1. What is a Retail Business?
2. Is a Retail Business Right for You?
3. Steps to Starting a Retail Business
4. Common Mistakes When Starting a Retail Business
5. Additional Costs
6. Talk to a Lawyer

Retail businesses come in many flavors and in some cases are very easy to start. Regardless of how easy or difficult it is to get your business off the ground, you should have a business plan. You should also have the right personality to own and operate a retail business because your livelihood depends on your customers.

What is a Retail Business?

A retail business is a business that sells products, services or both. Choose the best way for you to get your products and services out there.

  • Open a brick and mortar store. This method depends on a lot of walk-in customers.

  • Sell your products or services without a store. These methods include:

    • Catalogs,

    • Television ads,

    • Online shopping,

    • Door-to-door solicitation,

    • Vending machines,

    • In-home demonstrations,

    • Mail order,

    • Specialty retailing, and

    • Portable stalls.

  • If you choose mail order, you'll need:

    • A warehouse or drop shipper,

    • Catalog printing services,

    • A mailing list,

    • Relational database support, and

    • Back-end fulfillment.

  • You'll need the same things as mail order for an internet store, except:

    • Your catalog will be your website.

    • Your mailing list will consist of subscribers to your newsletter or website.

    • Internet stores also need to be optimized for search engines.

  • For vending machines, you'll need to:

    • Purchase or lease the machines.

    • Buy the product to stock the machines.

    • You'll also need some cash in the form of change for the vending machines.

  • Specialty retailing means that you sell things people want, rather than need. Whether you choose to do this online or in a brick and mortar store, you'll need to do your research to ensure that there is a market for your product.

Is a Retail Business Right for You?

Just because you're great at selling things doesn't mean you'd make a good retailer. You'll need more than just business sense:

  • The personality to constantly interact with people, even when you're not feeling well or when a customer is yelling at you.

  • Multitasking, especially if you start a small specialty shop where you are not only the owner, but the main employee.

  • You do all jobs including:

    • Administrative work,

    • Cleaning,

    • Restocking,

    • Being a salesperson, and

    • Marketing.

Furthermore, if you're not big on taking risks, retail might not be for you.

  • You might have some months where you sell out all of your inventory and some when don't sell a thing.

  • You must be comfortable making decisions and being alone in the store.

  • You must be able to accept diversity, since you cannot discriminate when you hire people.

  • You have leave your ego home, else you will set yourself up to fail.

  • Be in tune with your customers. Just because you like something, that doesn't mean that it will sell.

Steps to Starting a Retail Business

Decide what products or services you want to sell. The rest of the choices you need to make will depend on what you are selling. Once you know what you want to sell, follow the steps to starting a retail business that apply to your unique situation.

  1. Choose a business name. Check with the Secretary of State for your state to determine if the name is available.
  2. Learn the laws. If you are selling liquor, you'll have different laws to abide by than someone selling personalized items. Laws may include those at the federal, state, county and local levels.
  3. Choose a business legal structure. Each structure has its own taxing rules and liability rules. You may be a:
    • Corporation,

    • S-corporation,

    • Non-profit,

    • Limited liability company,

    • Partnership, or

    • Sole proprietor.

  4. Locate funding for start-up costs and inventory. Even if you are independently wealthy, it's usually better to use someone else's money for inventory.

  5. Determine your profit margin. You want to make money, but you also don't want to price yourself out of business. Keep your prices competitive.

  6. Plan for distribution. If you own a brick and mortar store, this isn't as much as an issue, unless you also sell online. Those who are doing mail order or an internet store need to know how much shipping will be and will need supplies on hand to ship products.

  7. Create a business plan. This should outline location, demographics, financing, profit margins, distribution and marketing.

  8. Apply for a tax identification number (EIN) from the Internal Revenue Service.

  9. Find the perfect location if you are opening a brick and mortar store. The location should have plenty of visibility. Your products or services should be well accepted by people in the location you choose. You wouldn't want open an adult store or a bar next to a church.

  10. Open a business bank account.

  11. Apply for credit for the business.

  12. Establish store policies for returns, sale pricing and other “rules” customers should follow.

  13. Stock your store and open the doors!

Common Mistakes When Starting a Retail Business

Common mistakes that lead to failure include not having a business plan, undercapitalization and not enough due diligence. Due diligence is part of the business plan and might include traffic numbers and the average income of the area your store is located.

Learn that you are not the boss – at least not all of the time. Your bosses are bills, your building, customers and in some cases, even vendors.

Keep politics out of the store. No matter what you like, you'll alienate those customers who don't agree with you.

Additional Costs

Be prepared for the costs of starting up, including filing the appropriate documents, paying the appropriate taxes, obtaining licenses, utilities deposits, rent payments, mortgage payments, costs to improve the location, inventory costs and costs to purchase store fixtures such as shelving, racks, poles, mannequins, a cash counter and more.

Talk to a Lawyer

If you need help with starting a retail business, you can post your question or concern on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures and Airbnb.