How to Start a Consignment Business

Running your own consignment business can be immensely satisfying.

Now is always the best time to start a consignment business. Buyers are looking for deals and sellers are looking for ways to make money; plus, thrift is perennially in fashion. To start a consignment business, simply follow a few steps and you will get off to a great start.

Difficulty:

Moderately Easy

Instructions

1. Create a budget. Ask yourself how much money you have to invest in your consignment business and whether it is necessary to borrow any additional funds. Make a list of the kinds of things you will need to purchase, such as inventory, display racks and pricing supplies and divide your budget accordingly. Other things that go along with this step include obtaining any necessary business licenses and opening a business bank account.

2. Establish a niche. Most consignment businesses focus on one product category: adult clothing, children's clothes and equipment, furniture, even books. The advantage to specializing is that the learning curve is shorter. It is also easier to market when focusing on a niche.

3. Arrange a location. Many consignment businesses are set up in retail store locations, certainly a viable option. If you are not ready to sign a lease and commit to a monthly rent, however, there are alternatives. Hold a large, quarterly sale in the same location so repeat customers know where to look. Spend the time between sales gathering and preparing inventory and marketing the sale. Sell online. You can run a consignment business at online marketplaces such as eBay, craigslist and Etsy.

4. Build inventory. The success of a consignment business depends largely on the quantity and quality of the inventory you can build. Decide if you are going to pay outright for items and then resell or "take them on consignment" and only pay when items sell. It is most common to take large items like furniture on consignment and pay outright for small items. Either way, you will want to reject items you don't believe will sell. Next, find a way to get the word out that you are buying items, whether via ads in newspapers and online, signs, fliers and word of mouth. Either meet with sellers by appointment or set up predetermined times and locations where you will be available to accept items.

5. Market your business. Even the best-run business will not have success if it is largely unknown. Run ads, post fliers, encourage others to spread the word. Create email lists for ongoing marketing. Also look for free media coverage. You will have to be your own PR person to make this happen, sending press releases. Push the economy angle, which fits nicely with your business model.

Tips & Warnings

• Keep good records. Often, the best businesspeople find they don't like bookkeeping but it's vital that you do. Hire help, if necessary. You will thank yourself at tax time.

References

• SBA: Starting a Consignment Business