Getting serious about starting a retail operation

Patrick Rossello

September 16, 1991|By Patrick Rossello

AS YOU STEP UP to the cash register to buy an item, the thought enters your mind for the thousandth time that you could have your own shop. The difference is that this time you may be ready to give serious thought to the decisions that go into operating a retail store.

What to sell is a crucial consideration. To be successful, an entrepreneur should have some experience with the products and a "gut feel" for the need in the open marketplace. Many retailers base a successful business on their experiences with a hobby or a past job.

To help you make wise decisions, review market statistics. The data you need might be available at the local library or from the Baltimore Regional Council of Governments. For example, someone who wants to sell sports equipment might check on the number of school-age children within five miles of a possible location.

The business plan: Another step is the challenge of creating estimates for your business plan. Of the people who receive a special marketing flier or would pass the store, how many will enter? Of those, how many will make a purchase? For those who buy something, will they be in the market for cheap or expensive merchandise? How many sales per hour do you think will occur? You must answer all of these questions with conservative guesses. A consultant could help you in this process or you could try to closely observe a similar store.

In choosing a site, you will have to decide if the location is affordable. Will you have enough sales to pay the rent and make a living?

Personnel: Once you have guessed the average number of customers in the store each hour, you must then determine if there is a need for more than one store clerk. When the business is newly established, it is wise for the owner to open up and staff the shop alone in the mornings from Monday through Thursday. These are the slow retailing hours when the owner can tend the store and complete some of the administrative work. This strategy will save on personnel costs.

Keep in mind that when the store opens, you marry it. For the first year, a 12- to 14-hour day might be common for you. You may put in six to seven days a week, and you won't be able to take time off for a vacation.

In the retail industry, personnel turnover is very high. In some areas of sales, it is not unusual to see people quit within six nTC months of starting. As the owner, you will likely to be one who has to quickly fill in for a clerk.

Create a personnel replacement plan for each person. Start at the top: What happens if you get the flu, or even worse, are hospitalized? A plan should be in place for a trusted assistant manager, close friend or spouse to manage the store in your absence. Give the person some training prior to the need for action, and reinforce it with a notebook containing an outline of operational procedures.

A simple plan is needed for each employee. If there are two employees and one quits, can you and the other person fill in for a couple of weeks until a replacement is found? It may be best to hire more part-time help so that when one person departs, the work can be temporarily divided among several people.

Setting up: In the early planning stage determine the fit of the store. How many square feet will you actually need to display the products? A store that sells T-shirts may need only 500 square feet, whereas a kitchen appliance store may need 5,000 square feet. The calculations should be made early in order to determine the proper store location.

There is nothing worse for a retailer than presiding over a space that looks empty. Too few items may cause buyers to become skeptical. Shoppers might question the strength of the store. Will it be able to satisfy product complaints or accept returned merchandise?

Many years ago "Saturday Night Live" did a skit about a store in a mall that only sold one product -- cellophane tape. The TV show was funny, but in real life a single-product business is always risky. Even an apparently simple business such as an ice cream store usually has many flavors plus soft ice cream or yogurt. The more variety, the greater potential for a wide range of customers.

Display equipment: Clothing racks, shelves or cases will be needed to show off your merchandise. These can be inexpensively purchased at auctions. However, be certain that the equipment fits the store in style and size.

If the equipment is purchased from a distributor be sure to discuss delivery times and expenses. What you may not realize is that a merchant accepting delivery of a wooden jewelry cabinet now probably ordered it as long ago as May to make sure it would arrive for the fall season of high sales. When your own case is delivered, be sure that you have paid extra or arranged for someone to carry it inside. The driver won't unload it unless the work order has been written ahead of time.

Make a drawing of the floor plan. This will determine where each piece of display equipment will be located. It will assist in the purchasing process and it will later be helpful when the time comes to set up the equipment.

The Bottom Line: As you work on your business plan, pay attention to the details. When you're finished, you may conclude your current job is more secure. Or you may decide you're ready to go for broke.

Next week: How to pick a retail site.

Patrick Rossello, president of The Business Consulting Group in Towson, is a member of a number of local advisory boards. Send questions or suggested topics to him c/o Money at Work, The Evening Sun, 501 N. Calvert St., Baltimore, Md. 21278.

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