By Lexie Lu
Your business has grown to the point that you’re ready to set up a permanent location. This is an exciting but stressful time in the life of your company. Making the move from your garage or a small room in your home to an actual retail space is a big change. You likely have a lot of questions about all the costs involved, the best location to choose and what you need to look for.
There are more than a million retail establishments in the United States, and the number is rising. Figuring out if you’re ready for your own space also means you have to consider growth in your area and the number of competitors. Here are six key questions to help you decide if you’re ready to invest in a dedicated space for your store.
-Is your current location too small?
One reason small businesses seek a retail location is because their current space is too small to accommodate the needs of customers. If you live in a one-bedroom apartment, you may have inventory from floor to ceiling in every spare corner of your home. Perhaps you’ve used a small kiosk at the local mall for a while, but you want to expand and offer additional products. When you feel so cramped for space that you can barely turn around, then it’s probably time to consider whether you’re ready to make a move.
-Will your budget cover the costs?
The first time you open a retail location, you may forget some of the minor costs. However, these can really add up. Rent is an obvious budget necessity and can run anywhere from 1% to 13% of your overall revenue. You also have to pay electricity, internet, software fees for things such as point of sale (POS) systems, and possibly water, sewer and trash pickup.
-Can you improve a less expensive space?
The cost of leasing space in a high-traffic location, such as a mall, can be prohibitive for your first time leasing. Consider something less expensive, such as in a strip mall. You may need to improve a dated area by sprucing up the floors or adding some paint to the walls. Look at the bones of the building and how you might adapt the layout to suit the specific needs of your store. Get some graph paper and sketch out a few ideas to see if the design you have in mind will work.
-Do you need additional employees?
When you move to a retail location, you may have set hours — and covering all of them seven days a week causes severe burnout. Even if you’re there most of the time, you may need help with sales or ringing up customers. Figure out whether you’ll have to hire employees and how that works with your budget. How many hours can you afford to pay someone, and can you offer them a decent wage so you get the best employees possible? How much will training cost?
-Have you saved an emergency fund?
No matter how much planning you do ahead of time, you can be sure that something will go wrong. A flood will ruin some of your merchandise, a supplier will fall through and you’ll have to pay twice for the same order, an employee will quit and you’ll have to train someone new. It’s smart business to have at least a few months’ worth of your expenses saved and also extra money to cover emergencies. You may never have to tap into your emergency fund, but if you are faced with unexpected issues, at least you won’t have to shut your doors due to lack of cash flow.
-Does the building get foot traffic?
Spend time studying the traffic patterns of the space you’re considering. If it doesn’t get significant foot traffic, then you may be better off continuing where you are for the time being. Look at the type of traffic. If your target audience is baby boomers and mainly young college students walk past, then the new location isn’t likely to benefit your business in terms of growth.
Crunch the facts
Look at the different elements that make opening a new retail store a good idea and see if it makes sense for you at this point in your business journey. If you don’t quite feel you’re ready for one or more reasons, there’s nothing wrong with putting off the move for a few months or even a couple of years. You may need to rent some temporary storage space for inventory or set up at flea markets on the weekends until you’ve saved enough money. Take your time and make the best decision for your company.
