A note from Streamline: Today’s post is from Dana Kantalis. Dana is an expert retail strategist with vast experience in wholesale, online, and brick and mortar retail. Having worked for majors like Neiman Marcus, Horchow.com, and Tootsies, she now aptly guides independent retailers to growing their business by managing inventory and improving cash flow. In her work as an inventory planner, her ultimate goal is helping retailers sleep better at night by creating a work environment that is both productive and rewarding.
There are many details to consider when you are planning to open a store. Evaluating those costs can be difficult for new retailers. Do not sit and worry on the ‘what-if’ questions. You know you want to create true, viable numbers for your business plan, but you are a little unsure as to how much you really need to sell to achieve your goals.
Inventory is your biggest asset and your biggest expense! You need the right product in the right classifications to keep your cash flow alive. How do you figure out how much you need?
Kidding, kind of… below are the ways to begin your opening inventory process.
First, assess your breakeven point.
While it is lovely for someone to say they want to open a million dollar store, what is the amount you need to generate to actually break even with your costs? Start there. Put pen to paper – rent, utilities, taxes, point of sale, telephone, internet, fees, salaries, freight, etc. What are your true monthly expenses?
Remember, you have the one time only expense of fixtures, office furniture, selling equipment, hangers, computers, POS system, and mannequins. Overestimate a little – it is better to have a little padding rather than to skim out of the gates.
What product lines do you ‘want’ to carry?
Make a list of vendors and do the research on your initial markup for these wishlist vendors. Are you fashion forward, fast fashion, high end, gift, apparel, home, men’s – who are you? Are you able to carry those lines – meaning they are not already exclusive to your zip code and vendors are open to working with you? Research styles, vendors and classifications. Keep track of buying trends and who you want to be.
Assess Stock and Sales Ratios
What is the safe amount of denim you need to sell a pair? How many novelty tops or knits, candles, or placemats? Do you need to sell one or 10? A full size run? Multiple size 8 shoes or are you dealing with case packs?
The initial cost requirements vary. Location, products, build-out negotiations, salaries, rent – it can be anywhere between $50,000 to $150,000. Know that positive cash flow will help you sleep at night. You are not an island. There are countless resources that can help you with the right plan for your business. You do not need to do this alone. Get your thoughts together, assess if you need to borrow or if you are using personal funds and get a plan together. A dream without a plan is just a wish.