, but take longer if you can. It is invaluable in its ability to flush out potential problem areas and customer experience detractors that you may not have foreseen. Fixing these things now before your grand opening means you are putting your best "face" forward when the marketing kicks in.
15. Grand Opening
Never grand open until you are ready. You only get one chance to make that first impression so make sure all of your employees know how to handle all situations. Nothing annoys a customer more than an undertrained or ill prepared employee. Make sure every incentive, every sale, every sign, every product is ready to go in your store. Staff your store for crowds. It is better to have too many employees in the beginning than not enough. Make sure your employees can tell the "why" story of your store. Why shop with you over everyone else. They could give this commercial to every customer when they first engage your store.
Plan for lots of breaks for your employees. Bring in lunches and dinners so that can focus on your customers. Keep them fresh and motivated. And make sure every customer leaves your store delighted. A delighted customer tells her or his friends and that's the cheapest and best form of advertising available.