Starting A Retail Business From Scratch

RESOURCES AND LINKS FOR SMALL BUSINESS HELP

This page brings you:

• A special resource (Starting A Retail Business From Scratch).
• A Business Plan example used in the Sandhills SCORE Business Plan seminar

STARTING A RETAIL BUSINESS FROM SCRATCH

1. Start preparing a draft Business Plan to structure your thought process. See this web site’s navigation bar “BUSINESS PLAN TEMPLATE” for exactly what you need. Constantly refine your Business Plan and the associated financial projections. Soon you will have a comprehensive, workable and compelling final Business Plan to “take to the bank” or to successfully start your business with your own funds.
2. If you intend to seek a loan, then skip directly to 12/13/14/15 just to be sure that you understand the most important part of any start-up business Business Plan (the role of the financial statements). After you read and understand these paragraphs, come back here and ask yourself where this financing will come from. When you have that answer, carry on!
3. HELP: Set your search engine to conveniently click to the NC Department of Commerce’s Business ServiCenter. (http://www.nccommerce.com/servicenter/)
4. HINT: Everything required to start a business costs money (licenses, permits, Attorney/CPA fees, rental escrows, business furnishings, signs, business machines and software, loan initiation fees, inventory, marketing and advertising, travel expenses, etc [see IRS Pub 334]). You should faithfully record these start-up costs and keep all receipts or records of payments. Much money will be expended before you even buy, turn on and get your business software or your hand ledgers operational. All business start-up expenses are tax-deductible…if you have documented the expenses. Unfortunately they might have to be depreciated, but every little bit helps.
5. Carefully review the potential business structures available for your business with your Attorney and CPA. These structures have a number of differences and it is important that you evaluate their pros and cons as they relate to your business:
   - Sole Proprietorship
   - General Partnership
   - Limited Partnership
   - “C”Corporation
   - Subchapter “S” Corporation
   - Limited Liability Corporation (LLC)
6. Business legal structures information can be found at the NC Servicenter site through Start-up Legal Structures (http://www.nccommerce.com/servicenter/blio/startup/structure.asp) Sand at a SCORE site through Business Legal Structures (http://www.score.org/leg_6). Attorneys and CPA’s to discuss the issues can be readily found in The Yellow Pages.
   If you choose to incorporate or form an LLC, then you must designate a “Registered Agent”. See Registered Agents (http://www.score.org/leg_registered_agent) for information and suggestions. Many CPAs will act as your Registered Agent as well as fulfilling all the requirements for payrolls, reports and tax filings for corporations.
7. Research the State, County and Township requirements for Licenses/Permits and legal requirements for being in business, collecting and forwarding sales and payroll taxes. For excellent NC info go to the NC Servicenter through Requirements Questions (http://www.nccommerce.com/servicenter/blio/faq/). In Moore County see Starting a Moore County Business (http://www.co.moore.nc.us/). For specific business license info (including forms) go to Business License Information Office (http://www.nccommerce.com/servicenter/blio/).
8. In today’s business world a web site is an essential element of doing business. The NC Servicenter discusses your Business Name selection and registration process, but it does not mention obtaining your web site’s’ Domain Name. You should seek to have your Business Name and your Domain Name clearly linked. This means that you need to organize your efforts for each on a parallel route. Type “Domain Registration Service” in your service engine and you can select a web site’s host and domain registration package from the dozens available. Or you can outsource the effort to professional local web site’s design establishments.
9. Research business insurance requirements and costs with one or more reputable insurance agents. If you plan to have employees, you will need Workman’s Compensation insurance.
10. Research any general safety, health and environmental regulations relevant to your business. Pay particular attention to anything you may sell or consume which would be potentially or definitively considered a hazardous substance. The cost of compliance with all such regulations are significant and must be reflected in your Business Plan.
11. Understand the building code, architectural standards and zoning restrictions and the costs of compliance with respect to your facility and signage in the county or town where you will establish your business.
12. Before you go site hunting: Describe (to yourself and your Business Plan) your perfect/ideal retail establishment’s general location, size, operational features, parking and delivery requirements, signage, and any peculiar structural or utility requirements (high ceilings, strong floors, steam, natural gas, un-interruptible electrical power and DSL or high speed internet. In addition:
    - Establish a maximum price you are willing to pay for your ideal location
    - Look for it and informally negotiate a potential price and modification-and-use restrictions. Carefully consider all additional costs and permits for the modifications
    - Do a trade-off analysis of features vs.full-up price of each available site and that site’s specifically required one-time modification and decorating costs.
    - Pick your operating location.
    - IF YOU ARE NOT SELF-FINANCING YOUR START-UP THEN DO NOT ACQUIRE YOUR BUSINESS LOCATION YET!
    Considering your selected location, carefully estimate all costs (and the time necessary) to modify, decorate, furnish, equip and prepare your facility to open for business.
13. Inventory is a significant element of expense in your start-up cost estimating and your financial projections for a loan. Given the display capacity of your facility and your estimates of sales and your products’ order/ship timelines, establish an inventory level for your sales items. Work out with your potential vendors their required terms of payment (COD, net 10, net 30, not until so ld…) so that you can properly plan for the expense AND the inventory impact on your Cash Flow. If you intend to modify inventory items after purchase, then this cost must be estimated and it becomes a recordable additional cost of your inventory (reportable to IRS).
14. Be sure to project your business financials in a very conservative manner. Assume things will not be rosy for the first 6 – 12 months. This is very important in establishing a Cash Flow that will be able to meet all obligations. Avoid at all costs going forward without having the necessary positive Cash Flow. Indeed, the lender will undoubtedly find this flaw and your credibility suffers.
15. Finalize your Business Plan including all financial supporting documentation Balance Sheet, Income Statement, Cash Flow and all appropriate 12-month projections). Realize that you must supply at least 30% of the required start-up funds when you seek your loan. The lender must see that you have placed your own assets at risk before the organization will supply you their funds. Understand that the lender’s objective is to proceed with a minimum risk to their funds. The obligation is on you to show that the start-up will have low risk and that you have financially invested all reasonable capital into the enterprise.
16. Recognize that your business will not be the only element held to repay the loan should the misfortune occur that the business fails. You will be asked to sign a personal financial obligation to repay the lender.

YOUR SANDHILLS CHAPTER SCORE COUNSELOR CAN GUIDE YOU SEAMLESSLY THROUGH THE ABOVE. LET OUR EXPERIENCE BE YOUR ASSET.

BUSINESS PLAN EXAMPLE
FINESTKIND SEAFOODS, Inc.
2456 Main Street
Beachtown, NC
910 555 1717
Prepared September, 2005
by
Mike Gosling and Mike Swan
mgosling@star.net miswan4@aol.com

Complete Business Plan (http://www.sandhillsscore.org/FinestkindBPlan.doc)
Balance Sheet (http://www.sandhillsscore.org/FKBalanceSheet.xls)
Income Statement (http://www.sandhillsscore.org/FKIncomeStmt.xls)
Cash Flow Statement (http://www.sandhillsscore.org/FKCashFlow.xls)
Income Projection (http://www.sandhillsscore.org/FKIncprojection.xls)