How to Write a Business Plan for a Retail Business
From luxury pet spas and coffee shops to electro-meat delis where you can get pastrami on rye with a techno record to go, there's a retail business to suit any entrepreneurs tastes. Whether your brick and mortar sells out-of-the ordinary items or more traditional goods like furniture and apparel, your business plan should outline certain criteria that will illustrate how you plan to reach your financial goals. Here's some topics you may want to include in your business plan to help ensure that the time and capital devoted to your business will deliver a positive return on investment.
How to Write a Business Plan for a Retail Business: Your Research
Starting a new business is exciting and it can be tempting to dive-in head first to get things up and running. But before you start, go undercover. There are numerous trade organizations and small business bureaus that can provide valuable information about your genre of the industry.
Both the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) are resources that offer market research, sales forecasts, supplier guides, recruitment and training tools plus information about regulatory and tax laws.
Sandy Kennedy, president of RILA says, because "our members are some of the most successful in the industry they are able to provide access to benchmark info that can help shape a plan."
Several retailers like The Gap and Home Depot are RILA members and were originally single-store businesses. Because they "started off as entrepreneurs, they are always willing to give advice," said Kennedy.
It's always a good idea to tap into the expertise of more established businesses to learn what did and didn't work. This type of information can be invaluable so you don't have to make the same mistakes.
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How to Write a Business Plan for a Retail Business: Taking Inventory
A crucial part of the plan is how you will obtain the goods being sold. Making sure the store always has what a customer asks for will reduce walkouts and the number of customers that don't return.
The first step is to select a manufacturer or wholesaler that sells directly to retailers. If they don't ship, find a company that will deliver your goods or choose another provider that does.
During the selection process research prices, the payment terms, how quickly they can fulfill re-orders and whether or not you can get credit, suggests The Small Business Association.
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How to Write a Business Plan for a Retail Business: Watch Your Money
Tracking expenses and revenue can be one of the most important parts of a plan. It serves as a fiscal bible to keep cost under control and the business profitable.
There are numerous software packages or free online worksheets that can be used to tabulate starting inventory, fixtures/equipment, decorating, utilities, legal fees, advertising, licenses/permits, staff salaries and other things that will cost the business money.
The bright side is calculating expected sales and finding out that your revenue is greater than your cost. If you are in the red, it is not necessarily a sign that the business is in bad shape but you may need to cut back or seek out a loan.
Having extra equity will cover your expenses while you get the company off the ground. However, the best business plans show profitability early on in the life cycle.
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How to Write a Business Plan for a Retail Business: Conduct Financial Housekeeping
For retailers needing financial support, it's wise to understand a bank's lending criteria before you get started.
According to Blair Smith, a financial consultant and former banker, it may not be wise to dump all of your cash into a new business. Instead, he recommends using some of that equity to clear up any unresolved personal credit issues. This can make a difference between getting approved for a loan versus being asked to provide collateral.
Smith added, "There was a time when a bank would look to see how much your company would be worth in five years." Valuing a business is not as reliable as it used to be so a retailer's total revenue is very important. It's an indicator of the ability to pay back the loan.
Also, some businesses like casinos and jewelry stores are frowned upon. Owners of these establishments need to "include safeguards in the business plan to eliminate the perceived risk," warns Smith.
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How to Write a Business Plan for a Retail Business: Environmental Sustainability
Giant retailers like Wal-Mart are creating advantages over their competitors by using eco-friendly branding as a way to promote the chain in a positive light. You too can include "green" as an integral part of the store's customer promise. It's a great way to establish a leadership position in the eyes of customers and can differentiate a brand in a crowded pool of competitors. Long term, it can create a loyal following of buyers that want to support socially conscious establishments.
Nicole Copeland, who provides small business training and supportive services through TAC Companies, in Bal Harbour, Maryland says, "Using recycled bags, motion detector lights, electronic receipts and green construction products can set your business up to be environmentally sensitive while saving you money at the same time."
Eco-friendly retailers may be eligible for grants and special tax incentives once they've established a track record for reducing the carbon footprint. Copeland recommends contacting the local Department of Economic Development to get information on your city's programs.
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How to Write a Business Plan for a Retail Business: Advertising Strategy
Now that you've got supplies, it's time to create demand and move that inventory off the shelves. Coming up with a way to advertise your retail business will bring exposure and foot traffic into the store.
The first step is to determine who your target audience is. You can identify the characteristics of potential customers by asking these questions:
• Who will my product/service appeal to?
• Who can afford the price point of my product/service?
• What customers are in close proximity to my retail location?
• My product/service will most likely appeal to which gender, culture and age group?
The second step is to evaluate the competition. Find out what retailers in close geographic location offer the same products/services you do. Conduct an online search of those businesses to see if and where they are advertising.
Because we live in a viral world, retailers are not only using traditional advertising like radio and print but there's sources like blogs, and other social media outlets.
There are even services that can make your business appear as one of the first links listed in an online search. For example, if a customer types in "Paint Store, Dallas," a paid search engine result would put your business at the top of the list.
Determine what advertising works best for your store and how you will allocate the money budgeted for marketing.
Once the business plan is completed, you'll be on your way to turning a vision into what will hopefully become a profitable reality.
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