Opening a Retail Store, Costs & Considerations
If you’re in the process of deciding to open your own retail store, understanding exactly how much your new venture will cost is essential if you’re going to make it a success.
In order to help you better understand what it takes to start a new retail business, we’re taking an in-depth look at the costs involved with launching a brand new retail empire.
Writing a business plan
All successful businesses start with a thorough business plan. This is where you’ll estimate your startup costs, forecast your cash flow and assess the running expenses of your new business.
Your business plan needs to be specific to your company. This means you’ll need to research everything related to your specific niche, your location, your target audience and your product line. The more detailed and thorough you can be at this point, the better positioned you will be when it comes to things like pitching your business for initial investment.
Use our custom startup cost calculator to get a better idea of how much it will cost to launch your retail store (please note these costs are indicative, and you can alter the figures for your own requirements).
Resources and equipment
The biggest costs incurred when launching your retail store are your premises and your inventory. As with real estate in any part of the country, the exact amount you’ll need to cover will vary depending on the size and location of your store. Your inventory costs will also vary depending on the type of store you are opening. On average, you can expect to spend:
- Rent - from $1.75 per square foot
- Signage - $500 to $1,000
- Website - $0 to $5,000
- Market research - $900
- Utilities - $500 per month
- Liability insurance - $3,000 per year
Hiring a team and finding your vendors
- The average salary for a retail worker is $26,000.
- The average salary for a retail store manager is $45,800
When searching for vendors, remember that you’ll need to take a cut of whatever their products sell for in order to make a profit. In some cases, vendors will give you a recommended retail price for their products. In other cases, it will be left up to you to set the final figure.
When choosing your price point, it’s important you understand the difference between markups and profit margin. It’s also a good idea to take a look at other businesses in your industry to see how much they’re charging.
What paperwork do I need to open a retail store?
Opening a new business involves a lot of paperwork. Among the most important permits and licenses you need to obtain are:
- Employer Identification Number
- Business Permit
- Resale Permit
- Business Name Registration
- Certificate of Occupancy
- Professional Licenses (will depend on your specific business niche)
You can expect these licenses and permits to cost you around $175 per month.
Choosing a payment system for your retail store
A payment system is an integral part of any retail business. You’ll need to ensure your chosen system is suitable for the size of your premises, and the level of business you hope to do. It’s also a good idea to choose a point-of-sale system that offers its clients a high level of support and a range of extra services. If you’re planning on launching an online store alongside your physical premises, you will want to ensure that you adopt an omnichannel retail strategy, and your payments system should be able to be used on all platforms. Remember to allocate money for web hosting if you opt for this route.
For more information on how payments processing works read our Credit Card Payment Processing 101 Guide.
Marketing for a retail startup
Marketing helps to tell potential customers about your business and get your company’s brand out there. Most small businesses spend around 1% of their revenue on marketing. However, you’re likely to spend a lot more than this in the first year in an effort to get your business up and running (such as the cost of a grand opening event, and ongoing expenses like business cards). You can minimize your costs by taking advantage of social media and digital marketing.
Social media is a great marketing tool for small business owners and can often keep your initial costs down if you have a good strategy in place. Social media can help:
- Increase brand awareness
- Create a loyal fanbase
- Improve public relations
- Improve ROI
- Drive in-person sales
Retail store startup statistics
In 2017, the US retail market was worth $3.1 trillion. In 2018, sales are expected to go up by another 4%. This is an incredibly exciting industry for entrepreneurs looking for profitable business opportunities.
Many new business owners find starting the process of starting their own business incredibly rewarding, especially if it’s a success. The most important part of starting any new business is getting your financial forecasting right. Make sure your costs breakdown is as accurate as possible to ensure there are no surprises along the way.