Opening A retail Business??? Business owners come on in!! - Lateral-g Forums

Rick D · #1 08-05-2012, 12:27 PM

So I have a question? I am thinking of opening a retail store, but I have never been down this road in retail. I have run several body shops and part owner of a shop so I know about what's involved in running and owning a business.

My question is in retail what's the best way to get capital for the inventory and such. I know for the start up cost what I need at least as far as setting up the place, phone, build out, signage, fixtures. I know what and how to get that done (at least I think I do

). But at the beginning how do I go about the working capital? Loan from a bank ok that one is easy, but do I look for investors?? If so how would I go about that? My brother-in law as over 20 years in retail all the way up to regional manager for Home Depot, he has shown an interest in getting involved in this project but again he has worked for major corps with their own capital, (or at least they had their investors already) so not much help in that department.

Just looking for some ideas on what others have done?? So please let me know what you think good or bad?

NAPA 68 · #2 08-05-2012, 12:58 PM

If you don't mind me asking, what type of retail business? Many franchise type companies have financing programs to qualified individuals.

Tim

**Flash68** · #3 08-05-2012, 02:26 PM

Savings is a good way to fund a business. You don't have to give away ownership/profits to investors.

Of course if you want to spread your risk around and not take on all the financial risk (whether you have the savings or not) then investors/partners are an option.

Partners = some level of involvement.

Investors = passive = no involvement (or minimal at least, depends on how much they invest/own)

I have an SBA loan (not for startup costs, but for saving us after the 2009 slowdown in my industry). It is a lot of red tape but it is a great loan program.

For any kind of a bank loan you will likely have to show your background in the niche you are getting into. That's where the question above comes in - what kind of retail business? Do you have the experience?

Small business is the heartbeat of America.

**Rybar** · #4 08-05-2012, 03:47 PM

Well, from my experience. I used my own captal. Which does limit what you can do as far as advertising, merchandise and stock.

You should really budget for advertising and a lot of it. Lots of money can be wasted on different forms of advertising.

Also, try to keep your overhead as low as possible. Otherwise if your prices are too high its tough to be competetive. And if you start dropping your pants to get sales its a losing battle.

The other thing about retail is expect to work a lot of hours. Work weekends, evenings. And if you hire someone you still have to be there to oversee daily operations. Its a customer driven business so you or your employees need to sit there and wait for people to walk in the door. How you get people into your store and its location and PARKING are crucial. I would also target local people in your area or locate the store near other business that have a lot of traffic to generate more exposure. Like I said advertising can cost huge dollars and you have to be repetetive with it or it won't work. Depending on your products you might not see the fruits of yours ads for a few years.

Anyways, good luck with it. Everyone I know it retails knows its a very tough go. Esp. The long hours and remember the customer is ALWAYS right, even if you have to lose money to make them happy.

**Sieg** · #5 08-05-2012, 04:10 PM

Quote:

Originally Posted by Rybar

Well, from my experience. I used my own captal. Which does limit what you can do as far as advertising, merchandise and stock.

You should really budget for advertising and a lot of it. Lots of money can be wasted on different forms of advertising.

Also, try to keep your overhead as low as possible. Otherwise if your prices are too high its tough to be competetive. And if you start dropping your pants to get sales its a losing battle.

The other thing about retail is expect to work a lot of hours. Work weekends, evenings. And if you hire someone you still have to be there to oversee daily operations. Its a customer driven business so you or your employees need to sit there and wait for people to walk in the door. How you get people into your store and its location and PARKING are crucial. I would also target local people in your area or locate the store near other business that have a lot of traffic to generate more exposure. Like I said advertising can cost huge dollars and you have to be repetetive with it or it won't work. Depending on your products you might not see the fruits of yours ads for a few years.

Anyways, good luck with it. Everyone I know it retails knows its a very tough go. Esp. The long hours and remember the customer is ALWAYS right, even if you have to lose money to make them happy.

Good info.

Can you leverage your suppliers for start up inventory extended terms or dated flooring?

How much and what type of advertising are you planning? If you don't have a location with high traffic count you need to reach out to your potential customers with reasonable frequency.

Graphic designers, websites, social media, email lists, direct mail, print, TV, radio, billboards, in-store signage, etc. use up cash fast. What can you get for co-op from manufacturers and suppliers?

**John510** · #6 08-05-2012, 05:42 PM

A bank will not loan you money if you have no experience in that industry especially the SBA. SBA will want a track record in that industry. Banks will want a UCC filing also on all of the assets which may not be a lot in a retail store. I have had 2 SBA loans and each one took over 6 months to fund.

You can also use a hard money lender. They typically charge 20-25% and you have to pay them back in 6 months to a year. I would only recommend something like that as a LAST resort. Ive used these guys twice. http://www.ondeckcapital.com/ One for 60K and the other for 75K. They fund you in 2-3 days.

If you get rejected for every loan possible there are always credit cards you can advance cash from.

Negotiate with the landlord and have them pay the TI's. (You will most likely have to pay up front then they reimburse you)

I would not partner with anyone whether it be a friend or family member. It will kill your relationship with the person especially when there is money involved. Plus, who wants to give away half of the profit?

When I open a new store I plug everything I need in full detail on a spreadsheet. I factor in inventory, equipment, construction, permits, etc. As far as working capital goes you should have capital coming in as soon as your are open. Use that money to pay for new inventory, bills, etc.

Advertise, advertise, advertise. Plan to spend 3-5K a month on some decent mailers, coupons, etc to get your name out there.

**Rybar** · #7 08-07-2012, 12:14 AM

Quote:

Originally Posted by Sieg

Good info.

Can you leverage your suppliers for start up inventory extended terms or dated flooring?

How much and what type of advertising are you planning? If you don't have a location with high traffic count you need to reach out to your potential customers with reasonable frequency.

Graphic designers, websites, social media, email lists, direct mail, print, TV, radio, billboards, in-store signage, etc. use up cash fast. What can you get for co-op from manufacturers and suppliers?

Seig, I bought my retail space and own it. Also did all the TI's like John mentioned and that is a huge cost. Let's just say that used up most of my capital lol. It has given me a huge break for monthly overhead costs. However, because I wanted to own it limited the locations I could choose from. I would recommend to really research and put a lot of thought into the location, it's a major part of a retail store.

I've done most of those forms of advertising. My family is in that field of business it helps me out a lot with what to do. The best ads for me have been ads on the sides of the transit buses.

Mfg's offered me very little for co-op. my business is all about volume and I can't compete with the volume that the big boxes do to negotiate lower cost. You can buy product by the container but then you tie up lot of capital on inventory you're not sure when you will ever sell

Good luck Rick, if you need any help shoot me a PM.

**Flash68** · #8 08-07-2012, 12:34 AM

Nothing against you other guys, but IMO a lot of this advice is moot until we hear WHAT retail business Rick is considering going into. Not all retail is created equal.

Vince@Meanstreets · #9 08-07-2012, 03:15 AM

Hi Rick,

As a fellow small business owner I feel your pain. Partnerships are tough. Stay away. I lost big trying to help a partner through tough times. Mind you this is someone whom I have known and trusted for 20 years. Bit me in the ass. Trying to get a loan is a bigger joke. I gave up. I had a credit score of 800 +, $25K in the bank, 90K in equipment, own a home, have a car collection worth at least $80K and it made no difference or did it help. If you figure it out clue me in please.

My suggestion is to look back at what you have to offer and start there. Use what you have to create the capital. Start small, use companies like Keystone to create your inventory. Look at your area, what do people need. Look to other small companies that may put product on your shelves on consignment.

Some manufacturers/suppliers may offer cash incentives to stay loyal to a product. Similar to what body shop supply stores do. You may have to take a small hit but it can pay out in the end.

Let me know when you get up and running, I may send you some products to sell as soon as I get back to manufacuring.

**GregWeld** · #10 08-07-2012, 07:52 AM

I was always on the wholesale side of the retail trade. Not to be a Debbie Downer - but there's no way I'd start a retail business without having adequate capital to fund the inventory. In a wholesale business you can sell your receivables (I never did but that avenue is available) at a discount to fund yourself.

You need to sell the inventory to pay rent - salary - overhead etc.... and you need to REPLACE that inventory at the same time... There's no way you can catch up if you don't start out with 100% of your inventory out of your pocket.

IMHO you'll need to also have enough capital to pay all your living expenses for at least 6 months because the business will have all manor of unaccounted for expenses for the first few months and that will have to come out of cash flow or capital. People never allow enough for this. You'll have plenty of miscellaneous expenses that will be double and triple what you allowed for and like building our cars --- things tend to get the "well... as long as I'm here...." Such as shelving - walls - fixtures - lighting - signage - office equipment - deposits for phone and other services - expenses for legal (skip this at your own peril).