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Local retailers around the country are hoping the biggest shopping day of the holiday season occurs two days after Thanksgiving on Small Business Saturday. About 3,000 neighborhoods have already signed up to support the day, which resulted in about $5.7 billion in consumer spending with independent merchants last year, according to data from American Express. (American Express is a sponsor of TODAY.)
Entrepreneurs – both established and aspiring -- are eager to capitalize on this interest. But opening your own bakery, clothing store or furniture shop can be a daunting task without the passion and perseverance to weather the ups and downs. Being prepared well-before opening the doors to your brick-and-mortar store can help you avoid some potential pitfalls. If you’re eager to set up you own shop, here are 5 steps that can help you start out strong.
Location is critical. Do a trial run at a pop-up store. Just because an area of town or a local strip mall has significant foot traffic doesn’t necessarily mean it is the right location for the type of customer you’ll want. “It’s all about location, location, location,” says Melinda Emerson, founder of SucceedAsYourOwnBoss.com. Before getting locked into a standard five- to 10-year lease, “you want to understand where the foot traffic is coming from,” Emerson says. Knowing who your buyers are and identifying a target audience will help finding the best location for your store. “Test your idea with ‘pop-up’ location,” which allows you to rent short-term space. The online startup Storefront (www.thestorefront.com), for example, connects store owners and landlords with retail spaces in New York, Chicago, Los Angeles and San Francisco for $150 to $1,500 a day.
Figure out your budget before forging ahead. Developing a three-year business plan can help you (and potential lenders) know what costs to expect. Go to the U.S. Small Business Administration’s website at www.sba.gov and/or talk to a counselor at a local Small Business Development Center for free help in writing your plan. “Identify available capital and set a budget,” says Nicole Leinbach Reyhle, founder of the online publication Retail Minded (www.retailminded.com). “It's always a good idea to allocate some extra dollars to ‘surprise’ expenses.” But make sure you cover the basics: consider how much money you’ll need to rent or lease the location as well as the cost of inventory, staff, merchandising and display fixtures, a computer or point of sale provider, and marketing and advertising.
Get creative with financing. First, be prepared to put a good chunk of your own money in your business. Lenders want to see that you’re willing to bank on your store before they do. Next, contact friends and family. If they’ve invested, you may be more reluctant to lose their money than your own. Getting a bank loan can be tough since many lenders won’t loan money to small start-ups with no track record. Talk to other businesses that have been successful using peer-to-peer lenders, such as crowdfunding platforms, where people lend money to a business and get paid back over the course of the loan. A $5,000 or $10,000 loan can make a big difference for a small business, says Jill Johnson, founder and CEO of the Institute for Entrepreneurial Leadership in Newark, New Jersey. “It may allow you to do a pilot or get a piece of equipment to operate more efficiently.”
Make marketing a major priority. A big chunk of the budget of a new store often goes to marketing and advertising to get those first customers in the door. “Social media is extremely valuable,” and much less expensive than traditional advertising, says Reyhle. Check out some of the free marketing resources at ShopSmall.com (www.shopsmall.com), a website from American Express to help independent retailers promote their businesses. A few more tips: “Word of mouth far outweighs any media you can buy. Think of three things that you do that your competitors don’t do and put that on your business card and website” says Marc Wilson, a retail consultant with the Virginia Small Business Development Center network. “Make sure your business is the first listing that comes up when some searches for it on Google.”
Don’t be afraid to ask what you don’t know. “Having a support team in place is so important,” says IFEL’s Johnson. “Too often entrepreneurs are making decisions in a vacuum. You need people with real expertise who will give you honest feedback.” An attorney, accountant, business and/or financial advisor will likely see potential challenges to the business before you do, Johnson says, from permits and licenses that may be required to a practical legal structure for your business. Non-profit organizations like IFEL, as well as local SBA offices, and Small Business Development Centers offer free counseling and training programs to help you get your store up and running – and help it continue to grow.