WHAT´S IN STORE
BY MARGOT CARMICHAEL LESTER
OPENING A BOUTIQUE has its own set of challenges—and rewards.
Tired of being a small part of a large company? Trying to turn your passion into a thriving retail venture may be tempting, but before you kiss the cubicle farm goodbye, consider this advice from experts and those who have done it.
When asked, “What’s the first piece of advice you would give someone considering getting into retail?” most successful merchants will echo the sentiments of Ana Pieruccetti, who pursued her infatuation with all things canine and opened Dallas’
Lucca Bella Doggie Spa & Boutique in March 2007. (She was previously first vice president of Washington Mutual Bank.) “If you think you work a lot of hours now, get ready to never have a day that you’re not thinking and/or doing something for the business—at least at the beginning,” she says.
Martha Jenkins, a 24-year retail veteran and owner of Kitchenworks in Chapel Hill, NC, agrees. “It’s a lot of hard work—and sometimes thankless—so you must really love the substance of what you’re getting ready to do,” she says.
If you’re still thinking of taking the plunge, you must be committed. Read on for some helpful tips.
MAKE THE TRANSITION
No matter how successful you are in the corporate world, there’s a lot you may not know about opening a store. Megy Karydes, owner of Chicago’s World Shoppe accessories and gift store, took an innovative approach to find out what working in retail is like: She volunteered at a nonprofit organization’s store.
“I learned how to handle inventory, what I needed to consider about security, how to please the customer, and the importance of marketing and publications to help drive success,” she says. The experience gave her the confidence to leave her job as managing director for marketing at Merchandise Mart in Chicago.
Bob Phibbs, the self-proclaimed “Retail Doctor” and author of You
Can Compete: Double Sales Without Discounting, offers more traditional suggestions. “Take a course at your local college on selling or networking. Join Toastmasters International to learn how to speak in front of people. Learn a sales process.
Join your Chamber of Commerce,” he says. Your local Small Business Administration office can also provide counseling, training and loan information.
Once you’ve gotten a general idea of the business, the goal is to find the answers to key questions, says Sridhar Balasubramanian, associate professor of marketing at the University of North Carolina’s Kenan-Flagler Business School. What is the demand for your product or service? Is the proposed location a high-traffic area? Where is the closest competition and how are they doing?
“As a next step,” he says, “you want to decide on the key diff erentiators—specifically, what will be special about your store that will make customers willing to drive that extra mile to do business with you?”
MANAGE THE MONEY
With market intelligence in hand, it’s time to whip out the calculator. “A lot of small businesses fail because they are undercapitalized,” says Lisa Drake, a CPA and professor of accounting at Foothill College in Los Altos Hills, CA. “In the case of a retail establishment, this means you either a) don’t have enough inventory, or, b) have sunk all your money into getting the beginning inventory up that you are cash-strapped. Do your due diligence and find out how much reserve capital you will need to float your business for at least a year until you determine the selling cycle. You don’t want to spend the first year in business getting behind with your vendors or not being able to meet payroll.”
So how much is enough? Plan on having cash to cover 12 months of rent, utilities, inventory and living expenses. “Manage cash flow carefully,” says JoAnn Laing, president and CEO of the business consulting firm Information Strategies Inc. in Ridgefield, NJ. “Collect receivables soonest and pay critical bills—those that can shut you down—first. Further, try to get the most favorable payment terms from suppliers as possible.”
KNOW HOW TO MEASURE SUCCESS
Profit is the obvious measure of success—but there are other meaningful metrics, too.
“Measuring success still involves the financial aspect that was so important in the corporate world,” Karydes says. “after all, if I didn’t make money, I couldn’t pay the mortgage. However, measuring success to me now also includes the happiness factor. I’m happier working for myself in an area and business that I enjoy. I enjoy my customers and working with my vendors. I enjoy the experience of looking at my sales figures and seeing where I did well and what I can improve upon. I also enjoy the networking that comes with being a small business owner.”
Ultimately, the feeling of independence can provide the payoff for taking the plunge into retail. Karydes says, “My success is only measured by me—not a board, not my president, not my boss, not my staff —and maybe my accountant and my husband and kids! That’s priceless.”
LOCATION, LOCATION, LOCATION
You may have a better mousetrap, but if no one can find your store, no one will beat a path to your door. Choosing a location is one of the most critical decisions for aspiring retailers. Follow these guidelines:
GO WHERE YOUR CUSTOMERS GO
“Choose a location where a high concentration of your customers live or work,” says Mark Tarczynski, senior vice president of the CB Richard Ellis’ urban redevelopment group in LA. One easy way to find a “target-rich” location is to plot out the sites of stores that cater to a similar clientele. You can also consult with a commercial real estate broker specializing in retail.
Marty Kotis III, president and CEO of Kotis Properties Inc., a Greensboro, NC-based retail and restaurant brokerage firm, advises choosing an area before looking at available spaces. Then, look for locations in that area that are the most visible and easily accessible to your customer base.
UNDERSTAND TOTAL COSTS
Most commercial leases consist of rent (a monthly fee per square foot) plus “triple net” (or NNN) charges. “This is usually the retailer’s pro rata share of common-area maintenance expenses, real estate taxes and property insurance,” Kotis says. “When the NNN invoices start appearing, people are shocked to find their true occupancy costs are 30% to 40% higher than anticipated.” So be sure to ask the landlord or broker to give you the asking rate “triple net,” so you’ll have the true cost to factor into your budgets and pro formas.
DREAM BIG, LEASE SMALL
“The most common mistake is paying too much rent versus annual sales,” Tarczynski says. “Generally, a successful retail store should be able to generate $500 to $700 of sales per square foot annually. A good rule of thumb is that occupancy costs (rent plus NNN charges) should come in somewhere around 10% of annual sales.”