It’s an exciting time to be in the retail industry. Modern technology has created an engaging, fast-paced environment for retailers, with unlimited opportunities for creativity, innovation, and a diverse range of goods and services for customers.
If you’re reading this, chances are you’re dreaming of opening your own retail store. You may have chosen a name for your company, have an idea of the products you want to sell, and are ready to take the next steps to launching your store. But where do you begin?
Opening your first retail business can be a daunting task. The industry is highly competitive, and stores often require a lot of sweat equity. Sometimes, the biggest obstacle is simply knowing where to start. However, with the right planning and a little help from those who work with retail partners every day, your business can grow from just a dream into a great success.
We’ve put together a checklist of 10 essential steps that will create a secure foundation for your retail company. These basics will take the guesswork out of the process so you can focus your energy on what matters most – your products and your customers.
Step 1. Choose a legal business structure.
One of the first and most important decisions is to choose a legal structure for your business. This not only determines the way your taxes are filed, but it also impacts the amount of personal liability you take on, what type of paperwork your business is required to submit, and your status on financial loans and fundraising.
The most commonly used retail structures are listed below. Choose the structure that is most aligned with your current business operations and needs. If needed, you can always change your business structure in the future to one that better suits your growth model.
Limited Liability Company (LLC)
A limited liability company is a business structure allowed by state statute. This is the most common structure chosen by retailers because it protects your personal assets without the tax burden of a corporation.
Corporations are the most complex legal structure and exist as separate legal entities not tied to any person. Retailers who decide to operate as a corporation often choose to become an S-corp because of its special tax status. An S-corp is considered a “pass-through entity,” which means income is reported on the owner’s personal tax returns, therefore avoiding the corporate tax rate.
Step 2. Identify your channels.
You’ll also need to determine where you want to sell your products. This decision has far-reaching effects, so it’s important to answer this question early in the planning stage. Do you want to sell online? Do you want a brick-and-mortar storefront location or a mobile app? Do you want to maximize all platforms and give your business the best opportunity to succeed? Modern retail employs omnichannel strategies, and customers expect a seamless user experience among multiple platforms. You’ll need to identify what channels you’d like to sell through and integrate those options together if you want to retain a strong brand image and positive customer experience.
Step 3. Name and register your business.
Once you’ve identified a business structure and how you want to sell, it’s time to officially register your company name. There are multiple ways to do this, and although some are legally required for doing business, others provide extra layers of protection and help ensure no other entity is doing business under the same name.
The easiest way to register your business is to obtain a DBA at the local level. You can register any name you want to start “doing business as,” regardless of the legal structure you choose. Visit your county or city clerk’s office and register your name in their system for a small fee, and you’ll also need to search their system to ensure no other business currently assumes the same name.
If you’ve decided on an LLC or corporation structure, you’ll need to file your business at a state level. Registration requirements vary, so it’s best to visit your state’s official website for specific information and to register online.
If you plan to conduct business only at a local or state level, you can stop here. But if you plan to expand your business nationally, you’ll want to consider registering your name at a federal level through a trademark. Though not required, trademarks offer powerful brand protection to larger businesses who want to sell in multiple states.
Finally, if you plan to sell online, make sure to buy a domain name for your website and secure usernames for all of your social media platforms. It’s best to maintain consistency among your usernames so that customers can easily find you across different online channels.
Step 4. Get tax ID numbers.
An Employer Identification Number (EIN), also known as a Federal Tax ID number, is a 9-digit identification number required for all U.S. business that have employees. Most vendors will also require your tax ID before engaging in business with your retail store.
The IRS provides a free online application that you can fill out here.
Step 5. Obtain licenses, permits, and certificates.
Once you’ve obtained the necessary legal forms listed above, it’s time to consider the remaining paperwork you’ll need. Laws and regulations vary by location and industry standards, so be sure to find out what licenses, permits, and certificates your store needs before you open for business. Listed below are common legal requirements for retailers:
- Certificate of Occupancy
- Industry-Specific Professional Licenses
- Sales Tax Certificate
- Industry Permits
- Business Insurance
Step 6. Open a business bank account.
A business bank account allows you to accurately track your revenue and expenses, manage your employee payments, and capture important financial data for your business. You’ll need to determine which bank you want to use, what accounts you need, and whether your store will need to receive or extend credit. Be sure to have your tax ID and official business registration in order before visiting your bank.
Step 7. Establish your vendors.
After opening a business bank account, you’ll need to establish relationships with vendors. This is a critical step because these vendors play a significant role in the success of your company, from your product sources to your customer experience to your brand reputation. Specifically, you’ll need to identify the following vendors:
- Point Of Sale
- Payment Providers
- IT/Tech Support
- Inventory Planning
Step 8. Choose your location.
It goes without saying that location is key. It affects who you reach, how much revenue you generate, and in many cases, the success or failure of your business. Prime locations can be expensive, though. Whether you’re considering leasing a storefront, a warehouse for inventory storage, or both, you need to take a hard look at your budget and determine how much you’re willing to spend. If you can’t afford it, it’s probably not worth it. Make a list of 2 or 3 cheaper alternatives and consider the target audience you’ll reach at each location.
Step 9. Create a management structure.
A great product and a prime location still rely on people to make the sale. From who you hire to what policies you implement, your relationship with your employees really matters. This is one of the primary driving forces behind your business operations, and creating a great customer experience starts with a great management structure.
Determine your store policies before you open and communicate them clearly on all of your communication channels. What are your store hours? What is your return policy? How do you handle warranties? Knowing these answers well in advance allows time to test these policies out and refine them before your grand opening.
Define your ideal customer experience, and identify some policies that facilitate that experience in your store.
Hire great staff. Your employees represent your brand, so you want them to share the same values and fit within your company culture. Look for candidates with qualities that will translate to great customer service. Are they patient, friendly, and compassionate? Experience is a great thing for an employee to have, but some of these softer skills can be invaluable to your team – and often prove difficult to teach.
Make sure your staff is trained well on all of the store policies, procedures, and expectations for customer service.
Step 10. Promote, promote, promote!
So, you’ve completed all the preparations and now you’re ready to open. It’s time to spread the word!
We highly recommend running a “soft opening” a week before your grand opening day. This allows you and your employees to test your process and work out any problems beforehand. It also generates some buzz for your brand and gives time to promote a larger grand opening event. When you do have a grand opening, make sure you’re ready for it! Your store should be well-staffed, your systems should be running smoothly and ready for any potential problems, and your store should have clear signage and layout to allow customer flow. Include some fun activities, such as a DJ, free food, or a photo booth. Make the customer’s experience so good that they’ll want to return. Beyond opening day requirements, you’ll also need to consider these marketing strategies:
- Sales Promotions
- Digital Marketing (web, social media, PPC, Google AdWords)
And then the real work begins! Let’s face it: retail is hard work, but it’s also a very rewarding industry. If you follow these 10 steps, we believe you’ll be on your way to building a solid business that you can truly enjoy.