How Much Does It Cost To Open a Retail Store?

How Much Does It Cost To Open a Retail Store?

Permits licenses and insurance 

All retail businesses must obtain licenses, permits, and insurance before operating. 

Costs of creating an entity

But before the permits and licenses, there are the expenses associated with creating your business structure. A business entity is an organization that one or more people form to conduct business activities. The way a business entity is organized and operates is crucial because it determines how it is taxed and who will be responsible for paying its debts and obligations.

Most businesses are organized as follows:

License and permit fees

You will need to obtain an appropriate license for your store, depending on your location and the types of items you will be selling. For example, all liquor store owners are required to obtain a liquor license.

Below are some common items that you’ll need before opening: 

  • Employer Identification Number (EIN) for tax purposes
  • State and local licenses as specified by the SBA
  • Resale certificate (if you do not sell exclusively independent products),
  • Wholesaler licenses 
  • Resale certificate (for those who do not sell exclusively independent products)
  • Vendor’s license
  • Certificate of occupancy for your retail space.

These costs can range from $200 to $2,000, depending on your business and the state in which you operate. Check your state government website for more detailed information on the licenses you may need for your retail business.

Read also: Types of Business Licenses for Small Businesses

Business insurance cost

Opening a retail store will always have some risk elements, including unexpected events that disrupt your business, delays in your supply chain, cyberattacks that target your card payment systems, defective products, and employee issues. Just as you insure your health, life, and car, you must insure your business. Good business insurance coverage is vital to the long-term health of your business. Several types of insurance can help mitigate your new business’s risks.

  • General liability insurance cost: Also referred to as business liability insurance, general liability insurance protects you and your business from “general” claims involving bodily injury and property damage.

General liability insurance can help cover medical expenses and attorney fees resulting from bodily injury and property damage for which your business may be legally responsible. The cost of general liability insurance differs depending on your business’s operations and policy limits, among other factors. Small businesses pay about $40-50 per month for this policy.

Although you won’t know how much you’ll have to pay until you get a quote from a local insurance company, most small retail stores pay about $600 to $1,200 a year for a business owner’s comprehensive policy and an additional $1,070 a year for workers’ compensation coverage.  Factors that affect insurance costs, in general, are the size of the building, location, size of payroll and annual revenue, claims history, policy details, and the number of people who have access to your systems and data.

Human Ressources

Again, the costs associated with managing your staff depend largely on the size of your business. One thing is for sure, though: running a retail store of any size is not a one-person operation. You’ll need to find the right staff, so budgeting for their salaries is an essential part of the start-up costs of a retail store. Below are some of the crucial positions in a retail store and the average wages for each:

The above list of positions is far from being exhaustive. Positions such as customer service representatives, visual merchandisers, buyers, and assistant store managers, are all positions you may require depending on your business needs. 

The staff you will need to hire depends on how you plan to operate. Will you have more than one register open during a shift? Do you plan to scale your business quickly? Be as realistic as possible; don’t bring in people you don’t need, but ensure all bases are covered for your busiest hours.

Once you’ve hired your first employee, it’s a good idea to track their work using the employee management tools in your POS system. You’ll be able to track employees’ arrival and departure times and their sales performance. You can use the automated data to find out your best employees and schedule them at the busiest times to increase your profits.

Initial Inventory Costs

From an accounting perspective, inventory costs can help you determine how much profit your inventory can bring you. It will also tell you how much of your company’s capital will be tied up in inventory and for how long. You need to have a full inventory on opening day and enough product to last at least four to six months. If you don’t know the exact prices of your products, use an estimated mark-up assumption based on the rates you are likely to see from your distributors.

Also, to get a reasonable estimate of your initial inventory, you may want to determine the product lines you will be stocking. Then find out how many items in each product line you need and the manufacturer’s suggested retail price for each. When researching wholesalers and manufacturers, you may find that not all prices are completely transparent until you sign a contract. This is also why you must opt for a wholesale license to create assurances between you and your suppliers.

Here are some resources for inventory management once you launch your retail business:

Purchasing a point of sale system for your store is essential in your start-up process. With no hidden fees or contracts, KORONA POS is an all-in-one point-of-sale solution that makes running a business easy. All plans come with free 24/7 customer support and the ability to choose your credit card processor. You can start with KORONA POS, starting at $49 monthly. KORONA offers several affordable options for businesses that want to finance their POS equipment through leasing.

eCommerce platform and web hosting

A brick-and-mortar retail store is no longer sufficient in light of the rapid rise of online shopping. After all, eCommerce sales are expected to reach $6.5 trillion by 2023. There are dozens of eCommerce platforms, and some are designed specifically to help retail stores ship their products and offer in-store pickup of online orders. 

eCommerce platforms with native site builders and templates will save you money on site design. You will need to consider domain hosting costs, however. Domain hosting typically starts at $36 per year and goes up for premium domains. Platforms such as GoDaddy and Bluehost are some of the best web hosting platforms. 

See related: How Much Does It Cost To Build an eCommerce Website?

Your inventory will be synchronized with online and in-store transactions by choosing an eCommerce POS integration platform. An eCommerce point of sale integration provides a streamlined connection between your eCommerce platform and your POS system. This synchronization allows you to pull detailed data from the system in real-time and process transactions and orders across online and offline channels. This will make it easy for you to offer local deliveries and curbside pickups, measures that appeal to customers and increase your return on investment.

Find more resources about eCommerce here:

Retail location renovations

Most of the time, stores or commercial premises require some renovation to meet your needs. And most of the time, it is your responsibility to pay for these renovations. The most needed renovations are painting, flooring, lighting, retail shelving, cash wrap, locksmithing, etc. Once your renovations are complete, your city will likely require you to obtain a certificate of occupancy prior to your opening. Check with your city’s building department.