Local retailers around the country are hoping the biggest shopping day of the holiday season won't end up being Black Friday, but the day after—what's known as Small Business Saturday.
About 3,000 neighborhoods already have signed up to support the day, which resulted in about $5.7 billion in consumer spending with independent merchants last year, according to data from American Express.
Entrepreneurs—both established and aspiring—are eager to capitalize on this interest. But opening your own bakery, clothing boutique or furniture store can be a daunting task without the passion and perseverance to weather the ups and downs.
Being prepared well before opening the doors to your brick-and-mortar store can help you avoid some potential pitfalls. Here are five steps that can help you start out strong.
Just because an area of town or a local strip mall has significant foot traffic doesn't necessarily mean it is the right location for the type of customer you'll want.
"It's all about location, location, location," said Melinda Emerson, founder of SucceedAsYourOwnBoss.com. Before getting locked into a standard five- to 10-year lease, "you want to understand where the foot traffic is coming from," she said.
Knowing who your buyers are and identifying a target audience will help in finding the best location for your store.
Emerson's suggestion: Test your idea with a "pop-up" location, which allows you to rent short-term space. The online start-up Storefront, for example, connects store owners and landlords with retail spaces in New York, Chicago, Los Angeles and San Francisco for $150 to $1,500 a day.
Developing a three-year business plan can help you (and potential lenders) know what costs to expect. Go to the U.S. Small Business Administration website or talk to a counselor at a local Small Business Development Center for free help in writing your plan.
"Identify available capital and set a budget," recommends Nicole Leinbach Reyhle, founder of the online publication Retail Minded. Allocate some money to cover any surprise expenses, but make sure you cover the basics too. Consider how much money you'll need to rent or lease the location as well as the cost of inventory, staff, merchandising and display fixtures, a computer or point-of-sale provider, and marketing and advertising.
First, be prepared to put a good chunk of your own money in your business. Lenders want to see that you're willing to bank on your store before they do. Next, contact friends and family. If they've invested, you may be more reluctant to lose their money than your own. Getting a bank loan can be tough since many lenders won't loan money to small start-ups with no track record. But there are other options.
Talk to other businesses that have been successful using peer-to-peer lenders, such as crowdfunding platforms, where people lend money to a business and get paid back over the course of the loan. A $5,000 or $10,000 loan can make a big difference for a small business, said Jill Johnson, founder and CEO of the Institute for Entrepreneurial Leadership (IFEL) in Newark, New Jersey. "It may allow you to do a pilot or get a piece of equipment to operate more efficiently."
A big chunk of the budget of a new store often goes to marketing and advertising to get those first customers in the door. "Social media is extremely valuable," and much less expensive than traditional advertising, Reyhle says. Check out some of the free marketing resources at ShopSmall.com, a website from American Express to help independent retailers promote their businesses.
A few more tips: "Word of mouth far outweighs any media you can buy. Think of three things that you do that your competitors don't do and put that on your business card and website," said Marc Wilson, a retail consultant with the Virginia Small Business Development Center network.
Put effort into making sure your business secures search traffic too. "Make sure your business is the first listing that comes up when some searches for it on Google."
"Having a support team in place is so important," said IFEL's Johnson. "Too often entrepreneurs are making decisions in a vacuum. You need people with real expertise who will give you honest feedback."
An attorney, accountant, business and/or financial advisor will likely see potential challenges to the business before you do, Johnson said, from permits and licenses that may be required to a practical legal structure for your business.
Nonprofit organizations like IFEL, as well as local SBA offices, and Small Business Development Centers also offer free counseling and training programs to help you get your store up and running–and help it continue to grow.