How To Open a Small Town Store

Yes, location matters. Experts suggest aspiring retailers find a highly trafficked spot, and offer more tips for getting started

After 25 years as a paralegal, I'm launching a new career as an entrepreneur. I own an old building where I plan to open a gift, art, and antiques store later this year, debt-free. The store is in a small town, so I don't expect heavy traffic, but I'm hoping my low overhead will help compensate for a smaller customer base. Am I right? —D.A., LaCoste, Texas

An inventory-heavy retail venture like this, for a first-time entrepreneur in a location with a small customer base and little foot traffic, is particularly risky. Assuming you'll be using retirement or other savings (, 1/11/08) to launch this business, your nest egg could easily slip through your fingers unless you do better than "hope" your business can support you.

Just because you own a building doesn't mean it's a good location for a gift and antique store, says Bob Kramer, a retail consultant, author, and speaker. Location is so crucial to retail business success that you might be wiser to lease your building out as office or warehouse space and use the income it generates to rent an affordable storefront in a more retail-friendly spot. "It's not a good idea to think that since you're not paying rent, everything will be fine. By opening a store, you're giving up the opportunity to earn money working elsewhere and giving up the opportunity for the building to provide a rental income stream," he notes.

Projections and Placement

You need to do some serious financial projections, based on realistic estimates of what it will cost you to make building improvements, put up signage, and purchase inventory, fixtures, and equipment. You'll also want to look at what you can expect to pay in monthly operating costs, including often overlooked overhead items (, 2/25/08) such as insurance, business taxes, and permits. Don't forget to include a sales and marketing budget.

Then you'll need to research issues such as: Is there a need in this community for what you'll be selling? Is anyone else doing it already? Will this business be a hobby, or do you expect it to be profitable? How much will you need to sell on a daily, weekly, and monthly basis in order for the business to supply you with sufficient income? What's the potential for growth in your community? Do local demographics support a market for luxury purchases like art and antiques—particularly at a time of significant economic uncertainty? Can you draw clients from a distance?

Franco Fidanza, founder and president of Newburgh (N.Y.)-based franchisor Planet Wings Enterprises, suggests you might be wiser to locate your business in an area known for arts and antiques. "Here in New York, we have several towns and villages that are known for their artistic communities. Every year the town of Sugar Loaf holds a village-wide festival for three or four days to promote local businesses, theaters, and restaurants. This event draws large numbers of people to a very small community," he says. A similar town in your region might be a much smarter location for your store.

Plan Ahead

Retail consultant Bob Phibbs echoes the idea that you'll have to draw customers from a larger region to be successful. "You'll have to spend a lot of money to get people to come from farther away, and you'll have to sell unique items that can't be purchased at Costco (COST), or Wal-Mart (WMT), or online. Even if you invest in fun, unique inventory, you may not have enough traffic to get a decent turn on your merchandise," he says. "And that will be your money sitting there on the shelves, earning nothing, while it could be making 3% sitting in the bank."

Do some homework on entrepreneurship in general and retail operations specifically (, 2/5/07), then write a simple business plan (, 1/7/08). If you're realistic about your costs and potential sales, the plan should help you make a good decision about whether this opportunity is right for you or not.

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