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I'm considering going off on my own and opening a new retail/service business.  For purposes of focus I don't want to disclose the specific type of business - and while I realize this will somewhat limit the *best* advice I might get, I am looking now for more general advice as I have no experience running a business of this type (I have run a one-man consulting business before, but the mechanics/financials of that are totally different).

I'm sure there are many common elements from opening a clothing store, to a massage parlor, to a pet store that should be considered.  The most of which is probably "will this endeavor be profitable?"
I'm still focusing on that main question, but it is difficult to know because I only have just started to begin investigating things like rent, insurance, etc that I can't yet determine if the business model will be profitable.

That being said, I just don't know much of anything on this.  Like how to best find places to rent, negotiate rent, find a liability insurance provider, etc.
I also know marketing is a major factor - but would like to stay away from that for now because I believe I have a good enough handle on the basics of that (though I will need to certainly investigate specific further if that time comes).

Is there a good (relevant, modern) book anyone can recommend on starting their own retail/service business?  
How to properly determine necessary start-up costs, etc.
I have done some google searching and found a few case studies, but none are concrete/informative enough for me to bank on.

Another question I have is how to go about financing it.  From initial investigation I would say that I could do this for between $75-$200K.  I would prefer to stay in the middle of that estimate.
I have the funds to finance that myself, but should I go about seeking a loan?  I don't know if there is an advantage of using the bank's money - since if I lose it I still need to pay it back.

I'm sure there are questions I'm not even considering because I don't know what they are - so those are welcome too.

Thanks.

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So how does he become rich from cashing out after only 9months?

rufflesinc (Feb. 14, 2017 @ 11:43a) |

By not chasing after Sunk Cost.

ZenNUTS (Feb. 14, 2017 @ 11:51a) |

?

I start to think a lot of small biz are profitable because they underreport cash income and deduct a lot of stuff thats... (more)

rufflesinc (Feb. 14, 2017 @ 11:54a) |

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rated:
After many years of watching my mom run her retail business while growing up and helping her for the last decade with her wholesale business (her retail businesses failed), I've concluded that retail stores exist solely to enrich landlords. In the off chance that you are successful, you will have little leverage in reducing the rent as a % of revenue and you will soon realize you're just a slave to the landlord.

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user1337 said:   After many years of watching my mom run her retail business while growing up and helping her for the last decade with her wholesale business (her retail businesses failed), I've concluded that retail stores exist solely to enrich landlords. In the off chance that you are successful, you will have little leverage in reducing the rent as a % of revenue and you will soon realize you're just a slave to the landlord.
  
So you're saying that the rent is too damn high?
 

rated:
sounds like OP's retail store can't be done online and OP is selling a service?
 I don't know if there is an advantage of using the bank's money - since if I lose it I still need to pay it back.
Not if you get it in the name of LLC and don't sign a personal guaranty. cf trump
So you're saying that the rent is too damn high?
not just high, I know someone who closed up shop just because the LL wanted to rent to someone else. established companies sign 20-30 year leases ...

rated:
is it an ice cream shop in Chicago?

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I don't have experience with retail space but do you have a niche where retail is really needed?
Why not rent warehouse space and sell online only?

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user1337 said:   After many years of watching my mom run her retail business while growing up and helping her for the last decade with her wholesale business (her retail businesses failed), I've concluded that retail stores exist solely to enrich landlords. In the off chance that you are successful, you will have little leverage in reducing the rent as a % of revenue and you will soon realize you're just a slave to the landlord.
  
That's definitely a concern.  In my extremely rudimentary search online so far I've determined that my monthly rent cost may be around $10K/month.  This was *very* rudimentary however and it is possible it could be had for a fraction of that.  I'm honestly unsure yet how much space I would need exactly and would need to do research there as well.

While I'm sure there is merit to your claim, there must be many exceptions as there are still many retail businesses that exist even those outside big name stores.

But this is certainly a decision point.  If the choice is between renting a place for $150K a year, or building a place for say... $300K, it would certainly seem to make more sense to build a location.  This way at least you own it should the business fail.  The issue there I would imagine is that actual retail lot space doesn't go up for "sale" as regularly, you may be able to build but might not necessarily own the land(?).

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imbatman said:   I don't have experience with retail space but do you have a niche where retail is really needed?
Why not rent warehouse space and sell online only?

  
While it is not an ice cream shop in Chicago (I'm not in Chicago anymore ), let's assume that it is something close enough along these lines where offering it online is not a possibility.
Again, I don't want to be too mysterious - I just don't want the specific type of store to distract from the generic concerns.  Should I get past these and move into a phase where I am seriously considering and working on a business plan I may disclose specifics.

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BenH said:   
 
While it is not an ice cream shop in Chicago (I'm not in Chicago anymore ), let's assume that it is something close enough along these lines where offering it online is not a possibility.
Again, I don't want to be too mysterious - I just don't want the specific type of store to distract from the generic concerns.  Should I get past these and move into a phase where I am seriously considering and working on a business plan I may disclose specifics.

  Buy a truck and sell from back of truck

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BenH said:   imbatman said:   I don't have experience with retail space but do you have a niche where retail is really needed?
Why not rent warehouse space and sell online only?

  
While it is not an ice cream shop in Chicago (I'm not in Chicago anymore ), let's assume that it is something close enough along these lines where offering it online is not a possibility.
Again, I don't want to be too mysterious - I just don't want the specific type of store to distract from the generic concerns.  Should I get past these and move into a phase where I am seriously considering and working on a business plan I may disclose specifics.


If online isn't an option, then I'd have to assume it's something perishable. If it's perishable, look into renting spaces at farmers markets/local markets. Problem with that is you'd likely have to store off site.

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Best way is to talk to other business owners with a similar business. Do it with someone far away from where you are going to open your business so there is no competitive threat.

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imbatman said:   
\ If it's perishable, look into renting spaces at farmers markets/local markets. Problem with that is you'd likely have to store off site.

  farmers market don't store, they get on site delivery and sell it that day. that's why it's freshhhhh

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BenH said:   
user1337 said:   After many years of watching my mom run her retail business while growing up and helping her for the last decade with her wholesale business (her retail businesses failed), I've concluded that retail stores exist solely to enrich landlords. In the off chance that you are successful, you will have little leverage in reducing the rent as a % of revenue and you will soon realize you're just a slave to the landlord.
  
That's definitely a concern.  In my extremely rudimentary search online so far I've determined that my monthly rent cost may be around $10K/month.  This was *very* rudimentary however and it is possible it could be had for a fraction of that.  I'm honestly unsure yet how much space I would need exactly and would need to do research there as well.

While I'm sure there is merit to your claim, there must be many exceptions as there are still many retail businesses that exist even those outside big name stores.

But this is certainly a decision point.  If the choice is between renting a place for $150K a year, or building a place for say... $300K, it would certainly seem to make more sense to build a location.  This way at least you own it should the business fail.  The issue there I would imagine is that actual retail lot space doesn't go up for "sale" as regularly, you may be able to build but might not necessarily own the land(?).

  If renting was $150k a year vs building/buying it for $300k then every business owner would build/buy it.  $10k month rent has to be for a store in a congested metro area or a very big store in outlying area but regardless, to generate that amount of rent, the market value of that place is in millions, not hundreds of thousands.

Edit to add: Also, a friend of mine went into a retail grocery business (specialized groceries) and he said that he didn't make any profit after paying bills and some take home pay to for the first five years.  He said that he was putting in a 80 hours a week at the minimum wage during that time.  Only once he was established then he started to make some money so keep your expectations low.  Another friend, opened an independent fast food place and he sold it a cost after one year because it was impacting his family life, he was there from 6am to 10pm, 7 days a week so keep that in mind as well. 

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I think it's a weed store.

rated:
jaytrader said:   I think it's a weed store.
  you can ship weed

rated:
Most small businesses start from home in the basement or garage. Since you're vague about the specifics, I don't know if that applies. What comes to mind is, Got Junk. Guy probably started with one truck parked in his driveway and put ads on Craigslist. After a while he hired people, bought trucks and moved into a commercial location.

rated:
BenH said:   
user1337 said:   After many years of watching my mom run her retail business while growing up and helping her for the last decade with her wholesale business (her retail businesses failed), I've concluded that retail stores exist solely to enrich landlords. In the off chance that you are successful, you will have little leverage in reducing the rent as a % of revenue and you will soon realize you're just a slave to the landlord.
  
That's definitely a concern.  In my extremely rudimentary search online so far I've determined that my monthly rent cost may be around $10K/month.  This was *very* rudimentary however and it is possible it could be had for a fraction of that.  I'm honestly unsure yet how much space I would need exactly and would need to do research there as well.

While I'm sure there is merit to your claim, there must be many exceptions as there are still many retail businesses that exist even those outside big name stores.

But this is certainly a decision point.  If the choice is between renting a place for $150K a year, or building a place for say... $300K, it would certainly seem to make more sense to build a location.  This way at least you own it should the business fail.  The issue there I would imagine is that actual retail lot space doesn't go up for "sale" as regularly, you may be able to build but might not necessarily own the land(?).

  The landlord will want a 3-5 year lease, so if you know you the business model doesn't work in year 1, you have to prepare to BK because they will not give you the lease without a personal guarantee. 

I don't think there are many exceptions. Go look around your area and look at the retail storefronts. Look at the history/churn of occupancy. Small businesses rarely last. The sad thing is, any business you come up with that happens to be successful will not have a high barrier to entry, so you will quickly meet copycats that will inhibit your growth rate, especially those in the food industry. I remember when a Poke shop opened near my area and line was out the door my friend would say wow this guy is going to kill it by making a chain. He went as far as to investigate if he could open one himself. I told him it's a low barrier to entry with no brand value and suggested he look at how to make money from being a servicer of Poke restaurants (supplier of raw goods, services, etc.) because no doubt others will enter the business. Lo and behold a year later Poke restaurants are everywhere. And the guy making all the money is the local sashimi grade tuna supplier.

Think about it this way, the landlord shifts all the risk to the retailer and participates in the upside. It's really a lopsided deal and also why it's binary tenants - big successful corps with leverage and bankroll, and immigrants with no other marketable skill sets. 

rated:
jaytrader said:   I think it's a weed store.Dabs too

rated:
OP, the called "generic concerns" like book keeping, inventory tax, business licenses aren't really worth talking about. It is what is and your locality determines it. Hence, you won't likely find a book for it either. Depending on your business, location might matter or not. You are asking a question that is too open-ended and non-specific that I can't even begin to guess what you are really after. Otherwise, BostonOne give you the best generic answer to your generic question.

rated:
BenH said:   I'm considering going off on my own and opening a new retail/service business.  For purposes of focus I don't want to disclose the specific type of business - and while I realize this will somewhat limit the *best* advice I might get, I am looking now for more general advice as I have no experience running a business of this type (I have run a one-man consulting business before, but the mechanics/financials of that are totally different).

I'm sure there are many common elements from opening a clothing store, to a massage parlor, to a pet store that should be considered.  The most of which is probably "will this endeavor be profitable?"
I'm still focusing on that main question, but it is difficult to know because I only have just started to begin investigating things like rent, insurance, etc that I can't yet determine if the business model will be profitable.

That being said, I just don't know much of anything on this.  Like how to best find places to rent, negotiate rent, find a liability insurance provider, etc.
I also know marketing is a major factor - but would like to stay away from that for now because I believe I have a good enough handle on the basics of that (though I will need to certainly investigate specific further if that time comes).

Is there a good (relevant, modern) book anyone can recommend on starting their own retail/service business?  
How to properly determine necessary start-up costs, etc.
I have done some google searching and found a few case studies, but none are concrete/informative enough for me to bank on.

Another question I have is how to go about financing it.  From initial investigation I would say that I could do this for between $75-$200K.  I would prefer to stay in the middle of that estimate.
I have the funds to finance that myself, but should I go about seeking a loan?  I don't know if there is an advantage of using the bank's money - since if I lose it I still need to pay it back.

I'm sure there are questions I'm not even considering because I don't know what they are - so those are welcome too.

Thanks.

  
You want to do your own thing, but look at franchise startup costs to get an idea of what's involved.  Startup costs for franchises are anywhere from $150k to the Sky 's the limit to do business for the first year.  And even then it's not guaranteed to be profitable as some franchises end up getting sold or closed.  Setting up your own retail space with $75k - $200k will pay for salaries and retail space for a year, but if you need additional equipment or interior design/decorations/remodeling be prepared to shell out a lot more.

Be prepared to deal with the following:

Company culture
Employees who don't want to work or do the bare minimum.
Star employees who go above and beyond yet don't get compensated fairly because you can't make enough to pay them more.
Dealing with customers
Cash flow issues
Inventory (if your business requires inventory)
Accounting
Payroll
Taxes
Personal guarantee for any credit you want to borrow
Negotiate and haggle on purchasing
Marketing
Lawsuits, whether frivolous or legitimate

And probably most importantly, the willingness to work more than 40 hours a week for a good part of your life.

rated:
Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

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zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

rated:
This might be an alternative idea, instead of going the big traditional route which might be overwhelming at the start, is it possible for you to begin your business on a small scale to start?

When I was a teenager, I had a stand alone retail shop with many tedious things provided by the property owner.  Bookkeeping, taxes, hours, staffing, business idea, supplies, product, service, delivery & promotion were mine. Retail property maintanance, warehouse property maintanance, electricity for both, insurance for both, heat, parking lot maintanance, security for all & seasonal issues were by the property owner (along with free advice).

I was a success in a small town, but I never enjoyed the product and after 4 years moved to the big city to do something else.

Anyway, the general idea is try to find a low effort location, start smaller and see if your business idea is worthy of a bigger scale operation.  Instead of opening a new store on Main Street, lease a selling cart in a mall.

rated:
BenH said:   
Another question I have is how to go about financing it.  From initial investigation I would say that I could do this for between $75-$200K.  I would prefer to stay in the middle of that estimate.
I have the funds to finance that myself, but should I go about seeking a loan?  I don't know if there is an advantage of using the bank's money - since if I lose it I still need to pay it back.

 A loan lets you keep a stash of readily available cash.  No matter what you want to project financially, you should start with enough cash on hand to cover the fixed expenses for atleast a year.

rated:
ach1199 said:   
zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

  Foreign oil, De Beers, ...

rated:
qcumber98 said:   ach1199 said:   
zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

  Foreign oil, De Beers, ...


I was referring to general business, not a monopoly business such Luxotica. To answer your question:

Domestic oil, synthetic diamond.

rated:
you have no idea what you're doing. for that reason, you need to go in with a highly experienced partner or 3. if you go solo (with zero industry experience and with apparently little common sense), you're going to fail 9 times out of 10.

(it's hilarious that you've gotten such politeness from FWF. my guess is that people are taking it easy on you because you're a reg. if a noob had created this thread, he would've gotten flamed into an early grave).

rated:
rufflesinc said:   
imbatman said:   
If it's perishable, look into renting spaces at farmers markets/local markets. Problem with that is you'd likely have to store off site.

  farmers market don't store, they get on site delivery and sell it that day. that's why it's freshhhhh

  I'm assuming OP is his own supplier of whatever the perishable good is. That stuff isn't picked/caught/killed/made at midnight for a 6 am opening. It's stored someplace.
Also, if it's something that keeps for say... a week. You don't leave that stuff out in a farmers market. Has to be stored someplace from day to day.

rated:
I would suggest working for someone in the same or similar business for at least 6 months.
You can learn valuable lessons on what to do and not to do.

rated:
ach1199 said:   
zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

  The real question is how easy will it be for new competition to open if OP is successful.

rated:
rufflesinc said:   sounds like OP's retail store can't be done online and OP is selling a service?
 I don't know if there is an advantage of using the bank's money - since if I lose it I still need to pay it back.
Not if you get it in the name of LLC and don't sign a personal guaranty. cf trump
So you're saying that the rent is too damn high?
not just high, I know someone who closed up shop just because the LL wanted to rent to someone else. established companies sign 20-30 year leases ...

  It's going to be very hard for OP to avoid personal guarantees on rent and CCs.

rated:
If it is weed as suggested above, it might be hard to find a local bank to do business with.

rated:
2 things i've seen:
1. location is key - can make or break pretty much any type of retail
2. have at least 1 years full rent worth of cash on hand, if you're in retail, the main thing is being able to pay the rent so the doors stay open

rated:
ach1199 said:   
zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

  Ticketmaster?

rated:
stanolshefski said:   If it is weed as suggested above, it might be hard to find a local bank to do business with.
  Even if he were really, really high he could just dial up Uber and give them the address of the bank...

rated:
ChinaRider said:   
ach1199 said:   
zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

  Ticketmaster

  Stubhub, TicketFly.com, Tickets.com.    

rated:
ach1199 said:   
ChinaRider said:   
ach1199 said:   
zapjb said:   Will you have competitors or no? Very important downfalls to each, I'll inform when answered.

Show me a business where there is no competition.

  Ticketmaster

  Stubhub, TicketFly.com, Tickets.com.    

  
none of those are competitors to Ticketmaster

rated:
BenH said: ...I'm sure there are many common elements from opening a clothing store, to a massage parlor, to a pet store that should be considered.  The most of which is probably "will this endeavor be profitable?"...
 

Unfortunately, the common elements are rarely the challenge.  Rather it's the specifics that create the challenges and pitfalls.

Massage Parlor...Could lead to frequent police visits and 'sting' operations looking for happy endings.
Clothing Store.... Inventory value can go from $100 per article to $1 per article in a week based on something beyond your control (wrong celebrity caught wearing it)
Pet Store... PETA and Activists (need I say more)

It's the 'special' regs that get you.  I know someone in Illinois who got their Tobacco License.  Illinois never mailed the letter due to some budget crisis, yet still charged late fees and penalties for failing to file returns from the date they were 'approved'.  (Nevermind they didn't know they were approved).

I could go on all day on the healthcare fields alone (licenses, credentials from multiple agencies, HIPAA, electronic transmittal requirements, network enrollments, 1099 vs W2, appeals process, non-payment, ...) 

Bottom Line, the best advice you will get will be specific to your business.

rated:
rufflesinc said:   
 I don't know if there is an advantage of using the bank's money - since if I lose it I still need to pay it back.
Not if you get it in the name of LLC and don't sign a personal guaranty. cf trump
 

  Banks don't lend like that to small business anymore. We're a 15 year old profitable LLC with ~$10M in revenue per year and the banks still require personal guarantees from all 5+% owners.  

Skipping 15 Messages...
rated:
ZenNUTS said:   
rufflesinc said:   
zapjb said:   But I learned a lesson from a rich friend years ago. He's HAD may successful businesses. He started a business that was wildly profitable. But less than 9 months later he was out. Why? Competition. He has a bottom line & an escape plan going into every business. And he got out early. A few months later there were many competitors throwing millions at advertising.
  So how does he become rich from cashing out after only 9months?

  By not chasing after Sunk Cost.

  ?

I start to think a lot of small biz are profitable because they underreport cash income and deduct a lot of stuff thats not 100% biz

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