Back when I was a kid, my mom had her own retail store, and I would go there after school to help out. Working those couple of hours every day made me really fall in love with the idea of opening my own shop one day. Since then, I’ve always wondered how much does it cost to open a retail store and actually run it?
However, when I got my degree, I felt like I was too inexperienced to open a store, and I didn’t know anything about running a business. So, for a while, I bounced around from one retail store to the next, learning everything I could and creating my business plan along the way.
A few years had passed, and I decided it was finally time to muster up the courage and open my own retail store. The process has been extremely challenging but incredibly rewarding.
I’ve managed to learn so much in the few years I’ve been running my shop, and I wanted to share it with others. Here’s what I learned:
The Basics of Opening a Retail Store
The most important part of opening a retail store is having a sound business plan. Since I was still inexperienced, I had to look online to find the best ways to do it. In the process, I found that on the Power Home Biz website, I could get free business plan samples for countless industries.
Then, I chose the name for my store and started searching for the best location for my business. Since I didn’t have a lot of money in the beginning, my storefront was pretty small at first, but I didn’t mind.
My main focus was on finding the right staff and build good community relationships. I also explored the best ways to advertise my business and create a unique shopping experience for every customer.
Now, after years in the business, I’ve moved my store to a bigger space and have more staff. My business is doing better than ever, all because of some strategic financial planning and hard work.
Planning Your Expenses
Before I could calculate my costs, I first had to determine what my budget would be. Of course, I couldn’t predict every single cost down to the last penny, but I had to figure out how much I was willing to spend. I started off by asking a few simple questions:
- How much do I need to open the doors?
- What are my fixed and variable expenses?
- Which costs can I reduce and by how much?
- What can I do without?
Once I had the answers to these four questions, I opened a spreadsheet and started calculating everything. However, it was trickier than I thought it’d be, so I decided to break it down into a few more categories.
When figuring out what my start-up costs would be, I tried to include every single expense I could think of. From rent, all the way to paper clips, I wanted to make sure that I could keep my doors open for a while.
Of course, every shop is different, so your costs won’t be exactly the same as mine. However, I wanted to share this essential list of the seven basic things every future shop owner has to think about.
Step 1. Renting a Space
A general rule of thumb when starting a business is to have at least two years of rent money in advance. If you don’t have that kind of cash in the beginning, it shouldn’t put you off opening your shop. But I suggest having enough money to cover at least one year. That should give you enough time to get your business off the ground.
Depending on where you’re opening your store, the rent prices can vary dramatically. For example, the average cost of renting a space in New York in 2016 was a whopping $1,300 per square foot. On the other hand, if your shop is in a smaller town, that price will be much lower, starting at $100.
Of course, you also have to factor in the costs of your monthly utilities, like water, electricity, and sewer charges. Also, your phone and internet expenses will add to the total price of your rent space.
Step 2. Paying Licensing and Administrative Fees
Licensing and administrative fees include everything you need to open your store legally. To start, you need to get an Employer Identification Number (EIN) for your taxes. Also, you have to get a few different local and state licenses, a certificate of occupancy, and a seller’s permit.
Depending on where your business is and what you’re selling, the prices for these licenses and permits can vary. The best estimate I can give you is that it can set you back between $200 and $6,000 in your first year.
However, as the years go on and your business grows, these administrative fees will become smaller and smaller. What’s more, once you get a better handle of your expenses, you can easily cut down on some of them.
Step 3. Buying Insurance
One thing that no business can do without is insurance. Not only will it protect you and your business, but, in some cases, you might need it to receive financing. Here are a few insurance types I recommend all shop owners get:
- Property insurance — In the event of physical damage or theft, your store will be protected.
- Workers’ Compensation Insurance — Nowadays, most states require you to have this. With it, you’ll be protecting your employees if they get injured or become ill.
- Liability insurance — You and your property will be protected against lawsuits in case someone gets hurt on your property.
- Health insurance — Again, you and your employees will have to spend significantly less on medical bills if one of you gets hurt or becomes ill.
- Business Interruption Insurance — If you had to close your store for a few days due to a natural disaster, you’d be compensated with this type of insurance.
Of course, you don’t have to get most of these types, but I strongly recommend that you do. The cost of insurance might seem a bit steep at first, but in case something goes wrong, it will be well worth it.
Step 4. Doing Renovations
If you want to create a unique look and customer experience in your store, you’ll have to invest a bit in the renovations. However, I don’t recommend going overboard and blowing your entire budget on this alone.
Instead, you should look at what you immediately have to change and what can wait a while. Also, rather than replace everything, try to refurbish some of the furniture or fixtures that you already have.
For example, flooring can be extremely expensive, so it might not be the best idea to replace it right away. If you want, I recommend waiting a few years and making these huge changes when you’re making more money.
Step 5. Buying Office Equipment and Inventory
From the moment you open your doors, you should have enough initial inventory to last you at least four months. Take into consideration how much money you’ll need to buy your inventory and where you’re going to keep it.
Then, think about the equipment you need to run your business like computers, point of sale terminals (POS), and office supplies. You’ll also have to get a cash register and a safe, which don’t come cheap.
Also, you need to buy a good security system for your store and business right away. Getting one is pretty much the same thing as buying insurance. You hope you don’t have to use it, but you’re glad it’s there. A security system and a few strategically placed cameras will keep you and your business safe for a long time.
Step 6. Finding a Web Host
One of the best ways to draw attention to your business is by having a strong online presence. To start, you need a good website, someone who’ll make it, and a hosting provider.
Now, if you’re working on a tight budget, there are some services that offer free hosting. However, I strongly advise against it, because you’ll never truly own your website and won’t have control over the ads.
Also, if you’re a bit tech-savvy, you could make your own site using WordPress or Wix. But if you can afford it, I recommend hiring someone experienced for the job. They’ll know exactly what to do to draw attention to your website.
Step 7. Advertising
The last thing that’ll determine the cost of opening your store is how much you’re willing to invest in advertising. A good rule of thumb is to allocate between 9% and 12% of your sales profit on your marketing budget.
If you want to make a statement and not just rely on word of mouth, you can hire an advertising agency, which will do all the work for you. They can design your logo, create promotional materials, and much more.
However, if you’re working on a smaller budget, you should start by working on your social media and search engine optimization (SEO). Slowly but surely, you can build an audience and attract more customers.
I hope you enjoyed this article and found it helpful. If you did, please consider leaving a comment down below or sharing it with your friends!
Now, as I said in the beginning, these were my personal experiences with starting a business.
How much it’ll cost to open a store will vary from one person to the next. It’ll depend on where you live, how big the space that you’re renting is, and, of course, what you’re selling.
The most important thing is to set a budget right away and stick to it. Think of what your variable and fixed costs will be and start with that.
As your business grows, you can add more services and renovate your store to create a better shopping experience. But, in the beginning, stick with the essentials, protect yourself and your business, and work hard until you make it.