Do You Really Need a Retail Storefront? | The Small Business BIG IDEA Show
Creating a retail storefront is a BIG dream for most entrepreneurs. But, is opening a physical space really a smart move?
Today, we are able to buy almost anything online, yet entrepreneurs and small business owners still romanticize the idea of having their own brick-and-mortar store. In fact, many don't feel that they've actually made it unless they have their own location.
The siren call to build a store is a strong one. There's a lot of emotion tied up into the idea. Of course, there are many types of businesses that do need a physical location in order to serve customers - restaurants, car washes and hair salons, for example. But, too many small business owners make the commitment to retail before carefully weighing the consequences involved.
Here are 7 questions that you need to ask yourself before taking the plunge into the world of retail:
1. Can you afford the increased monthly overhead? Having a physical space creates additional expenses, such as a mortgage payment or rent, utilities, insurance, real estate taxes and employee payroll. And, these need to get paid regardless of your sales volume.
2. Do you have a plan for finding the right location? Picking the wrong location can sink your business. Too many entrepreneurs make a decision based on gut instinct rather than on hard data. In addition to working with a real estate broker, consider hiring a location consultant who specializes in your retail category.
3. Have you factored in all of the costs to build out the space? Construction costs can be significant, often running into the tens of thousands or even hundreds of thousands of dollars. Total expenditures are often underestimated by entrepreneurs. Make sure to include a contingency fund, design and architecture fees, permitting, licensing, and other soft costs into your budget.
4. Are you prepared to spend significant time in your store? A big mistake made by newly minted retail owners is to underestimate the time involved. 80 to 90 hour work weeks are not uncommon. Don't fall into the trap of thinking that you can just hire someone to run your business for you. You need to be there to make sure that the doors stay open.
5. Do you want to hire, train and manage retail employees? Most retail jobs are part-time and the potential employee pool can be transient. Turnover is usually high - ranging anywhere from 50% to 75% per year - depending on the economy and the type of retail involved. And, replacing employees can easily run you $3,000 or more per person.
6. Can you build your business online instead? There are many advantages to running a virtual business, such as not being bound by geographical constraints. Also, money saved from not building a storefront can be used to market and advertise your business online.
7. Have you considered low-cost startup alternatives? Before sinking your money into a full-blown retail location, can you start smaller? Some examples include wholesaling, selling at farmers' markets, craft fairs, through a delivery service or at a pop-up location to get started. You can also share space with other retailers that offer complimentary products.
Now, my goal here isn't simply to discourage you. As I mentioned, there are many cases where it makes sense to open up your own store. But, there are also too many cases where entrepreneurs with successful online businesses (or the potential to have successful online businesses) end up complicating and weighing down their business models with a time consuming and expensive storefront.
Therefore, I'd like to challenge you to fully consider your answers to the 7 questions we just discussed before you dive head first into retail. In the end, make sure you have a sound business case for opening a brick-and-mortar and that it's not driven by ego or some other emotional reason.
Now, here's a question for you: Have you ever opened up your own store or considered it? If so, what have you learned from your experiences with retail?
Remember, as small business owners and entrepreneurs, one of the best ways that we learn is from each other, so please share your thoughts in the comments below.
Did you enjoy this episode? If so, please share it and hit the like button. My goal is always to serve you by providing the most valuable, useful and practical information found anywhere for small business owners and entrepreneurs. And, you make this possible by sharing and supporting my content. Your word of mouth is the lifeblood of my work, so thank you.