Steps to open a retail business

1. Generate an idea and business plan.

The first step to opening a retail store is developing your idea and a business plan. When determining what type of store you want to open, you should answer each of the following questions:

• What will your business sell?
• Who is your target customer?
• How will you price your products or services?
• Who are the competitors in your industry and local area?
• Who will be on your team?

There are dozens of other questions that need to be answered, but opening a retail store is like starting any other business. You must determine what you want to sell and who makes up your target audience. It’s important to create a retail store that satisfies a need of your customers.  

“Know your competition,” said Juli Lassow, founder and principal of JHL Solutions, a retail business management consulting firm. “No ideas today are fully original. Understand what options your customers have to you and your offering … Once you understand your competition, build out your strategy to compete. Will it be on price? On quality? On service? On variety? Be specific on what your competitive advantage is. Know how to communicate that to your customers through marketing and presentation.”

It’s important to understand your competitive advantage and what makes your business unique. Retail is competitive, and you need to be clear on your plan to find success. Identifying how your business helps your target market is arguably the most important aspect of opening any business.

Other basic factors to consider include business funding and marketing ideas. Will you need to use business loans? [Read related article: Best Business Loans] Will you take on investors? What types of marketing channels will you use? Does your team need people specifically for social media marketing? What online channels do your customers use?

Once you’ve answered those questions, you should write a business plan that outlines your goals and details how the business will operate. The plan should include marketing possibilities to communicate your unique selling proposition to consumers, and you should consider tech trends and marketing strategies. It should also contain important financial information like funding and the costs of running your business. 

2. Choose a name for your retail store.

In addition to the other basics that go with creating a business plan, take time to find a good business name. When choosing the perfect business name, you should consider a few factors:

• Meaning: There should be some meaning to the name from the customer perspective. That meaning may be developed over time, but you’ll want a brand name that is recognizable to customers.
• Simplicity: Look for names that are relatively short and easy to say. Apple, Google, Facebook and Nike are all major brands that are easy to say. If your brand is a mouthful, it’s probably not the best name for branding purposes.
• Uniqueness: Don’t opt for a name that’s similar to those of your competitors. Look for something original and authentic that encapsulates your business. Try to draw your own inspirations for names without looking at other brands.

The name alone won’t determine the success of your business, so while it shouldn’t be the focus when opening a retail store, you do want to make sure you have a name that fits your brand identity and that customers will remember. 

3. Cover your legal basics. 

Covering your legal basics includes choosing a business structure, following any regulations and obtaining the right licenses and permits.

“If you are opening a retail store for your business, you will need a few common business licenses and permits in order to stay in operation and remain in compliance,” said Deborah Sweeney, CEO of MyCorporation. A few of the basics include:

• A basic business operation license, which allows you to operate your business in the city, county or state you do business out of
• An employer identification number (EIN), which is a federal tax ID that allows you to hire employees to work at your storefront and ensures your business collects payroll taxes
• A seller’s license; this depends on what kinds of items your retail storefront sells; it’s recommended you check in with your state’s government office to determine whether or not you need one.

When it comes to selecting a legal structure, you follow the same process as most businesses. For retailers, however, becoming a sole proprietor can be risky. Taking on a business structure that doesn’t place liability solely on the individual owner is a good way to mitigate your risk, should the business fail.

It’s common for retailers to become corporations or limited liability corporations (LLCs). Both of those options help limit personal liability. 

4. Get your finances in order.

Once you have a great business idea and a plan to make it happen, you need to start thinking about the financial aspects of opening a store. A physical location means incurring significant overhead costs upfront, so you should start lining up funding right away.

You might consider a small business loan to get things up and running. It’s important to research your options and try to get the best rates possible. Unfortunately, some new businesses won’t qualify for a loan, but there are many other financing options, such as investors, grants and crowdfunding. 

You should also create a list of the fixed and variable costs that may affect your business. It’s easy to brainstorm a potentially successful idea only to forget about hundreds of thousands of dollars in costs. Consider property leasing, equipment purchases, staffing needs and other costs specific to your business when developing your business plan.

5. Find the right location.

If you’re opening a brick-and-mortar business, finding a prime retail space needs to be a focal point. While it can be tempting to try to pick a cheap location and hope your business generates a steady flow of customers through its marketing efforts, sometimes there’s no substitute for being in a busy part of town. Picking a location downtown might be a pricier option, but it could bring in thousands more customers per year.

“First-time retailers need to be wary of trying to save money on rent if they are not a true ‘destination retailer,’” said Bethany Babcock, founder of Foresite Commercial Real Estate. “Poor access or awkward positioning in the center can keep clients away. The retail real estate business is very psychological, and the price [of real estate] is usually one of the last considerations for most retailers.”

When choosing a business location, you want to meet your customers where they are. Find out where your target audience spends their time, and look for a space close by. What might seem like an ideal spot could turn out to be a huge mistake if it’s inconvenient for your customers. 

Don’t forget to keep storage space in mind. If you expect to have a lot of inventory, because you sell a lot of items at affordable prices, you may want additional space. But, if you don’t keep a lot of items in stock, paying for extra square footage would be a waste.

6. Consider a pop-up shop.

If you already own an online retail business and want to expand to a physical store, experimenting with a pop-up shop is a good way to test the waters without shelling out a lot of money. These shops open in temporary locations for a short amount of time. For example, your clothing store may open a pop-up shop at a downtown event or a weekend street market.

Pop-up shops allow your business to move around or offer a physical location to attract new customers. You can gauge important data, like consumer interest and foot traffic, to see whether your online retail shop will translate to a brick-and-mortar location.

A pop-up shop can also support a brick-and-mortar location; opening one from time to time in nearby towns may pique the interest of new customers and convince them to visit your main store. Plus, it is always a good way to generate buzz around your business.

7. Create a personalized experience. 

Finding success in retail often comes from adding value that competitors don’t provide. With the convenience of online shopping, physical stores need to offer a reason for customers to visit. Personalization and a quality in-store experience are important ways to consistently attract customers.

Marco Castelán, senior principal of The Navio Group, a retail business consulting firm, said, “I think the biggest question an entrepreneur needs to ask himself/herself is simple: Can I provide the customer a new experience? It doesn’t matter that you are selling items that can be bought elsewhere. The biggest way to differentiate yourself is by creating a unique experience for the customer, because you are creating value that cannot be replicated.”  

The key is understanding your customers so you can offer them value that they won’t be able to find elsewhere. Personalize the experience in a way that makes them want to spend their money with you and keep coming back. That could mean providing helpful in-store staff, allowing them to try out products or offering free samples. Every decision you make for in-store operations should emphasize creating a unique experience for your customers.

[Are you interested in improving your customer satisfaction? Check out our best CRM software picks.]

8. Build vendor relationships.

Small business owners face challenges, and it’s important to consistently please customers despite those challenges. Building strong relationships with vendors is a good way to prevent issues. You’ll want to find a vendor who not only offers quality merchandise at affordable prices, but is also reliable and fixes issues as they arise.

It’s worth making contact with more than one vendor so that you always have a backup in case something goes wrong. Quickly developing relationships with multiple vendors will set your business up for success. However, this can prove difficult if you’re using overseas vendors.

“The global supply chain is changing rapidly,” said Lassow. “Current trade uncertainty makes it difficult to build global relationships that will provide you with the goods and services you need. If you plan to fully or partially source your products from outside of the U.S., get support. Be sure that part of your operations planning includes partnering with experts in sourcing, logistics, customs and tax.” 

9. Determine staffing needs.

Finding dependable staff is a critical part of your retail store’s success. As you develop your business plan, you should think about the different job roles that need to be filled and how many people you can afford to bring on. Make sure you have all the right state and federal paperwork and remain compliant. 

While finding employees who are qualified on paper is important, you also want to make sure that they are a perfect fit for your brand. Staff can leave stronger impressions than the actual product, so you’ll want to make sure you employ people who make customers feel welcome and engaged. 

The hiring process can be daunting, so if your budget allows it, consider a top HR outsourcing company to help find the perfect team. 

10. Choose business software solutions.

Technology has made taking care of the day-to-day tasks of running a business much easier. But to ensure that your business runs as smoothly as possible, you’ll need to dedicate time to selecting quality small business software solutions. That means determining what your specific needs are and researching the best options. 

Most businesses will need a top POS system to take orders and process payments. Many include hardware and competitive credit card processing rates. You should also consider the best accounting software to help keep your finances in order if you can’t afford an accountant. You might also consider software to help with inventory management, payroll, HR, marketing or customer relationship management. 

Whatever your software needs may be, make sure to test the product out and read all the fine print before signing a contract. You don’t want to be stuck paying more than you can afford for a product that doesn’t support your needs. 

11. Explore marketing opportunities.

Marketing is an important part of building a successful retail store. Although you have a solid product, you need to find a way to make your name stand out so people skip the competition and come through your doors. 

“You risk not standing out in a crowded marketplace,” Lassow said. “Consumers have so many options today to learn about products. They have options in where to shop. They have options for how to buy. Your retail strategy of product and marketing must reach your consumer. It must resonate with them.” 

Invest time in creating an effective marketing plan with a unique message and strategies on how to reach your target customers. That might include email, SMS or direct mail campaigns. You should also work toward building an online presence so more people can find you, whether that’s through Google, your own website or social media platforms. 

[Are you interested in using direct mail to market your store? Check out our small business guide to direct mail.]

Other marketing opportunities may come from sales or in-store discounts. Sales can be a good way to draw customers into your store. For example, offering 30 percent off select items during a holiday weekend may increase foot traffic. Coupons and loyalty programs are another great way to bring people in and keep them coming back.

Regardless of your marketing and sales tactics, it’s important to be creative. Find ways to reach your customers through creative marketing ideas. Running a retail business is a nonstop endeavor, and finding success requires quality marketing campaigns. 

12. Plan for a grand opening. 

If you’re opening a retail store, go big for the grand opening. This doesn’t necessarily mean you need to spend excessively, but you do want to make it an event. Reach out to local news outlets, as media coverage is a good way to get the word out about your business for free. Share a pitch with journalists as to why your store matters and how it fits into the local community.

In addition to securing media coverage, plug your business’s grand opening through social media and other marketing channels weeks in advance. You want to build up excitement so that as many people as possible come. Consider timing as well. Opening a store on a Tuesday at 2 p.m. probably doesn’t make much sense, but opening on a Saturday morning when lots of people are out will help make opening day a hit.

It doesn’t need to be over the top, but your grand opening should be an event you take seriously when trying to win over the local community. You want to start off strong and have a good first few days to get your business into people’s minds and win over customers.