Retail Store

Many people think owning a small retail store is the ideal job. You are your own boss, answerable to no one but Town Hall and the IRS. You set your own hours (hah!) and can cultivate a clientele interested in the same things you are.

If you are one of the people who dream of owning a retail store, you need to figure out these three things, at least, to get start:

1. Start from scratch, franchise, or buy an existing business?
2. Location?
3. Where to buy inventory?

Before answering these questions, though, stop and consider how serious you are about owning a retail store in the first place. Read my article Is Owning a Store Your Dream? Then act like it. and come back. If that hasn't discouraged you, read on...

Purchase a Running Concern?

You almost never think, 'You know, I think I want to buy a widget store', and then the widget store downtown is suddenly for sale. What usually happens is you happen to find out that a store you know and like is suddenly for sale, and that makes wonder if you'd like to buy and run it.

Before you buy, find out why the owner is selling. Be prepared for obfuscation - if the owner wants to sell because business has been trending downhill, and he wants out before the bottom falls totally out, he will never tell you. Maybe the fad for widgets is almost over, maybe the neighborhood is going to the dogs; if this is the case, you're going to have to find out in other ways. Of course someone with a business to sell had better be prepared to show you profit and loss statements for the past several years, so if sales are down, you should be able to tell from these reports.

A neighborhood in decline is harder to judge. What's the vacancy rate in the surrounding area? How long are the tenants in the shops around the one under consideration been in business? Rapid turnover and recent arrivals are bad signs.

If the shop is a going concern and the owner just wants to retire or move to follow a relocating spouse, then move on to the next questions.

Start From Scratch

This is always riskier than buying an existing business. You have to take on faith that there is a market for the kind of things you want to sell. If other stores offering the same kind of product or service exists in close proximity to your area of interest, are you sure the area can support yet another vendor?

Perhaps you have discovered a unique and untapped niche or have access to stock that other vendors do not. This might be a sign to proceed with your planning.

Location Is Key

It is trite because it's true - three things matter to business success and those three things are location, location, and location.

When buying an existing business, of course, you are stuck with the location it comes with, but this should play heavily into your decision to buy. If traffic has been recently rerouted, or a super-mall opened outside of town, how are you going to get foot traffic back to your side of town?

When starting a new business, location can be anywhere there is a vacancy within your budget. Should you go with the slot in the mall or the quaint old storefront on Main Street?

Malls come with bylaws, just like home owners' associations. Make sure you can abide by them before committing. The most pertinent bylaw, to you, is mall hours. To rent in most malls these days, you have to agree to hours of operation that coincide with open 'mall hours', which is usually 10 AM to 10 PM. And you are also required to be open seven days a week. This means a seventy-hour work week, so be prepared to hire staff if you are going to choose the mall location.

The quaint shop in the old part of downtown offers you more latitude in open hours, but that can be a catch-22 in itself. The shops downtown are competing against the shops in the malls, and if you can't stay open late, you are losing all the evening business. If it's not clear whether only being open 'banker's hours' will be enough to keep afloat, reconsider the mall, keeping mall hours downtown, or ultimately whether owning a retail store is right for you.

Stocking Up

When you purchase an existing business, you will be purchasing all the contact information on that business' suppliers. Starting a new business, you will have to locate them on your own. But how?

Trade Shows: Your first stop is at a trade show that specializes in your product. For jewelry stores, it's the gem shows; for toy shops, toy fairs. To get into these - at least the wholesalers parts not opened to the general public - you will need a reseller's ID. Get one through your city or state. At trade shows, you can make contacts with many companies who sell products wholesale to your kind of store. Take cards, catalogs and brochures. Many of the booths offer trade-show specials, so bring a credit card and be prepared to part with some serious money.

Trade Publications: Most specialties have some sort of publication specific to it. For New Age stores, it's the periodical New Age Retailer. In these magazines, new products are reviewed, trends are discussed, advice columns appear, and - perhaps more importantly - wholesalers advertise here. Find the trade pub that covers your area and subscribe to it. Be prepared to prove you are a retailer; these magazines aren't for general subscribers.

Vendor Reps: Vendor representatives are roving salemen for the suppliers, and in general, they find you. How they do is a mystery, but once one rep finds you, the rest of them will find out and start calling to schedule appointments. Get into the grapevine by asking the first wholesaler you contact if they have a vendor rep who services your local area. When reps call, they bring the catalogs, samples of new lines, and a lot of savvy on what sells well. These representatives usually service more than one wholesaler and can take orders for multiple lines. A visit from a rep who handles several accounts can be an afternoon's work.

How much inventory do I need?: It is really hard to say how much it will cost you to stock your store; this is so dependent on the size and value of your items. A jewelry store, with lots of very small, expensive items, will require a larger investment than a book store. But you ought to consider somewhere between $20K and $50K (wholesale cost) for each 1,000 square feet of sales floor space.

Staffing Up

Now all you have to do is hire a suitable number of people to staff the sales floor and you're good to go. Right? Well... Read the articles listed below first.