Many aspiring entrepreneurs jump into operating their retail business without acquiring enough knowledge about the processes that would ensure success.
Although productivity is a required characteristic of these business owners, starting without learning the basics may lead to business growth plateaus or failure.
Retail is not how it used to be, with technology completely revolutionizing the way customers do business today. This is a good thing because if you and your business can adapt, you will reap the tremendous scalable rewards of modern-day retail. On top of this, cloud-based POS systems, Accounting Software and Inventory Management Software make managing your business easier than it has ever been before.
This guide will take you step-by-step on how to set up and start your retail business. It will also teach you how to utilize what the industry offers today, to skyrocket the profitability of your business.
Having a well thought out business plan before beginning operations is essential for any business to succeed. A well-written plan will help stakeholders get a clear picture of how exactly the business is going to operate. It will also help you acquire funding if you don’t have enough capital to start up. You should keep expansion in mind when creating the plan. The goal should be to eventually own more than one store.
This document will include basic summary and the specifics of every aspect of the business, going into detail of what exactly the retail business does and how it operates. It will be a guideline on how the business should operate to achieve the business goals.
A good business plan should include all major aspects of business development:
- Executive Summary: This should include the goals and responsibilities of your organisation including Target Market, Type of Store, Kind of Retailer, Location, Products and Size.
- Product Overview: This is a holistic overview of the products you intend to sell, and their details down to their SKUs as well. (SKU – Stock Keeping Unit: The identifiers of each product you plan to sell)
- Market Analysis: This involves due diligence required by you to understand your position in the marketing. This will include competitor analysis and trend analysis within your target area.
- Marketing: This is the marketing overview of which mediums you will use to market your product. Whether it’s social media, radio, TV, E-Commerce Stores etc.
- Funding Expectations: This includes the funding expectations and requirements to maintain your business over the initial years of operation.
- Financial Statements: This involves the financial Statements and projects including income statement and balance sheet to help acquire funding.
- Organizational Chart: This consists of the management Structure and Member Responsibilities.
The math you need to know
You will need to know some basic financial ratios before you start your business, to make the right business decisions for maximum growth:
Mark-Up: This is how much money you put on top of the cost of the product for your sales price. Higher mark-up = Higher profits. But this has to be calculated carefully based on the market, otherwise, customers will explore other options.
Turn-Over: This is the total yearly sales/Average Maximum Inventory Value, to figure out how many turns you have per year. More turns per year = more revenue.
Sales to Stock Ratio: This is the inventory on hand at the beginning of the month/Amount of predicted sales. Basically, how much you sell compared to how much you are holding. You should ideally hold around double of what you are selling. If you sell out your inventory every month, it usually means you are under inventoried.
Return on Investment: ROI is usually discussed when it comes to marketing. This is how much money you make depending on how much you spend. If you spend 100 dollars on marketing and get 50 back, that’s a 50% return on investment which is great.
It’s important to know such math because once you optimise all these numbers for the best results possible, it makes a huge difference over time.
Finance your operations
A complete and thorough business plan will help you finance your operation. This is something you will most likely have to do, unless you have a large amount of capital saved up to start your business already.
You will need to know how much you need, how long you need it for before you start repaying it, and how exactly you are going to use these funds. Include this in your business plan by going into the details such as how much of it is required for inventory purchasing, rent and marketing.
Your credit history will determine your loan conditions so be sure to review it before applying for one. If it isn’t great, you might need to start working on improving it as well.
Find your location
After you acquire funding, use it to find the best location within your means. Consider factors such as size, price, storage, renovation requirements and opportunities. A popular location in the city centre will cost much more than a remote location outside. However, the cost may be justified since you would not have to spend nearly as much on marketing.
Set up your location
Once you acquire your location, you then need to acquire the materials required to run your shop. These would include things like Shelves, Mannequins, Hangers, Counters, Bags, Mirrors, Chairs, Shopping Baskets/Carts, Cleaning Supplies, Office Supplies etc.
Furthermore, you would also have to acquire the hardware and software required to manage your business. Finding the right software will save you a lot of time and money. The software would be able to automatically do what multiple employees would need to do manually. As for hardware, most Business / Retail Software Providers will help you find the right hardware as well.
Build your team
Whether you hire the right team can make or break your business. Hiring a good set of employees will increase revenue by increasing sales, customer loyalty and ensuring return customers while providing excellent customer service. A bad team will lead to revenue loss due to poor customer service, customer experience and destroy your reputation.
Ensure you spend enough time and hire the right team instead of re-evaluation whoever came easiest during the time of hiring. Doing your diligence initially can save you a lot of money in the long run. There are situations where one employee can sometimes have the productivity of multiple employees. These are the people you should look out for.
So, how do you find such employees?
Keep a look out for their Schedule; find employees who can commit rather than a bunch of part-time workers who aren’t very reliable. Look at their demeanour; how do they behave? Find employees who are kind, hardworking and flexible. These people will ensure the customer experience is continuously great. Go by your gut instinct, you can tell a lot from the interview process and try to identify how these employees will behave in stressful situations.
Remember that this process is a marathon and not a sprint, so never hire any employees with visible red flags such as attitude problems.
These are the business tasks of your retail operation. Any business decisions for growth and profitability will be taken based on the information received from these back-office tasks. Accounting, HR, Employee Management, and Inventory Management are all back-office tasks.
Modern technology and software make it extremely easy to handle these tasks by minimising human input and automating data transfer. It is important to make sure you find the right system that lets use utilise these features.
You will no longer need a professional accountant to handle all the books of your operation. The right system with a couple of hours of learning will make you a professional, saving you a lot of money.
POS, Inventory Management and Accounting Software
A modern Cloud POS Solution could arguably be the most important aspect of managing your retail business today. It allows you to manage your orders, inventory, track revenue, analyse business information and more in one place.
Some systems allow you to manage every single one of your back-office tasks in one centralised location. A Cloud POS System such as IDZlink.com even has an in-built accounting module and E-Commerce Website creation built into it.
With these systems, all you have to do is set up your inventory and start running your sales on the POS. Whenever you need reports, just set your filters for whichever reports you need, and export or print it. All the data for the reports are continuously being collected automatically.
Many POS Systems now have Business Analytics dashboards built into it. These dashboards allow you to see your daily/weekly revenue generation whilst comparing it with revenue generated during previous weeks. Furthermore, it allows you to see your top-selling items, categories, number of return customers, average spend per customer and more. This information will help you optimise the products that you provide, identify which customers come in more and why, sell more to loyal customers and other vital data to base your business decisions on for profitability.
Not only do you get to see all this data in one place, but you can also even see it in real-time, anywhere on any device. This allows you to manage your business even while you are away on holiday!
If COVID has taught us one thing, it’s the importance of an online medium to make sales. Businesses that were ready to sell online managed to stay afloat much easier than brick-and-mortar stores that had to close down for quarantine.
It’s practically a necessity now because 50% of your customers expect to buy online and pick up in store. 73% are more likely to visit the store if you have information about your products online, compared to 36% if you don’t.
If your POS integrates to your online shop or has an online shop module built into it, you can ensure product availability in real-time as your stock changes. Cloud-based POS such as IDZlink.com syncs inventory across your omnichannel operation and sets up your E-Commerce Store automatically as you configure your POS. Being visible to your customers in the digital and real-world is vital for your business to operate in the modern-day.
Setting up your online and brick-and-mortar store well is just the first step. You need to ensure your target market can easily find your store online. Almost everybody does a google search about the things they are looking for today. You need to make sure your customers can find you first when they search for your products.
Data is constantly being collected by Google, Facebook, Instagram and other online marketing mediums. Ads can be targeted to customers who are interested in your products with a click of a button. You can use these media to build hype around your business before it launches and maintain a relationship with your customers by providing valuable content as well. Utilising these media can be extremely productive for growing and scaling your business so it’s important to learn how to market online properly.
Optimising your site for your targeted keywords, such as “Summer Clothes”, or “Supermarket Delhi” can make your site pop-up first on Google for these generic products. This is called Search Engine Optimisation (SEO) and setting this up can build organic (free) traffic from interested customers. Spending some time figuring out SEO, whether you have an online shop or not is vital in today’s Retail industry.
Customer Management and Experience
You should always put the customer first. Put yourself in your customers shoes and ask yourself how you would like the experience to be.
Let’s take inspiration from some of the best retailers in the world, such as Apple. From the moment you enter the store, to the end of your purchase, they organise the experience around what you would want. An employee would usually come and assist you throughout your experience, with a tablet POS in hand. This is so they can help you with any information or even make the purchase at your position. Finally, if you have a negative experience where you want to return a product, they would definitely compensate you if it was a mistake on their part. What we’re trying to say is, any customers coming out of the Apple store will remember their positive experience.
The image of the brand improves when you focus on customer experience and this leads to return customers. Return customers are paramount to your retail business.
Never stop learning
Once your business starts generating some revenue, it is quite easy to get content and plateau your business growth. This leads to far too many businesses stagnating after a certain point. Just because you manage your business in a certain way that works does not mean that it’s the most effective method. Ensuring you are using the most efficient and effective method for all aspects of your business will save you heaps of money over time.
Make sure you get with the times and prepare for new trends. If a new fad comes up, be sure to stock up if the hype about the product is great. These are opportunities to bring in quite a bit of revenue for business so be ready to jump at every opportunity.
Another area where you must be constantly learning is how you manage your back-office operations. For example, there are many formulas and such for inventory management that helps you assess whether you are holding the optimum amount of stock-based on your previous sales data. When it comes to accounting, there are many financial models that apply to your business so you can see exactly where you stand. Some of these models help you analyse your finances and compare it with the industry average.
Once you have this data, you can make the right business decisions to be on a level playing field with your competitors. There are a lot of tools available now that help you figure out exactly what your competitor is doing as well.
Point is; if you want your business to be successful, you must be constantly learning about each aspect of your business to improve it. Do everything you can to keep your business on an upward trajectory.