Opening a Small Retail Shop

Yes, it's notoriously difficult to start and run one successfully. Here are the key steps to take to ensure you get off on the right foot

I'd like to open a small retail shop serving the Hispanic immigrants in my neighborhood. It would carry items that they need and currently have to travel a long way to get, though most of them don't have cars. I have help with the language barrier, but I'm a newly retired teacher and have no idea how to start a company. Can you offer some advice?

— L.A., Waterford, Mich.

There are a number of things you need to think through, ideally with the help of a professional, before you put your retirement savings and income at risk. The first reality is that starting and running a successful business are a lot harder than they look. The second is that it's particularly difficult for someone new to entrepreneurship who presumably has no experience in retailing.

The third is that the market you describe—immigrants who probably have little disposable income, living in a state with a tough economic climate—is not an easy one to build a business on. Finally, after finishing up a long career, do you really want to take on a demanding challenge? If so, why not consider starting a tutoring business, a business teaching English, or becoming an educational consultant? Any of those would fall closer to an area in which you already have marketable expertise (see, 4/26/06, "Getting Started").

Talk to a counselor at your local SCORE office or Small Business Development Center, or take a class at a community college or university near you that offers an entrepreneurship program for adults (see, 5/30/06, "The Library: The Next Best Thing to an MBA"). The Web site of the U.S. Small Business Administration is an excellent resource for those seeking to understand the complicated issues involved in small-business startup and operations. There are also many good books that can help you make an informed decision about your future pursuits.

Learn the Operations Hands-On

If, after you've gotten a realistic look at what's involved, you still want to pursue the retail business, there are some ways you can prepare yourself. Start by learning the operations of a small retail business inside out by going to work for one and staying in the job as long as it takes for you to master its operations.

"Search out a small retail business that looks successful and try to get a job there, especially if you can get a job that would give you experience working with the vendors that the store buys its products from," says Paul O'Reilly, a small-business consultant with Los Angeles-based O'Reilly & Associates. "Think of it as an internship. Don't focus on what you will earn, but on what you will learn. The closer you can get to working in a business that sells similar products or sells to a similar target customer market as you plan to, the better your learning experience will be."

Next, survey the residents who will be your customers to get their feedback on your idea. You could stand on the street corner near your future location (with a Spanish-speaking friend, if necessary) and ask people to participate in your survey.

"Be sure to keep the survey process pleasant, regardless of whether people choose to participate or what their answers are. You don't want to scare away future customers by being too aggressive," O'Reilly says.

"Develop a short list of questions to help you identify if they would shop at a local store if it offered the types of products you are planning to offer. Ask what five products you should always have in stock. Ask them what would most affect their decision to buy at your store."

Business Planning

Use the retail knowledge you gain at your job, plus the survey data and any demographic information you can find, to develop a formal, written business plan. (You can get plan templates online or through your SCORE or SBDC counselor.)

"The most important part of your plan will be creating a list of your startup costs, including inventory, so you will know your immediate cash needs. A three-year budget should be created showing expected revenues and expenses. Be realistic with the numbers," says Robert G. Kramer, a retail consultant and author of Revolutionary Retailing. The Hispanic Chamber of Commerce would be an excellent group for you to become acquainted with, if there is one in your area.

When you've done adequate business planning, the bureaucratic tasks of starting a business are fairly straightforward. An initial task is choosing and creating a legal structure such as a sole proprietorship, partnership, limited liability company, or corporation.

You'll need to choose a business name and pick a location, which may require negotiating a commercial lease, says Peri Pakroo, author of The Small Business Start-Up Kit (Nolo Press). "Depending on where you'll be running your business, you'll probably need a seller's permit that will allow you to collect sales tax, and will obligate you to periodically remit those taxes to the state. Check with your state tax agency."

As your store gets up and running, implement a solid and simple system of tracking your money and use it, Pakroo advises. "Following solid bookkeeping practices will make your life infinitely easier than letting your finances become a jumbled mess. You'll also definitely want to take risk management seriously, which will involve carefully evaluating your liability exposure and purchasing appropriate insurance." Good luck!

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