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Starting a retail business on a shoestring budget


David asked:

How much capital does it take to open a small clothing store? I've been doing research online, but haven't been able to find a simple answer. I realize there a lot of factors, but I'm going to be financing my business without loans and I need to figure out the minimum to make it work and survive until I can turn a profit.


As you have pointed out it is very difficult to provide a simple answer as to how much it will cost to start a business.

My partner and I started CanadaOne on a shoestring, so I do understand what it means to take the "bare minimum" approach. The formula in this case is actually simpler than it might seem.

First, identify your absolutely essential costs; some will be upfront costs and others will be ongoing monthly expenses. The costs are not limited to, but will likely include:

  • rent;
  • heat/hydro;
  • any renovations / store preparation costs;
  • purchase costs for your initial inventory;
  • purchase of basic business supplies;
  • purchase of any business equipment that is needed (computers, cash registers, software, shelving and racks for store, etc.) ; and
  • your initial marketing / advertising costs

Next, look at how long you will need to get the store ready before you can open for business. Since you are operating on a shoestring you will want to get the store open as quickly as possible, but store design will have a direct impact on your sales once you do open.

I believe that it's important to make sure that you have the right product in the right place with the right look to draw in customers ... even if this means that you aren't going for the cheapest, fastest or simplest solution. This is where things start to get complicated again. You have decisions to make and they will affect not only your costs, but your likelihood of success.

As soon as your store opens you will have money coming in as well as going out. You'll want to estimate your sales. As products sell you will need to reinvest your earnings into new product. Some product won't sell that well and you will have the burden of having paid for inventory that is not generating money. Again, this is where things become complicated. You'll need to determine when and how to offer discounts so that your inventory moves effectively. This is one of the secrets to success in retail and goes well beyond the scope of your original question or my own expertise.

So to recap, start looking at the hard costs and you should be able to work out a rough budget. I would recommend that you build in a contingency for the unexpected as well.

Good luck,

Julie King

About the author

Julie King is the co-founder and managing editor of CanadaOne, Canada's first small business portal.

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