Small Business Startup Costs: A Complete Retail Guide
As an entrepreneur starting a retail business, you are probably well aware that there is no true and accurate answer to this question. So many aspects go into calculating small business startup costs, that there’s really no reason to even attempt to address them like this. But, we can give you a better idea of what you’re in for by breaking down different sections of retail store startup costs.
While we did say that it’s almost impossible to answer the question, there are some general studies that say that retail store startup costs (with a brick and mortar store included) come out to an average of around $40,000. And keep in mind that is just a general average, and so are all the numbers we will bring up.
So, actually how much are startup costs? Let’s get to the nitty gritty to break down this number.
Start With Your Business Plan
Starting a retail business begins with having a solid business plan, and there is no way around that. You as the business owner need to know your reasons for starting the journey in the first place, your goals for the business, the customers you’re intending to attract and serve, and the vision of your business.
Once you have your vision and goals in mind, then you can plan your steps to get there.
From the outside, it seems like a vision before anything is pointless, but you won’t know your retail store startup costs without having something solid to work towards. What would you like to be known for? Who is your ideal customer? What are your goals for the first few years? Long term goals? What are the financials you will need to get to where you want to go? Knowing the answers to these questions will only make starting a retail business easier.
One Time Initial Costs
When people wonder how much are startup costs, they mainly wonder about the one time initial costs that are a huge bulk of small business startup costs. Whether you’re opening a physical business or an online one (we’ll talk about the brick and mortar costs in the next section), multiple initial costs are involved.
Business Permits
All businesses, especially if you’re planning on having employees, will need an Employer Identification Number (or something equivalent if the business is not US based). This is one of the few small business startup costs that is completely free if you do it yourself. You will also need a business license ($200), a sellers permit ($25), and depending on which state you’re in, you may need local licenses that let you operate in those specific areas.
Business Registration Fees
In the US, starting a retail business includes registering the company as either an LLC (limited liability company) or as a corporation. These fees vary according to the size and location of the business, but you can probably count on an average of $400.
Legal Fees
While you can do all of this completely on your own, you may want to consult legal advice just to make sure all is filed correctly and your small business startup costs are in order, so leaving some cash for legal fees is a potentially pricey, but good idea. Good lawyers can cost around $250 an hour.
Brick and Mortar Costs
So when there is a physical component to your retail store startup costs, things like rent, utilities, location licenses, retail signage, and potential space renovations are added to the general business fees.
These costs are actually the biggest variation out of all the small business startup costs, so please keep in mind that location and size will play the biggest role in this one. Of course, to get the lowest rent, signage, utilities, and renovation cost, it is better to choose locations outside of major cities where those are generally lower.
Since we are working on averages here, the average rent for a medium size store in an average state can be about $28,000 per month.
Personnel Costs
Hiring and maintaining the staff that will help you run your business is one of the most important small business startup costs since these will be your partners in the journey of opening your small business. They will need salaries, health insurance, retirement, taxes, etc. Depending on what their salaries are, according to The Small Business Administration, in the US, an employee costs about 1.33 times more than their salary with all the extra charges.
It’s important to know in your business plan how much help you’ll need in the beginning to calculate your retail store startup costs, but it’s also good to keep in mind future personnel needs that may become a reality as your business grows.
For reference, the average minimum wage in the US is about $12/hour, and the average store manager salary in the US is about $54,000/year.
Inventory and Supply Costs
You have your place and your people, now the final thing to fall in place when starting a retail business is your inventory. This will most likely be one of your biggest retail store startup costs, but not if you’re selling services or partnering with a print-on-demand site.
Until you get experience with your customers, you have no idea how much and what kind of inventory you’ll need, so making sure you’re all stocked for at least the first 4-6 months of business before you start gaining revenue is a solid plan. Shopping around to find the most affordable and efficient deals from suppliers can help control the price you pay at the start.
Subscription Software and Online Costs
Whether you’re exclusively online or adding an online store and presence to your physical store, a POS software subscription is vital in starting a retail business. Both in store and online, your POS will manage transactions, payments, inventory, and some can even track customer loyalty and integrate social media marketing.
So, how much are startup costs with POS? Again, depends on the size of your operation, with free options available for the independent entrepreneur, all the way to customizable enterprise options for huge corporations.
Since we’re working with averages here, the average POS software subscription is about $85/month for small businesses.
Consolidate Your Costs with LincSell!
We’ve done our best to help answer the question: How much are startup costs? The numbers may not be exactly aligned with what you’ll need specifically, but we were never going to get to your small business startup costs because every business model, location, and size is different.
What we hoped to do instead of just giving you a number is talk about all the aspects and steps that you should consider in starting a retail business, starting with a business plan all the way through to your subscription fees. That way, you’ll be more prepared and your business can be more successful.
Online or brick and mortar, LincSell is the system you need to streamline all areas of your business, from POS to payment processing to customer loyalty metrics. LincSell is your #1 partner in starting a retail business.
Small business startup costs are manageable with LincSell. Book a Demo and see what LincSell can do for you!
