I want to open a store without ruining my life.
December 30, 2009 6:24 AM   Subscribe

How do I open a store? Is this a pipe-dream or a good idea?

I have no business training, savings or financial smarts. I am just a relatively capable and intelligent young woman who has reason to believe that her hometown needs a store that sells practical undergarments and that such a store would be a huge hit with locals who don't want to drive 40 minutes to the nearest department store to buy a pair of socks. How do I go about opening my own business? Is it feasible to do such a thing with no capital or business training? I'm sure I'm being extremely naive -- feel free to tell me so.
posted by RingerChopChop to Work & Money (14 answers total) 8 users marked this as a favorite
 
It depends really on how you want to do it. In the modern world you cold do a phone and/or internet order business with no storefront essentially no stock, taking orders in advance and doing home delivery for something under $500 bucks. But it really depends on what you neighbors expect in turnaround and stock on hand.

I'm just talking out of my ass I'm no businessman but one thing I do know is the internet has made the virtual or temporary storefront a real and very powerful thing.
posted by Rubbstone at 6:33 AM on December 30, 2009


The internet is not particularly great for dealing with very localised consumer demand. For what you are talking about, it sounds like your original idea of a storefront would be best. (Obviously, if you have stock, a website is also a great idea as it can expand your market, but you've identified your town as your primary market.)

You'd need a lease, shop fitting, signage, wholesalers, inventory, displays, a register and some kind of EPOS or stock management system, some design and some print. There would be insurance, light, heat and supplier bills, as well as the cost of forming a LLC, and of course taxes. It is feasible to do this with no business training - these are skills that can be learned, although some things (like merchandising) you need to have some flair for. It is not feasible to do this with no money, however.

Is there a way you could trial run an initial inventory line up at local markets? Could you do a cart / barrow / stall some place? There are ways to test the waters of an idea on a smaller and less capital-intensive way before you get into bank loans, SBA, etc.
posted by DarlingBri at 6:52 AM on December 30, 2009


I don't really know anything about business but my first impression is that such a store would have to stock a wide variety of items and sizes but would not have very large profit margins on those items. I think that means you would have to have a lot of money tied up in inventory without getting very quick return on it.

I assume if your hometown doesn't have anywhere that sells socks it is pretty small, how many people do you see buying socks (etc.) every day? I would think you would have to sell a lot of socks to make it worth your while.

Is there a local community college? You might find someone who teaches business would would be willing to talk to you about your plan and could offer specific insight.
posted by ghharr at 6:56 AM on December 30, 2009


Start with a business plan of some sort. Answer the basic questions about who will buy from you, why they'll buy from you instead of your competition, what volume of inventory you'd need to keep, what volume of sales you'd need to keep the doors open. Do your best to test your assumptions.

My guess is that nobody does drive 40 minutes to get a pair of socks; they put socks on a shopping list, and wear their old socks until the shopping list gets long enough to justify the trip, at which time they buy a bunch of stuff. So your store wouldn't really save them the trip; it would just save them the indignity of wearing threadbare socks, or from having to do an extra load of laundry. Do people in your little town care enough about the condition of their socks so much that they'd be willing to pay your (inevitably) higher prices to buy from your (inevitably) smaller selection now, rather than the cheaper, better selection at the department store in a week or so, and do they also not plan well enough to avoid this predicament most of the time? That's really the sort of thing you're up against.
posted by jon1270 at 6:57 AM on December 30, 2009 [1 favorite]


The lack of capital is going to limit your flexibility across more than a few dimensions. But still I'd suggest you don't give up your dreams, and find a way to work towards your goal.

First of all, you won't have to worry about what we call Working Capital, which can be a good thing as we know that roughly 90% of all businesses that fail do so because they haven't managed this resource properly.

Second of all, you're going to have to identify your product mix properly. There are businesses dealing in what we call Fast Moving Consumer Goods that actually can be run without working capital, as they feature what's called Negative Operating Cycle; in other words, the retailer never has to pay for goods until after they are sold.

Unfortunately, the same attributes I've noted above will tend to attract other participants i.e., competition, so its unlikely that if you can identify a sorely needed product, the opportunity will persist for long.

So I'd suggest identifying a product or products that are needed in your area BUT folks can't source locally. At the outset you'll probably have to show folks the products via catalogues, taking payments upfront then later delivering.

This will, of course, limit your business to what we call "low touch" merchandise, stuff folks are comfortable ordering without seeing in advance, but over time as your generate profits you can use this money as working capital, which will allow you to acquire inventory.

So yeh, go for it! Keep in mind these constraints, treat your customers like the kings (or queens) they are and who knows? You might just build a viable business.

Finally, keep in mind that while you've got the spark to try to do something you should.

Often actual failure in business is worth far, far more than an MBA (I can say this as I've got an MBA and I have failed in business in the past).
posted by Mutant at 6:59 AM on December 30, 2009 [4 favorites]


It sounds like you have a good idea, and you're willing to work on it - great! Look for an economic development commission / department / organization for your town or area, and they should be able to point you to a class, book, or maybe even a mentor to help you make a business plan, including a financial plan. This is very doable even without an MBA, but there are a lot of details that experience (or maybe a good book) can make sure you don't overlook.
posted by amtho at 7:08 AM on December 30, 2009


I ran a branch of an independent book store for a few years. While I have never started a business, I opened that branch and ran it until the lease ended and we relocated. As I understand it most businesses fail because of lack of capital -- you need to be prepared to make no money from your business for the first 3-5 years at least. That does not mean that you won't be selling stuff, but that money will go out again to purchase new stock, pay taxes and fees, rent, insurance, and so on. You will also lose money to damage, unsellable merchandise, and theft.

During this time period, you will be probably working alone. If you store is open 8 hours a day, you will be there 10. You get no holidays, no days off. If you are sick, your store is not making money. You will have to be the worst boss in the world to yourself, or your business will fail. If your business takes off, you will eventually hire people, which means dealing with the whole nest of laws around payroll and employee/employer relations. If your store is successful, you may have to move, which is a delicate process if you depend on foot traffic and occasional, rather than regular, customers.

And, if you do it all right, you could still fail, because people would rather drive 30 minutes to save $1 on a pair of socks. Retail is not for the faint of heart, and the world is full of business owners that were more enchanted with the idea of their store than with the reality of operating a small business.

Which is not to say that you shouldn't do it. I learned a lot in those years, both professional and personal. The store gave me room for creative, analytical, and emotional growth. I learned a lot about interacting with people, and, when it was time to move on, I had learned a bunch of skills that helped me make my jump to a new career.

So, go ahead, but:
1. Be sure you can last at least 3 years working 60-70 hour weeks with no or little money coming in.

2. Look at some spaces, and figure out what kind of rent and utilities you will have to pay for the spots you want. You can skip paying yourself, but not the landlord or the utility companies. Fixtures and similar things may be more expensive, but these are one-time or infrequent purchases, and they can be bought second hand. Rent and utilities are continual.

3. Talk to an accountant to get a handle on the amount of paperwork you will need to run the business -- can you stand that much? They might also be able to give you a sense of fees required for licensing, insurance, and so on.

4. Talk to some distributors to see what kind of wholesale prices they offer, then figure out what kind of mark up you will need to pay the various charges in items 2 and 3. Then you can decide if you might be able to pay yourself a salary or plow the profit back into expanding the stock.

And that is it off the top of my head. Feel free to memail me if you have specific questions. I am not your business advisor, but I would be glad to discuss my particular experiences.
posted by GenjiandProust at 7:15 AM on December 30, 2009 [1 favorite]


Some random thoughts:

1. Don't underestimate the cost of filling the average retail space with enough stock so it doesn't look empty. You can sink thousands and thousands of pounds (dollars) into even a small space. Then you OWN all that stuff and need to find a way to get rid of all of it at a profit!

2. Don't underestimate the value of your own time. A business that makes 20k "profit" is not really profitable if you didn't take any salary.

Of course the business won't be able to pay you in the beginning, but that's not a sustainable way to carry on for ever, unless you plan on being a sock charity.

3. Don't underestimate the amount of time you will need to spend on management tasks: purchasing, bookkeeping, calling around to find someone to work in the shop when everyone else is sick, etc. So: You need one or perhaps two people behind a counter the whole time (what happens when someone needs lunch, or a trip to the toilet?). If one of those people is you, when are you planning on doing all the business admin work? When are you going to phone the suppliers?

3. Do you want to own a business, or do you want to have a job? If you don't want your business to be a permanent job, then the business will need to pay for someone to do the day to day running as well. If (on the other hand) you are going to manage the shop yourself AND work behind the counter, do you really want a full time retail job as well as a full time management job? How much do you want to be paid for that?
posted by emilyw at 7:37 AM on December 30, 2009 [1 favorite]


Response by poster: This is all really great information for me to mull over-- Thank you, thank you.
posted by RingerChopChop at 7:57 AM on December 30, 2009


I don't really know anything about business but my first impression is that such a store would have to stock a wide variety of items and sizes but would not have very large profit margins on those items. I think that means you would have to have a lot of money tied up in inventory without getting very quick return on it.

No. You can have low margin businesses which turn over their inventory quite often. Grocery stores are one example.

You are correct, though, that a store selling undergarments will have very low profit margins.

To the OP: I don't know where you're located but you will need to think about competition that has far more capital than you (Wal-Mart?)

It's a nice romantic notion that ever locale should have its own store at which its residents can buy sundries, but people have proven more than willing, at least in the US, to travel up to an hour to a big box store to get all their shopping done at once. You may not like this. This may not comport with your values. But this is economic reality and it is foolhardy to found a business in defiance of economic reality.
posted by dfriedman at 8:05 AM on December 30, 2009


First, and before you spend a penny on anything, take the time to write a business plan.

I am in the process of doing that right now for a small retail operation and it has been amazing the types of things it has made me think about, calculate, research and think through. Writing it has both made me more confident of my idea from a profit viewpoint, while at the same time pointing out holes and weaknesses that I need to address before opening. I've found the templates available at SCORE to be a very good starting point, along with a few books on the subject of business plans. I haven't even opened yet (hopefully in 2010!), but I can say that the time and energy I've invested in drafting the business plan has paid back multiple returns to me so far. Feel free to MeFi-mail me if you'd like to discuss this further.

(p.s. One thing I would love to have is an AskMe type of resource for small business owners. Thus far, I've not found anything even remotely close.).
posted by webhund at 8:23 AM on December 30, 2009 [1 favorite]


Another thing I would think of is your product line-up. Can you build a business on socks and underwear? I'm pretty sure you could, but I'd be inclined to think about whether you could build a better business on:

a) socks, underwear and bath products
b) socks, underwear and ties
c) socks, underwear, flip-flops and wellies

If you have a tertiary product range, you might get more casual gift trade, which may be more sustainable. Also, you can get some things like bath products from small producers on consignment, which means if you don't sell them, you don't need to pay for them. Flipflops and wellies, however, cover a cross range of seasons, so that's great; flipflops are cheap to stock whereas wellies are not.
posted by DarlingBri at 11:28 AM on December 30, 2009


For a little more help on writing a business plan and figuring out the logistics of running a store, see if you can find a copy of Small-Time Operator. It will walk you through a lot of the things you need to think about.

While you're figuring out how much money this would bring in, have you drawn up a schedule? If not, do that - decide how many hours your store would be open, whether you would be the only person working there (I can't quite imagine being the only person running a shop, and if you need employees, that's a whole additional headache - legal issues, tax withholding, and so on), and what additional hours you'd need to run errands, do the books (if you can't do them during shop hours), etc. Can the profits provide you with even minimum wage during the first year? If not, where will your rent and groceries come from?

It can be very tempting to want to fill a niche once you've discovered it. Make sure the venture will cover your own basic needs (minimum wage), though, before you commit to something you can't afford.

Good luck, whatever you decide!
posted by kristi at 4:31 PM on December 31, 2009


aargh, sorry, wrong question. I contacted a mod to have it removed.
posted by R a c h e l at 2:59 PM on January 1, 2010


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