How to Start a Retail Business in 10 Steps
Although online businesses are popular, many consumers still enjoy brick-and-mortar retail stores. The U.S. Census Bureau reports that e-commerce only made up 15.1% of retail sales in the first quarter of 2023, suggesting shoppers still prefer brick-and-mortar retailers.
If you’re wondering how to open a retail store, this is your complete guide on how to start a retail business, from your initial idea to the store’s grand opening.
10 steps to starting a retail business
Starting a retail business takes a lot of planning, money, resources and commitment. Here are 10 steps to help bring your business idea to fruition.
- Fine-tune your business idea
- Write a business plan
- Develop your retail store’s brand
- Take care of legal stuff
- Secure small business funding
- Find the ideal location
- Establish vendor relationships
- Hire and train employees
- Explore marketing strategies
- Organize a grand opening
- Plus: How to improve your chances of getting a retail business loan
1. Fine-tune your business idea
Deciding to start a business can be exciting and overwhelming. Your first step should be to brainstorm about your business idea and what type of market you plan to serve.
Ask yourself the following questions to fine-tune your idea:
- What type of products and/or services will your business offer?
- Who represents your target market?
- What are the industry and local competitors charging?
- What will the workflow look like?
If you have too many ideas, try narrowing it down based on the following:
- Your natural interests: What do you feel most excited about right now? Your genuine passions can help sustain you as you tackle the less-fun aspects of starting a business.
- Potential challenges: What challenges do you foresee on the path to establishing this business? Do you have the resources to overcome them?
- Profit potentiality: Does this type of business have the potential to turn a profit? Research what competitors are doing and whether there’s room in the market for your retail business to compete.
Retail business ideas>
Here are some possible ideas to consider for your retail business:
- Children’s products
- Sustainable goods
- Organic cosmetics and skincare
- Pet products
- Design and home goods
- Jewelry store
- Solar power
- Consignment shop
For more inspiration, read our guide on the 11 most profitable small businesses to start.
2. Write a business plan
Your business plan outlines how you plan to turn your idea into a thriving, profitable retail business. Partners, investors and lenders can review your plan to understand your company’s mission and primary objectives.
It’s essential to break down each step, including descriptions of your products or services, marketing strategies and financial projections.
Your business plan should be as concise and transparent as possible, with room to revise it as your business develops and grows.
3. Develop your retail store’s brand
Your retail store’s name should closely align with what your company offers. You want something concise, unique and easy to remember. Over time, you want the public to associate your brand with reliability, trust and quality.
Depending on your business type, you might need to register a DBA (doing business as) name with your local or state government.
Be sure to check that a competing business hasn’t taken your business name. You don’t want your customers to be confused or end up at the wrong website or store.
4. Take care of legal stuff
While the creative work of starting a business can be a lot of fun, the legal logistics can be somewhat challenging. Here are the basic steps on how to open a store.
- Pick your legal structure: You have several options when choosing your business entity, although retailers commonly become corporations or limited liability companies (LLCs) to limit their personal liability. Your business structure also determines how much you pay in business taxes and what type of paperwork you need to file.
- Register your business: Most states require you to register your business with the state’s secretary of state office, which you can do online or in person.
- Register for an employee identification number (EIN): You can get an employee identification number (EIN) from the IRS for business purposes, such as on tax forms, business loan accounts and loans and to pay other employees.
- Obtain business licenses and permits: Depending on the type of retail business and location, you may need to obtain local or state licenses and permits. The SBA lists common federal and state licenses and permits that may pertain to your retail store.
- Buy business insurance: A small business insurance policy can protect your company’s assets, including equipment, inventory and property. It’s a good idea for retailers to get general liability, property and business interruption insurance. You may also need to carry workers comp, health and unemployment insurance for your employees.
5. Secure small business funding
Starting a brick-and-mortar business typically requires significant upfront costs, such as purchasing or renovating a storefront, buying computers and other essential equipment, installing a retail POS system and investing in inventory.
Unless you plan on bootstrapping your business with your own cash, you will likely need a small business loan to get your store up and running. Many lenders require your business to operate for at least a year or two to receive funding, although startup business loans are an option for newly established businesses.
Create a business budget>
Outlining your small business startup costs before opening your doors can help determine how much you need in small business financing. Here are some expenses you might include in your retail business budget:
- Business registration
- Licenses and permits
- Business insurance
- Basic supplies
- Advertising and marketing
6. Find the ideal location
If you have a brick-and-mortar store, the right location can help your business succeed. Even if you find cheaper rent in a less-suitable location, it might not be worth it if you can’t attract enough clientele.
Think about the areas your target customers frequent. For example, opening a toy store next to a daycare center could boost your brand’s visibility and awareness. However, starting your own clothing line with an upscale boutique in a rural farming area might not be the best choice.
Here are some questions to ask as you search for your perfect space:
- Do you need a space that accommodates an administrative team?
- Do you need extra storage space for supplies and inventory?
- Do you want to rent or buy a storefront property with a commercial real estate loan?
- Does your desired location allow for business and commercial activity?
Ultimately, your budget will determine the size of a place you can afford. If funds are limited, it’s best to start small — you can always open a second or third location if and when the business takes off.
Create an e-commerce store>
Even with a thriving storefront, having an online presence can help reach a wider audience and potentially increase sales. The e-commerce and in-person retail combo is often called “bricks and clicks.”
Fortunately, opening and maintaining an online store is relatively easy with platforms like Shopify, Squarespace or Wix. You can also consider starting an eBay business, selling on Amazon or creating an Etsy shop.
7. Establish vendor relationships
Working with trusted vendors can help you provide your customers with the best products and services. Research potential vendors in advance to find a good fit for your business. It’s worth paying extra for vendors with a track record of reliable, high-quality service.
8. Hire and train employees
Good employees are an essential component of a successful retail business. However, finding employees for your business (and keeping them) can take time and effort.
Before hiring, decide how much staff you will need and whether they should be classified as 1099 or W-2 employees (or both). Then contact your state labor office to learn about employer requirements, such as offering insurance, workers’ comp, unemployment insurance and more.
After figuring out the legal requirements, you can create and share job postings. To attract (and keep) the best talent, consider offering some of the following fringe benefits:
- Paid time off
- 401(k) retirement savings plans with matching contributions
- Life and disability insurance
- Employee stock ownership plan (ESOP)
- Tuition reimbursement or student loan repayment assistance
- Childcare services or discounts
- Fitness memberships or discounts
Lastly, draft a training manual and employee handbook to cover all bases during the onboarding process.
9. Explore marketing strategies
Creating a marketing budget and strategy can generate buzz before your grand opening. You can use a combination of search engine optimization (SEO), email marketing, flyers and brochures, online advertising and social media to spread the word about your new retail business.
Social media for business should be a critical part of your advertising strategy — about 26% of small businesses used between 10% and 30% of their advertising budget on social media in 2021. Be sure to post meaningful content to engage your audience authentically. For example, if your brick-and-mortar store sells gardening supplies, consider starting a weekly blog sharing insightful gardening tips. You can also offer regular giveaways or discounted coupons to gain more followers.
Your website is another way to spread awareness of your retail business. Make sure it is easy to navigate and has all relevant information on the home page, such as what your business offers, business hours and how to get in touch. If your budget doesn’t have room for marketing, consider getting a working capital loan to help cover this expense.
10. Organize a grand opening
Hosting a grand opening can help win over the local community and jumpstart sales. Consider contacting local media outlets to spread the word. Offer special discounts or prizes for the big day, such as free goodie bags, stickers, balloons, snacks or giveaways.
Think about the ideal day and time for your grand opening — you want to make the biggest splash possible. Weekends are generally best, especially if kids are welcome to attend.
How to improve your chances of getting a retail business loan
New businesses typically have difficulty getting a business loan since they don’t have a proven track record yet. The more you can prove your business is capable of repaying the loan, the higher your chances of receiving approval.
Here are a few best practices to help you obtain funding for your retail business:
- Prove your concept. Lenders may be more willing to finance your business once you’ve been in operation for a year or two. If you have a successful, scalable business model, you will likely be approved for funding.
- Offer collateral. If you have assets to offer as collateral, it may be easier for you to obtain a secured business loan. The lender may feel more comfortable with collateral since a bank could seize those assets if the business fails to repay the debt.
- Improve your personal credit. If you’re a relatively new business owner, lenders will look at your personal FICO Score to determine your eligibility for financing. Be sure to check your credit report and take steps to improve it before applying for business financing. Alternatively, you can consider a business loan for bad credit.
- Stay organized. While business loan requirements vary by lender, most lenders will typically ask for your bank statements, tax returns, financial statements and business plan when applying for financing. You may want to enlist a bookkeeper or accountant or use small business accounting software to keep everything organized.
- Build a banking relationship. Before applying for bank financing, consider opening a business bank account with the potential lender. You can establish your financial history as well as a relationship with the bank, which could make it easier to receive financing down the line.
If you don’t qualify for traditional bank funding, you could apply for a short-term business loan from an online business lender. Many alternative lenders provide business financing for retailers, typically with fewer requirements and quicker funding times than banks. Just be aware that these loans often come with higher interest rates, lower borrowing limits and less favorable terms.