Starting a retail store has many working parts all moving simultaneously, and if left unattended, could cause problems in the start up process and success.
Hopefully avoiding the six common retail startup mistakes below will allow you to avoid first-year failures.
6. Lack of a Clear Vision and Purpose
New operators that have not defined or can’t communicate their vision or purpose, will find it difficult to create the kind of climate that supports teamwork and dedication to excellence during the startup phase of any new retail store.
Forming a business plan and creating positive atmosphere from day 1 will go a long way in structuring a solid company culture.
5. Believing You’ll Start Making Money On Opening Day
The odds are stacked against this happening. Even the best run chain retail stores, whom open new locations for a living, factor into their startup budgets an allowance for funding operating deficits for up to 2 to 3 months after the retail store opens. It usually takes time to build sales volume to an adequate level.
Engaging an experienced real estate professional implement a time period of rent abatement during lease negotiations is a good way to mitigate this problem.
4. Lack of Documented Systems and Procedures
Business operations involve the ongoing repetition of hundreds and even thousands of tasks by many individuals and groups of individuals. Organization and consistent execution are key to creating a successful retail store.
Franchised retailers start out with detailed checklists and procedures to do everything from stocking the merchandise, to cleaning the restrooms to closing out the cashier. In new independent businesses, it’s often making it up as you go.
The longer the business operates without a documented way of doing business, the longer the business stays stuck in the often difficult and unorganized do-what-it-takes startup phase. Establishing program standardization is key to success.
3. Accepting a Secondary Location to Save On Rent
Location can be vital to retail visibility and attracting customers, so you want to make sure that you are in a location that is highly visible and accessible to your target market. A good location can catch the eye of a potential customer and bring in extra business outside of what your marketing provides. Don’t settle for the second choice location that’s slightly off the beaten path because it often results in spending all that and more on advertising in an attempt to get noticed and bring in more business.
Partnering with a knowledgeable tenant advisory real estate company will help you avoid this potential pitfall.
2. Underestimating Capital Needs
There are many new businesses with excellent prospects for success that simply run out of money. It’s common for first time owners in particular, to leave out or inadequately project all the startup costs involved in opening the retail store. Construction overruns, change orders, delays, permits, liquor licenses, building inspections, etc. are often missed completely or grossly under-budgeted.
Even if you’ve done it before, it is important to establish a working relationship with an experienced project management team early on to identify all startup costs and timelines.
1. Not Functioning As An Owner
Often times, due to necessity during the startup phase, the owner functions like just another employee and ends up stocking shelves, running the register, doing the books, or trying to manage the design, build-out and and dozens of vendors and contractors during the startup of a new location.
Managing the business includes activities like monitoring cash flow, analyzing the P&L, deciding about next month’s marketing activities, evaluating what’s selling in the store and other “strategic” functions to position the business for future success.
Having the right partners in place to take tasks off the owner’s plate will free up time and allow the owner to do what they do best. Run their business.
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