Retail Business Planning
Starting up a boutique, like any business, is definitely an exciting experience. There are a lot of fun and creative aspects to it. Picking your business name, scouting storefront locations, networking with suppliers, finding marketing partners in related niches, the list goes on. Of course, whatever your chosen product area is, it’s probably near and dear to your heart, which makes it all the more fun.
So, that’s the warm and fuzzy side. Then comes the not so warm and fuzzy. Putting numbers together on paper, deciding on funding options, choosing solutions for employee taxes and payroll….generally all the stuff that induces yawning or sleep in most creative people. Of course, a very common motivation for having your own business is greater financial reward and freedom, and that goes for “creative types” as well. But even with dollar signs in your eyes, the dreaded (by most) “Business Plan” behind your boutique may not be as appealing as all that “fun” stuff I mentioned above. In fact, for a lot of small business startups, the biz plan is either way to thin, or non-existent. No matter how much “fun” it may (not) seem to us, it is very important, and should not be “permanently procrastinated”.
And, under the subject of business planning also falls business financing. Again, I think we can all intuitively agree on how important this is. None of us would get any business off the ground without it. And here is where most would-be entrepreneurs get the most hung-up. The thought process for many of us is “You have to be rich to own your own store or business…” Or, “it will take a fortune to get something like that started…” If these tapes aren’t playing in your own brain, there is a good chance they are being parroted out of the mouths of skeptical friends and relatives if/when you mention the idea of starting something of your own. (My personal policy is NOT to mention a new venture until I’ve already started it - I prefer not to risk contamination with the doubts of others…)
The fact of the matter is, start-up funding requirements can vary widely, from “that’s not so bad” to “ouch, thats a lot of money.” Variables include your own existing resources and talents, average costs for the product area you specialize in, whether your vendors will provide 30-day net right off the bat ( so you can earn money prior to paying them for inventory…) etc.
So, depending on your boutique, you may be able to launch on a shoe-string, or not. If not, you have to decide whether to use OPM (”Other Peoples Money”- could be bank or SBA loans, investors, venture capitalists, etc.) or (God Forbid) your own money. My personal take on this, after having the experience of launching retail and consulting businesses, is this; If your credit and situation allow, go get an SBA loan (in your business’s name i.e. form a corporation) or some other reasonable small business loan program. If this is not feasible, next best is to be using funds you raised (i.e. saved or acquired) and hopefully, follow the “shoe string” route so as to retain as much of your cash resources as you can, and still launch.
What I would NOT do: Categorically, under no circumstances, would I begin to think about using consumer credit (i.e. credit cards) to finance any aspect of my business, except maybe minor expenses such as supplies and gas, to be paid in full each month. This includes so-called “business” credit cards. Those are generally just typically high cost consumer credit lines that are marketed to the business community. They are no less dangerous in my book than any other credit card.
Why dangerous? Because they’re expensive, and can reak havoc on your credit profile should you have a period of struggle (like 90% of new small businesses) at any point in the first 5 years of your business. The other no-no in my book, which may be obvious to most in the wake of the sub-prime lending fallout of the past couple of years, is to put your home or other assets in hock to raise funds for a startup. Granted, a lot of people have probably done this, and some probably succeeded, but bottom line, this is not a sound business strategy. Namely, placing any of your personal assets at risk to fund a business is not good practice. Just read about Trump or Kiyosaki, and you learn that they subscribe to the OPM strategy whenever possible, and specifically, the creation of a corporate entity (i.e. the “corporate veil”) and establish credit specifically for that entity. This shields you from any personal loss in the event the business folds. That way, if the business does not take off, you’ve minimize your liablility, and protected your credit profile. Exactly what Trump did when his business(es) bankrupted, and he somehow came out swinging shortly thereafter and re-built an empire that dwarfed his previous one.
And if you’re a stubborn entrepreneurial type, you’ll want the option of creating a whole new concept, writing up the plan, and getting back out there. That’s really hard to do if you’ve compromised your personal assets and credit the first time around.
June 8th, 2008 at 10:49 am
I found your blog via Google while searching for small business loans for startup with bad credit and your post regarding Retail Business Planning looks very interesting to me.