- Starting a retail business, regardless of location, used to be a time consuming venture. With the advent of the Internet and as more states put their division of corporations online, starting a retail business now takes a matter of a few hours.
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In order to start a retail business, you must know what type of business you want to start. Before you even choose a name, start drafting a business plan. The business plan should outline the following:
Financing: where you will get the financing (banks, private investors) and how you will pay it back. This involves making a prediction on the amount of product you will sell.
Demographics: to make a prediction on the amount of product you will sell, you need to know how many people are located in the area of the business. You will also need to know the average income of the people in that area. This makes the assumption that if the average person has enough income to buy the retail business's product or services that he wants the product or service.
The business plan should also describe the marketing of products and services, how the business will operate, the management and operation of the retail business and start-up expenses and capitalization. - Once the business plan is drafted and completed to your satisfaction, choose a name that best fits the retail business. Go to your state's division of corporations website and, depending on the entity you choose, register the business name. If you are going to be a sole proprietor, you should at least register the fictitious name. You will need to decide which entity is best for your retail business---corporation, sole proprietor, S corp, partnership, limited liability corporation, limited liability partnership or non-profit corporation. Each entity has its own pros and cons regarding liability and tax issues. If you do not understand the descriptions given at your state's division of corporations website, contact an attorney to help you choose an entity.
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After the entity is chosen and you have registered the retail business, you will need to obtain an employer identification number (EIN) from the IRS. This can be applied for at the website www.IRS.gov, and at the time of this writing (January 2009), is free. The online application process for the EIN is well documented with instructions based on the type of entity you chose.
Set up a business checking account and fund the checking account. The bank will ask you for (at a minimum) the articles of incorporation and the EIN from the IRS. - The rest of the licenses and insurance you will need to procure are based on your state, county and city ordinances. At a minimum, you will need an occupational license and insurance to cover any liability your retail business may create. If you open an automobile service and retail business, you will need garage keeper's insurance. If you open a retail establishment to sell only products (as opposed to service and products), you will need to get insurance for retailers. If your business uses, sells or otherwise handles hazardous chemicals, you will need to get a license from the Environmental Protection Agency or the U.S. Department of Agriculture.
- Purchase the inventory. Look for local wholesalers, as locally available product can help keep costs down by reducing shipping charges. Depending on the product you wish to sell, you may have to find out of state wholesalers. Make sure you purchase enough inventory to keep the store stocked for at least two weeks. Once income starts to flow in, you can change the amount of inventory you purchase and stock inventory for up to a month, if you have the space.
- Set up the point of sale register. You will have to manually enter all the products you are selling into the register. The point of sale register will keep a list of products and their reorder levels. This helps immensely in inventory and also helps with employee theft control. The point of sale register will ask you for the product name, ID number, price (wholesale and retail) and how many are in inventory. It will ask you for a reorder level---enter a number so that the point of sale reports will alert you when you are low on inventory.
- Once you have procured all of the required licenses, stocked up on inventory and programmed the point of sale register, you are ready to start advertising the business. One of the best ways to advertise a grand opening. Use local newspapers, television and radio to get the word out. Advertise at least a month prior to the actual opening date.
