RETAIL BUSINESSES FACE TOUGH MARKET

By Frances McGuckin

In our tough economic climate, staying in business is difficult, especially for retail stores. The small retail store has to offer something different that the giants and other small retail stores cannot.

Why do small businesses fail? There are a multitude of reasons, starting with the initial opening or purchase of a business. Many businesses sell because they are losing money as the competition moves in an the economy changes. A retailer has to be constantly aware of changing trends in the economy and cater to them.

If you are opening a store in your area, you have to thoroughly research the competition. How many restaurants or flower shops can one geographic area support? What can you offer that the competition can't? Your municipality can provide you with a list of locations and their addresses, and also with the demographics of the area. What is the population? Who is it made up of? What is their income bracket? Two questions need to be asked. Can I fill a need and a niche in the market, and who are my target market?

Retail stores carry high overhead, so the business must generate enough volume and gross profit margins to support paying even the rent. You have to sell $5,000 to pay a $1,750 rent at 35 percent gross profit. Most people new to business don't prepare a business plan and document their costs, projected income and cash flow. Those who do plan a business in fine detail usually have a better chance of success.

Hiring the right staff is essential to operating successfully, because your employees will make or break your business. It's not that easy to find the right people and cheap wages are no substitute for paying a little more for the right person. They are hard to find and all businesses experience this dilemma.

Other reasons include lack of marketing skills, expensive, ineffective advertising, trying to undercut the competition, and offering no-profit or costly specials that quickly dissipate profits. Knowing how to market your business and preparing a marketing plan is essential.

Starting a business without sound financial, marketing, administrative and accounting skills will soon lead to trouble. Having a profession or trade is not enough-a business should be monitored monthly and problem areas identified and rectified quickly. This all takes experience and expertise.