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Guide to starting your own retail business

Retail stores offer exciting opportunities to meet customers and fulfill their needs while reaping profits. Consumers want and need a variety of products to conduct their daily lives, and retail stores provide outlets that bring consumer goods from the manufacturer, wholesaler, agent, importer or other retailer to the end user.

You can gain self-confidence and public image, as well as monetary gains, by becoming a business owner. Following a good business plan can help to ensure the success of your retail store.

Apple Inc. began with two young men making personal computers in their garage. KFC began with one man cooking fried chicken for customers at his service station. How will your business begin, and how will it grow?

The retail sector offers good potential for success and growth, but many start-up businesses fail due to lack of capital, poor location and insufficient market analysis.

Starting a retail store involves selecting a market, stocking goods and setting prices, but first you must plan and prepare. Even if you decide to purchase an existing business, you will need to research the market, the location, state and local codes and regulations and other aspects of operating your retail store.

You need to begin by forming a legal company, then selecting a location and acquiring the proper permits. You will need to decide whether it is best to rent or own your location, and then you need to find the right suppliers and hire employees.

Forming a legal company

Sole Proprietor

Most retail stores start out as proprietary businesses. This simple form of ownership means that you as an individual are the sole owner of your store. However, this plan does have some drawbacks.

First, you will be personally responsible for the taxes and debts of the business.

Second, you will be personally liable for torts. For example, if someone slips and falls and then files a personal injury lawsuit, you might find your personal property attached in a judgment. They could go after your bank account, your house and your vehicle, in addition to the assets of the business.

A good insurance policy can help to reduce your personal risk, but you will still be personally liable for the taxes and debts of your retail store.


When two or more people start a business together, they often form a partnership. In most cases, all of the partners will be equally responsible for the debts, taxes and other liabilities of the business.

However, a limited partner will not share in the liabilities. Limited partners invest money in the business, but they do not participate in the operations. They are considered investors, not business owners.


Setting up a corporation can help to shield your personal assets from the liabilities of your business. You need to choose among several types of corporation. For example, the S-corporation offers the benefits of incorporation to sole proprietors’ partnerships. A similar option is known as Limited Liability Corporation. These types of corporation do not issue stock.

A privately held corporation issues stock, but it does not sell that stock to the public. Instead, it issues stock to a group of selected investors. This form is often used by family businesses and groups of close friends who wish to share in a business venture.

A public corporation sells stock to the public, usually on a stock exchange. Most start-up retail stores do not begin as public corporations.

If you decide to incorporate your business, you will need a competent attorney or accountant to help you with the process. The laws vary among different states, so you do need expert advice.

Finding the right location

Many small retail shops have started out with yard sales and home-based parties, such as Avon and Tupperware. Others have started out by selling products on the Internet, either on auction sites like eBay or as affiliate sites for retailers like Amazon and Overstock. This type of strategy involves minimal investment and low risk, but they have limited growth potential.

Despite the growing popularity of online shopping, many consumers still prefer face-to-face contact with retailers. A brick-and-mortar store in a high-traffic area offers benefits to both you and your customers.

If you select an attractive building in a location with complementary stores nearby, plenty of traffic and ample parking, you will benefit from the flow of potential customers to your location.

Customers will benefit from the convenience of your location, especially if they can combine their purchase of your merchandise with purchases at nearby stores. They will be able to get your products right away, ask you questions without waiting for an email or a phone call and take their purchases home without waiting for a delivery truck to bring them.

When selecting a location, you need to keep ten factors in mind:

  1. Size of the city’s trading area
  1. Zoning regulations and permit requirements
  1. Population trends
  1. Income and employment trends
  1. Number, size, quality and aggressiveness of the competition
  1. Customer attraction power of a particular mall or other commercial structure, including general appearance and accessibility
  1. Available access to the location, including freeways and other roads, parking and proximity to residential housing
  1. Sales and traffic growth prospects
  1. Traffic flow and complementary stores in and near the location
  1. Cost of the site, including rent, maintenance and insurance

Rent, Landlords, etc.

Whether you decide to rent or own your location, you need to keep in mind that you will not be free to do absolutely anything you want. Cities and other local governments impose restrictions on signs, parking, appearance, landscaping and other aspects of commercial property through zoning laws. In addition, you will bear all the costs of repairs and maintenance of your building.

Moreover, owning the location increases your risk because it is much easier to move out of a rented location than it is to sell a property, especially in today’s troubled real estate market. If you need to move your store to a different location, you will find the process much easier and more affordable if you are renting.

Most landlords require a one-year lease for new tenants. Since you are making a long-term commitment, you need to select your landlord carefully. A bad landlord can wreck your business, and a good landlord can help to ensure your success.

Some landlords put such severe restrictions on the size and placement of signs that customers cannot find your store. Some lack the funds to maintain their properties, so they squeeze out rent from tenants while allowing the property to deteriorate and lose visual appeal. This deters customers from shopping at your store.

You need to talk with current and previous tenants of the property to find out whether they have complaints about the landlord or the building. The best question to ask them is whether they would renew their lease or rent form this landlord again.

Required Permits and Applications

If your state has sales tax (for example, California does have sales tax, but Oregon does not) you will need to get a retail permit that allows you to collect sales taxes from your customers and requires you to pay those taxes to the state.

Your county will probably require you to file a Fictitious Business Name, also known as “DBA” (Doing Business As). The forms are readily available at county government offices, and the fees are generally quite low. You need to search the database to make sure that your business name is not already registered by someone else. Most county offices provide computers to do that search at no cost to you. May counties offer the same services on their web sites.

Most cities require permits to do business within the city limits, and they usually charge annual fees for issuing those permits. In some cities, especially major metropolitan areas, the permit fees can be quite high, while smaller cities tend to charge lower fees. The amount of the permit fee tends to reflect the amount of traffic and consumer spending that you can expect in that city.

If you sell food, you will need to comply with a wide variety of rules and regulations. You will need expert help in this type of venture.

Finding Suppliers

Before signing a lease, before committing large amounts of your time and money to your retail store, you need to select a product line to sell. You need to find out who can supply your inventory.

One strategy is to talk to retailers who already sell the same or similar product lines. They can provide timely information from their personal experience about the reliability, honesty and supportiveness of suppliers. They know whether deliveries are made on time, how returns are handled and who gives them the best prices.

Trade associations can also provide you with information, as well as education and support from other retailers.

Also decide on a good way to store and organize customer, inventory and sales data. A point of sale system can provide a great way to efficiently track your new businesses information.

Choose how you will handle accounting. Hiring an accountant can be a great idea for saving time. You may also choose to handle your business with accounting software like Sage Peachtree or QuickBooks Pro.

Hiring Employees

Even if you plan to work full-time at your retail store, you will not be able to keep it open all day every day, seven days a week, 365 days a year. Sooner or later, you will need at least one employee.

Many stores can be owned and operated by one person with minimal assistance. Compared to manufacturing operations, specialty retail outfits are relatively easy to start both financially and operationally. However, you will need someone to keep your store open when you are ill, busy with family obligations or simply in need of rest.

Selecting the right employee means finding someone who agrees with and implements your retail philosophy. The retail clerk or salesperson makes face-to-face contact with your customers and directly promotes customer satisfaction.

While your employees should have experience in your field, their ability to connect with customers and ensure their satisfaction is at least as important.

Retail Success

Although no business strategy can completely ensure 100% success, failing to follow a plan can ensure failure.