How To Start a Retail Business in 13 Steps

Opening a retail store requires more careful planning than meets the eye, especially in today’s competitive landscape. To open a successful brick-and-mortar store, you need a business plan (including market research) and legal structure for your business, an ideal storefront location, startup funding (around $100,000), products, and a team of employees ready to sell. Plus, you’ll want to launch your online store and start marketing.

Learn how to start a retail business in 13 simple steps:

1. Create a Retail Store Business Plan

Creating a formal business plan is a crucial step for starting any business. Writing a business plan gives you a definitive path to follow, ensures you’ve done proper market research, and sets you up for success.

The Small Business Administration (SBA) outlines two types of business plans: traditional and lean startup. Traditional business plans are more thorough and ideal if you’re requesting funding such as loans. Lean startup business plans are more informal and designed for businesses that are more fluid and will change a lot as they grow. You can also create a shorter, one-page business plan.

When opening a retail store, we recommend following a traditional business plan. It’s more detail-oriented, and it can never hurt to be too prepared. Plus, it will give you a more concrete outline to show business partners or possible investors, such as banks.

The nine elements of a traditional business plan are:

• Executive summary: High-level paragraph outlining your company’s purpose, mission, and why it will be successful.
• Company description: Be specific about your company’s details, including what problem you are solving, how you will solve it, what consumers you plan to serve, and the talent on your team.
• Market analysis: Include industry outlook and trends, what successful competitors are doing, and what your strengths will be.
• Organization and management: Outline who will be running your business and the experience your team members have in retail or startup environments.
• Product line: Outline what kinds of products you will sell, why they are needed, and include any research and development on private labels or proprietary custom products.
• Marketing and sales: Describe the tactics you will use to obtain and retain customers.
• Funding requests: If you need outside funding, outline your needs and specify exactly how you will use the funds.
• Financial projections: Detail how your business will become stable and profitable, including a projected financial timeline of at least five years.
• Appendix: Use this space for any supplemental documents such as product prototypes and pictures, credit histories, licenses, permits, and so on.

This may seem like a lot of information, but it’s best to keep each section succinct so readers can easily get through the entire document and absorb all of the information—the “why” behind the “how” you will start a retail business.

When it comes to actually writing and formatting your business plan, there are a few different options to choose from. Of course, you can type away in traditional word processing software like Microsoft Word or Google Docs. You can also build your business plan as a slideshow in PowerPoint, which is a great option if you need to present your plan to an audience.

There are also business plan software tools available such as LivePlan, that have industry-specific templates. You can also use this business plan template and checklist. Alternatively, you can enlist the help of business plan writing services.

2. Determine Your Niche & Select Products

Carving out a niche for your retail store helps differentiate your business from the competition. With retail giants like Amazon and Walmart, the competition is fiercer than ever. And truthfully, many large retailers, like department and box stores, carry very similar products. Having a unique perspective will help you offer something shoppers can’t get at their local Target (aside from feeling great about shopping small).

A niche market is a small group of consumers who share a specific interest. The narrower the interest, the easier it is to become the go-to retail destination for that market. For example, there may be a dozen stores in town that sell pet products, but you may be the only retailer that specializes in dog costumes.

Our guide on how to find a niche market outlines three steps retailers can take to find their niche:

1. List your hobbies and interests: As a store owner, you will spend a lot of time engulfed in your chosen niche, so your own interests are a good place to start. Plus, choosing something you’re interested in will make your store more authentic.
2. Research the potential for each niche: Make sure you choose a topic that has good money-making potential by doing research on Google Trends and checking out competitors on social media.

The phrase “dog costumes” appear to be trending downward in search, indicating a different niche may present a more long-term opportunity.

3. Research potential profits: Determine how profitable each niche could be by looking at industry statistics and Amazon bestsellers lists to see what sales are like for your chosen categories. You can also research wholesale prices for products on sites like Alibaba and compare them to typical retail prices to get a sense of potential profit margins.

Amazon bestsellers lists highlight popular products by category.

Sourcing Products From Suppliers

Once you’ve narrowed in on your niche products, it’s time to find a reliable supplier for those products. When figuring out how to source products for your retail business, you’ll first need to understand the different options:

• Manufacturer: You develop the product concept and outsource the creation. This option allows for the most control over the product but also takes comparatively long.
• Wholesaler: Wholesalers develop products and sell them in bulk to retailers for a discounted price. Retailers then resell those items for a profit. This is the quickest route for product sourcing but also allows for the least control over the product.
• Dropship: Dropshipping is when you sell products directly to customers and then outsource the manufacturing and fulfillment for each order. Dropshipping is the most hands-off option, but also yields the lowest profit margins.

When choosing your supplier, research a few different options and order samples from two to five suppliers. Undergo quality assurance testing to narrow down which items you want to source. From there, nurture vendor relationships with effective communication and efficient payment—eventually you can negotiate discounts, especially for high-volume orders.

Retail Market Research

Instead of picking a few niches you’re interested in and then doing research, you can also start by doing primary market research on your target audience and figure out their interests. If you’re opening a brick-and-mortar storefront, you can study your audience directly to determine their needs. It’s possible, and likely, there are some specific needs locals have that your store can fill.

Effective market research tactics include:

Sending Out Surveys for Your Retail Store

Surveys are an easy and effective way to gather a lot of useful data. Established businesses typically use their customer database to send out emails. But because you don’t yet have a customer database, you can promote your survey through local Facebook groups and targeted Facebook ads.

Your first surveys can be very broad and simply ask local consumers why they like their current favorite stores and interests. As you get closer to choosing specific products, you can send out surveys to measure customer interest and reaction to specific items. We outline this kind of product development survey and offer a free template in our customer satisfaction survey article.

Conducting Consumer Panels & Focus Groups

Surveys can provide more accurate data than a focus group or consumer panel, but these types of information-gathering sessions can provide nuanced details and deeper insights that might otherwise be missed in a survey.

Tips for how to conduct focus groups:

• Keep your group small: Around eight to 10 participants is ideal so everyone’s voice can be heard.
• Incentivize participants: In your advertisements, make it clear there is a cash or gift card compensation for their time.
• Choose participants wisely: Have participants RSVP to make sure they live or work near your store’s future location.
• Have participants fill out a contact form before you begin: Provide consent forms indicating their responses will be recorded.
• Start with general questions: Get the group started by asking general icebreaker questions. Then move into asking for feedback on products and shopping preferences.
• Make sure everyone gets equal talking time: Your goal is to get a variety of opinions, so do your best to prevent one or two participants from dominating the conversation.
• Stay neutral: Remember to stay open to feedback and don’t guide participants or try to persuade them. Focus groups are all about collecting feedback. There’s no need for consensus.

3. Develop Your Brand

Your products are just one part of your retail business. Customers also connect with your brand. Developing a brand is so important because it attracts new customers and builds strong relationships with your customers. Your brand identity is the essence of who you are as a store—it identifies your “why.” And while you only get seven seconds to make a first impression, it takes up to seven impressions to create brand awareness. Consistent branding is crucial for that.

Ask yourself why your business exists. Tap into your market research—look at who your biggest competitors are and think about what differentiates your store. All of this information helps build the foundation of your brand. Elements of your brand include:

• Visual branding such as logo, storefront, fonts, signage, and colors.
• Store name and slogan that are completely unique to you. Use this free business name generator to help come up with ideas.
• Mission statement and vision statement that outline how you want to serve your community and customers.
• Positioning in your niche, market, community—and what sets you apart from the competition.

4. Choose a Legal Structure for Your Retail Business

Choosing a legal structure for your business is important because it determines how to collect and report taxes, how you’ll get paid from your business, and your level of personal liability. There are many types of legal structures, but the three most commonly found in retail are sole proprietorships, limited liability companies (LLCs), and corporations.

5. Organize Your Financials

Regardless of which legal structure you choose, it’s critical to separate your business finances from your personal accounts right from the beginning. Having a dedicated business account will make it much easier to track expenses and income, which will help you stay on track financially. Plus you’ll have an easier time filing your taxes. Not to mention, if your personal and business finances are combined, that could “pierce the corporate veil” of your LLC if things go wrong.

Top Choices for Retail Business Bank Accounts

When it comes to choosing a small business checking account, the options are virtually unlimited. Look for a bank that’s small business-friendly with few fees. Make sure there are branches close to your store or home. As a retailer, you’ll likely be making many cash deposits and making change, so getting to the bank should be convenient.

Consider other features that will make your life easier, such as mobile banking and online check deposit. Consider whether or not the bank has features that will help as your business grows, such as business credit accounts, loans, and overall branch location accessibility.

Invest in Accounting Software for Retailers

In addition to a small business checking account, you’ll also want to have an accounting software program. There are a lot of expenses associated with running a retail store such as products and shipping, employee wages, and advertising costs. Accurately tracking your income and expenses will help you see exactly how much revenue you’re making, understand where your expenses are high, determine your product purchasing budget, and make filing taxes a million times easier.

QuickBooks is one of our favorite accounting programs for small businesses because it is affordable, user-friendly, and integrates with many popular retail point-of-sale (POS) systems (we’ll cover POS systems below). It’s particularly good for retailers because it has retail-specific report bundles available, including reports like gross margin by inventory volume, and integrates with ecommerce solutions. QuickBooks plans start at just $10 per month, plus they offer a free 30-day trial.

6. Launch Your Online Store

While you might be opening a physical retail store, you may also want to consider a digital counterpart. Retailers that sold on multiple channels—including online—earned more than $350 billion in sales in 2020. And by 2023, experts predict multichannel sales will make up nearly half of all ecommerce sales.

Your bottom line has a lot of potential gain from launching an online store. Opening online in tandem with your retail store can help you reach a larger audience geographically speaking, and it also gives you another destination and channel through which to nurture existing customer relationships.

Choose an ecommerce platform that integrates with your POS system and accounting software. Most modern platforms have templates and tools to help you design your store, or you can hire a professional to help. Don’t forget that selling online also requires the extra step of order fulfillment and shipping. So while technically you can offer click and collect, you’ll also need to figure out a way to get products to customers who aren’t local.

7. Secure Funding for Your Retail Store

Opening a retail store requires a lot of upfront investment. You need to sign a lease on a physical space, invest in renovating that space, purchase products, set up your POS system and payment processing hardware, advertise like crazy, invest in a grand opening, and pay staff. It sounds expensive because it is expensive. Altogether, opening a retail store can cost up to $100,000.

To fund your retail store, ideally you have a decent chunk of your upfront costs saved up that you can invest personally. But there are also plenty of small business funding options where you can secure capital from external sources. Some of those options include:

• Small business loans: You find these loans from banks, credit unions, the SBA, and even your existing network of connections.
• Credit cards: If you’re just starting out and have no business income history, or if you have a lower credit score, choosing a business credit card may be the better option. A credit card will also give you more flexibility to account for unexpected expenses. Visit our guide on the best small business credit cards to see which one may be right for you.
• Crowdfunding: Crowdfunding is a great way to build buzz for your store and get people financially and personally invested in it. Plus, you don’t need to pay this money back.

The biggest factors to consider are the interest rates (APRs), upfront fees, and application requirements.

An alternative option for funding your business is using your IRA or 401(k) retirement account. Your initial reaction to this idea may be “Whoa, absolutely not.” But using your retirement account to fund your business doesn’t necessarily mean you’re cashing out or borrowing against your account.

There’s an option called Rollover for Business Startups (ROBS), which lets you invest retirement funds into your new business without paying taxes or early withdrawal penalties. This process can be complicated. So if you’re interested in using your retirement account to fund your business, we recommend working with an experienced provider like Guidant.

8. Choose a Storefront Location to Open Your Retail Store

Choosing a location for your business can seem overwhelming: Where do you start? How do you know if you’re choosing a profitable area? Will people even want to come to your location?

When choosing a location for your business, narrow down your options first, based on practicality and convenience. Consider how far you’re realistically willing to commute every day for the foreseeable future. Choose areas that are easily accessible from your residence. Spend time in each area to become familiar with specific neighborhood demographics and preferences, and to scope out other local businesses.

Contacting listings directly can offer the best deal; however, working with a real estate agent will give you peace of mind in the contract negotiations and help you find the best space for your business.

9. Design Your Retail Store Interior

After securing a retail storefront, it’s time to start strategically planning the interior. Strategically planning your store layout is so important because it has a dramatic impact on in-store sales. A well-designed layout will welcome shoppers, make them feel comfortable, and direct them toward specific products.

Choose a Layout Structure

The first thing you need to decide is what type of floor plan you want. This will largely depend on the type of store you’re opening. Most retail stores fit into one of three basic layout categories:

• Loop or Racetrack
• Grid or Straight
• Free Flow Plan

Best for specialty stores, showrooms, and retailers that want to lead shoppers on a specific path throughout the store.

This floor plan is exactly what you would expect: straight angular aisles that are typically found in grocery and box stores.

This is a popular plan for boutiques and allows for lots of creativity in the design process.

Place Your Checkout

A well-positioned checkout will open up prime retail space for displaying products and encourage shoppers to move through more of your store. Instinct might tell you to place your checkout at the front of the store so it’s most visible or on the right-hand side of your store where traffic tends to flow. But the best place to position a retail checkout counter is often on the left side of a store.

Shoppers naturally veer toward the right side of a store when they walk inside. So that’s where you want to display money-making products and new products. Some department stores and larger mall retailers place their checkout counters at the back of the store. But for smaller retailers, placing your checkout toward the front makes it easier for staff to attend the register and keep an eye on the entrance.

This small-footprint retail store layout features a checkout counter on the left side of the store, with featured products displayed on the right side.

Learn more about how to set up your checkout to drive sales.

Outfit With Fixtures & Displays

Once you have the bones of your store layout and checkout counter placed, you’ll also need to invest in display fixtures, signage, and lighting. Start with parts of the store that will be mostly permanent: counters, lighting installations, dressing rooms, and any fixed shelving.

Because these pieces will be permanent, invest in high-quality items that will form a cohesive look and won’t fall out of trend. From there, you can outfit the rest of your store with more affordable, temporary merchandise displays and decorations that are easier to swap out with the seasons or trends.

Position Your Products for Success

Exactly how you merchandise your products will depend on what type of store you have and the layout you choose. But there are a few simple tricks you can use to boost sales in any store environment.

• Eye level is buy level: Products placed at eye level instead of above or below are more likely to be seen and purchased.
• Place seasonal products and new arrivals front and center: Many retailers utilize a table display five to 15 feet inside the entrance that’s updated almost daily to show off new and limited products.
• Drive impulse sales at the point of purchase: Think candy at the grocery checkout; placing small, low-cost but useful or appealing items like phone chargers, Chapstick, and lottery tickets near the checkout counter is an effective way to drive add-on sales.
• Keep it comfortable: Shoppers who spend more time in your store also spend more money; encourage shoppers to stay awhile with Wi-Fi, product demos, and comfortable seating.

For more tips on how to merchandise your store, download our store layout e-book for step-by-step instructions.

Download Free Store Layout Checklist

10. Choose & Install a Retail POS System

Choosing your POS system is a huge step in opening your retail store. POS systems are software programs that bring together sales and retail transactions with inventory and other business management tools, so everything a retailer needs to manage their business is under one streamlined platform.

Using a POS saves time, is easy to use, and provides deeper insights into your sales, inventory, customers, and employee data. Many POS systems also offer built-in payment processing so that you only have to deal with one solution provider. There are many factors to consider when selecting a POS. Before you start seriously considering different options, it’s important to write down a wish list of what features you want.

Some of the criteria we use to evaluate the best retail POS systems include:

• Price: Most POS software programs charge a monthly fee, and some also charge extra for certain features like advanced inventory management.
• Setup and installation process: Some POS systems have a DIY installation process; others charge a hefty professional installation fee.
• Ease of use: Test out the POS to make sure the interface is comfortable to navigate; also read user and expert reviews to be aware of any glitches or common problems.
• Inventory management: Make sure the retail inventory management solution you use has features to bulk upload orders, set stock alerts, and create purchase orders directly from the system to save you time.
• Customer management tools: Almost all POS systems have a customer directory feature, but otherwise, they vary greatly in what loyalty, marketing, and customer feedback features are included.
• Ecommerce functions: If you have plans to also sell online, make sure the POS you choose also has an online store feature so all of your inventory, customer, and order information syncs between online and offline sales.

For traditional brick-and-mortar stores, boutiques, and specialty shops, we often recommend Lightspeed. It’s a small business POS with big business functionality like custom report builders and advanced inventory management tools (such as built-in product ordering) and offers a sophisticated ecommerce platform.

Lightspeed Retail POS

Choose a Credit Card & Payment Processor

The next step is choosing a credit card processing company or merchant services provider. Some POS systems offer their own payment processing while others require you to use a third party. The two most important things to consider when choosing a retail credit card processing company are price and compatibility with your POS.

Credit card processing fees can be notoriously murky and difficult to pin down. Our credit card processing guide defines common terms and breaks down different types of fees in detail.

Essentially, there are three different types of card processing fee structures:

1. Flat rate: Processing companies charge a set percentage of the transaction; this is usually a good option for retailers such as convenience stores that have lower average sales (under $20).
2. Interchange-plus: Processing companies pass along the interchange fees from Visa, Mastercard, and similar payment processors and add a per-transaction fee on top; this is usually a good option for most established specialty shops.
3. Tiered: Processors charge a different rate depending on the type of credit or debit card used in the transaction; we typically don’t recommend choosing a processor with this fee structure because it’s unpredictable and often more expensive.

Some card processing companies also charge monthly fees. Some have lengthier application processes than others. Some traditional merchant accounts also require contracts or have early termination fees. Be careful to read the fine print before signing with a card processing company.

The other thing to consider is whether or not the payment processor integrates with your POS system. Choosing a processor that integrates with your POS is ideal because it prevents human error in transactions and ensures the inventory and sales data in your POS matches reality. We have a guide to choosing the best retail credit card processors.

11. Hire & Train Retail Staff

Last but certainly not least, you need to bring on a stellar group of employees to serve as the front lines of your business. If you haven’t hired an employee before, navigating the process can be really intimidating. Our new hire checklist outlines all of the gritty steps you need to take such as obtaining an employer identification number (EIN), registering for state and local taxes, and so on.

12. Build Your Marketing Plan

Now that your brand and store are ready, it’s time to build a retail marketing strategy. Your marketing strategy will lay the blueprint for launch (as well as pre- and post-launch) to ensure you’re attracting a healthy mix of new and repeat customers.

Plan Your Grand Opening

You’ve put in months, if not years, of hard work conceptualizing your store and building it from the ground up. A grand opening is an essential way to introduce your business to the community with a bang.

Market in Advance

Planning a party only to have no one show up is really disheartening and definitely not the tone you want to set for your new business. Make sure your event is well attended by recruiting friends and family, but also by starting your advertising efforts as soon as you have a date planned. Draft a press release to send to local media outlets and neighboring businesses. Create an event on Facebook. Take an ad out in the local paper. Go all-out.

Partner With Other Businesses

Working with similar but noncompetitive businesses such as spas, fitness centers, and other types of retailers, is a great way to tap into a preexisting customer base. By involving other businesses, you’ll spread word of your store to their customers too. Tap into your local chamber of commerce, networking groups, schools, and even youth sports organizations. Invite members from those groups to attend your grand opening festivities.

13. Ensure You’re Compliant

Our final and possibly most important tip for starting a retail business is to ensure you’re fully compliant and legal. Be sure to comply with all local laws and regulations when opening a retail store. These include, but are not limited to:

• Federal tax ID or EIN: Used to identify businesses for tax-paying purposes; this is a nine-digit number issued by the IRS that all employers need to apply for.
• Sales permit: Issued by the state and allows businesses to sell products and collect sales tax.
• Certificate of occupancy: Local government issues a certificate stating the building your business is inhabiting is up to code.
• Sign permits: Some local governments require permits for certain kinds of signage, like the one you may want to display on your storefront.
• Safety and health information bulletins: You may be required to display certain signage about employee rights or safety information; these are often provided to you, but it never hurts to check with your local government.
• Local COVID-19 mandates: You might be required to have a fully vaccinated team and put regular testing in place for those who are unvaccinated. Many retailers may have to enforce mask-wearing by workers and customers alike.

If you’re unsure where to start or want to be sure you’re not missing any compliance aspects, check with your local town hall or municipal center and your local chamber of commerce.

Bottom Line

Opening a retail store takes years of planning. But putting in the time to make a detailed plan and execute accordingly will set you on a path to success once your business is operational.

You May Also Like …

• Our ultimate guide to managing a successful retail store
• Learn what retail metrics you should measure and how to interpret them to keep your store on track
• Ready to grow? Here’s how to know when it’s time to open a second retail store