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The start-up financing required for a retail apparel shop will in great part be defined by costs associated with the commercial lease, retail fixtures and signage, labour, marketing and inventory costs. A love of fashion and style helps in many ways when starting a clothing store, but be aware that an undercapitalised shop is at a significant disadvantage. It is a major undertaking that is more than any job you may have had in the retail industry.
A monthly retail lease expense that is not supported by sales is the biggest fear of entrepreneurs starting in retail. Ideally, you should keep rent between five and six per cent of your total sales, according to Dan Paul, a retail consultant with Retail Merchandising Service Automation to "Entrepreneur" magazine. This means that a retail store whose annual lease is £13,000 should have annual gross sales of no less than £260,000.
Fixtures and Signage
Unless build-out is part of your retail lease agreement or the shop was formerly a retail shop, factor in expenses for flooring and wall covering such as slate wall systems. Interior store fixtures for the typical clothing store includes a checkout counter, glass display counter, garment racks, tables, gondola shelving and mannequins.
Budget for credit and debit card processing machines, cash register, ticketing equipment, accounting and point-of-sale software systems, hangers, telephones and other general office equipment. Expenses for store exteriors can include a custom awning, neon signage, custom window displays and lighting.
While establishing wholesale fashion accounts, provide either a 30-day or 60-day window to pay invoices, which will determine how fast this window closes and becomes a recurring monthly cost for inventory turnover. For the initial three to six months, the shop owner should include inventory costs in its start-up financing budget to allow the store to establish a history of sales.
Base retail staffing needs on the store size, hours and traffic. Even a 1,000 square foot store will need to have one full time employee and at least one part-time employee. Don't skimp on labour costs. Hire quality sales persons with backgrounds in retail clothing sales and in providing quality customer service. Ultimately, quality customer care impacts sales potentials.
Promotions is important for a new clothing store. Create a budget that includes grand-opening events. Radio and television advertising is particularly important to get the word out about special in-store sales and promotions. Additional expenses include advertising in the local business directory and targeted print publications, as well as the cost of a new website and business cards.
- "The Budget Guide to Retail Store Planning and Design"; Jeff Grant; 1995
- Entrepreneur; How to Start a Clothing Store; Laura Tiffany; 2001
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