With a significant number of retail outlets failing miserably in their first year, many entrepreneurs prefer buying an established business. While acquiring a retail store seems like a walk in the park, the reality is that it can also fail and you can still lose your investment.
However, with adequate preparation and smart planning, you will be on your way to becoming a successful retail business owner.
Are you thinking of buying a retail business? Here are a few things you should nail down for your business to take off as expected in the new year.
Have a solid business plan
When buying a business, your goal is to run the store well, earn profits and grow. Achieving your objectives will depend on how organised you are. For instance, you cannot think about growth if you do not have a business strategy in place. How do you ensure your business is always on the right path to success?
Retail companies are complicated since they experience peaks and troughs. Creating a business plan for your retail store will ensure you take advantage of the opportunities and mitigate the weaknesses of the business.
Your business plan should include your pricing strategies and the business model you will adopt to carve out your share in the competitive market. Retail outlets buy products from the manufacturer and sell them to consumers, so you need to price your products competitively to earn profits and build a customer base.
Your business plan should also predict the expected earnings from the retail outlet. With a prediction of revenues, you can determine the areas of the store that are performing well and those that need improvement. You should do thorough research and come up with a realistic plan.
What is the current state of the retail industry and what is predicted for the sector in the coming years? How will your business adapt to changes in technology and the increase in online retail?
Have a financial plan
When acquiring a retail business, you are not merely buying the store and the inventory; you will also pay for the existing customer base, the seller’s goodwill and the strategic location of the store. Have an idea about the cost of the store you intend to acquire and prepare your finances.
Among the factors that highly affect the price is the location of the retail outlet. If the shop is situated near high traffic, it will cost more. It will also be important that you research whether there are any planned developments in the coming years that could change the value of the business.
While you’re there, identify your sources of finances. If you are financing with your savings, ensure they will be readily available. You should also know the amount of loan you can obtain from a bank. Finally, when organising your finances, ensure you have enough to cover the expenses of the first few months.
Keep an eye on future trends in your retail niche
Product offerings drive most retail outlets, so you should be able to predict the future direction of the store. What products will the customers want at the beginning of the year? How can you customise your goods to satisfy the needs of the consumer? It is vital to have in-depth knowledge of your retail niche to predict the upcoming trends.
You should also know how to take advantage of the trends to make a profit. If the previous owner was an expert in product curation, you could request them to stay on as a consultant as you learn the ropes.
Online shopping has merged with social media to make the customer experience as seamless as possible. As well as this, the next few years are going to see consumers expecting faster deliveries, access to excellent websites with extensive product information and customers are demanding that they be able to trust the brands that they use.
If you are hoping to become a retail business owner in 2020, how are you going to incorporate some of these trends into the way that customers interact with your business?
Research opportunities for expansion
As mentioned, peaks and troughs are common occurrences in a retail business. However, firms can ensure they earn steady revenue by taking advantage of the expansion opportunities. If you can introduce a new product that is used alongside the goods you are currently selling, it may increase your sales. For instance, if you sell electronics, can you introduce accessories for the electronics?
That way, a customer who already has the electronics will come back for the accessories. Identifying opportunities to scale your business requires understanding the industry and your customers.
Review potential retail stores thoroughly
Once you identify the type of retail store you want to buy, you can begin your search. However, there are considerations you need to take into account. Is the retail store situated at an ideal location? Does it get enough foot traffic? You need to research the earning potential of a store and do your due diligence before presenting an offer to the seller.
To become a successful retail business owner, find a store that meets your criteria and matches your goals. That way, you will be setting yourself up for success before the actual purchase.
The start of a new decade is a great time to become a business owner. You will, however, need to keep on your toes as competition will be keeping in step with the sector.
Jo Thornley is head of Brand and Partnerships at Dynamis.