So you want to open your own retail business? It’s hard work but I am guessing that you have been told that already. When I say hard work, I mean really hard.
Are you prepared to put the business ahead of family and friends? Do you have enough capital for unforeseen situations? Are you ready to deal with customers who try and steal from you? Can you cope with the business not meeting any of your budgeted goals for a year, maybe more? Are you prepared to work even when you have no reserves left inside yourself to open the business?
People going into retail for the first time often do so having looked at the opportunity from the other side of the counter and through rose-colored glasses.
The reality is harsher than that is often first considered.
As the proprietor of the business, the buck ceases you. You need to be ready to accept any kind of task of the business: buying, selling, cleaning, marketing, bill payment, spruiking, visual merchandising, employee appointment, employee termination and the prevention of theft. And this listing is not an absolute one. It is a very troublesome task to execute.
On an average two thirds of independent retail businesses are opened under-capitalized. That is, they don’t have sufficient finance backing in order to achieve what they wish in the business. This means the business is chasing cash from day one and that it will most likely open without sufficient stock.
Cash is the biggest challenge. Go in with more cash than you need and enough of a buffer to support the business while it finds its feet and the most significant problems are addressed.
By cash, I mean cash free and clear, not money you have borrowed to start the business.
If the retail business is being started on 100% borrowings then I would urge extreme caution. The cost of repayments, for a start up business, can be crippling. The ideal situation is one where more than half of the opening cost is from clear funds and not borrowings.
If cash is not an issue, stamina is the next biggest challenge, stamina for hard work and tough decisions. As the owner, you need to trust your judgment and back this with efficient decisions and then stand by them when people challenge the decisions – as will happen. In the early phases of owning a retail business it will seem that you are making decisions every minute. The challenge will come when decisions are found to have been wrong for the business. This can lead to self doubt and second guessing.
For many new business owners, business is personal, meaning that any impact on the business is felt personally. This is where running a retail store can be very hard. The personal toll on family time, physical energy and cash can be tremendous, more than most ever expected before going into the business.
By pausing before hitting the Go button and thinking about these issues, prospective retail business owners can at least reassess for themselves. After all, regardless of how things work, much of what happens comes down to them.