Starting and running a successful retail business starts with a plan. If you want to get your biz off the ground, you need to map out a way to make it happen. What will the business look like? Who are your customers? How will you make money? All these questions can be answered by a retail business plan.
In this post, you’ll learn the ins and outs of creating a plan for your retail business. We’ll discuss the benefits of having it and we’ll walk you through the various steps you need to take to create one.
Whether you’re an aspiring retailer who’s just starting out or an existing merchant seeking an investment, this post can help you formulate the right plan.
What is a retail business plan?
It’s a written document that outlines the need-to-know information about a retail business. Think of it as a roadmap that tells you (or any other reader) what the business is and how it plans to grow.
A business plan doesn’t have to be set in stone, but it should give readers an idea of the inner workings of the company.
Why should you create one?
So, why go through all the trouble of creating a business plan? Why not just… you know, start the business?
While there’s a lot of value in taking immediate action and diving into hustle mode, certain businesses — particularly in the retail sector — have a lot of moving parts. You need to iron out an array of details and in some cases, you require serious capital to start and run your company. You can’t accomplish these things if the plan is just inside your head. It’s important to formalize it and put it on paper for the benefit of yourself and your stakeholders.
Here are the key benefits of creating a business plan:
To give you clarity on what you need to do
We’ve said it earlier in this post, but it’s worth repeating: your business plan can serve as a roadmap for how to take your business off the ground. Your retail journey consists of multiple steps, and figuring out how to prioritize and implement everything can get overwhelming.
Writing a business plan forces you to be clear about what you need to do, so when it’s time to carry out the steps, you already have an idea of how to accomplish them.
To test your business idea
A business plan requires research and the process of writing it uncovers roadblocks or issues with your business idea.
As an entrepreneur, you want to spot issues as early as possible, so you can make the decision of whether or not to pursue your idea. The last thing you want is waste time on a business idea that has little chance of succeeding.
To attract investors or help you secure funding
A retail business plan is critical if you’re planning to secure funding for your venture (be it through investments, loans, or lines of credit. Creditors and investors will want a formal document in place so they can understand your idea, which then helps them decide whether or not to provide the funds you need.
How do you write a retail business plan?
Now that you understand what a retail business plan is and why you need it, let’s discuss how to create one for your company. The best way to go about this is to list out the different components of a business plan and what each part requires.
Let’s dive in.
1. Executive summary
The executive summary gives readers an overview of what your business is all about. It offers a glimpse into why you started the company and your general goals. The specifics will vary from one retailer to the next, but here’s a rundown of what you could tackle in this section of your biz plan:
This should be a paragraph or two detailing what your business is. As an example, let’s say you’re planning to start a maternity apparel boutique. Your business synopsis could be something along the lines of…
Luxe Maternity is a high-end apparel boutique that caters to affluent mothers-to-be. As our name suggests, Luxe Maternity will sell high-end maternity wear for the wealthy.
We will be the first luxury maternity boutique in Neptune, CA. Our goal is to capture 75% market share and become the go-to store for wealthy moms-to-be.
Your mission and vision
Talk about the purpose of your business and the big aspirational goal that you’d like to achieve. Going back to the Luxe Maternity example, the company’s mission and vision could be:
To serve the needs of well-to-do mothers-to-be through stylish clothes that make them feel beautiful and confident.
Create a bullet point lists of key goals that you want to achieve. In the case of Luxe Maternity, some of their objectives could be:
- To create a store environment that makes mothers-to-be feel comfortable, beautiful, and stylish
- To capture 75% of market share by 2020
- To gain a 50% profit margin after year 1
2. Business summary
After the overview, you’ll want to reveal more specific details about your business. In this section, you’ll talk about:
Company structure and ownership
Whether you’re the sole owner or have partners on board, this is the section to talk about these things.
You should also mention the legal and business structure of your company. Are you a sole proprietor or a corporation? Are you an LLC? Whatever the case, be sure to mention it in your retail business plan
You may not have secured your official premises at this stage, but you will want to give readers an idea of where you intend to set up shop. Luxe Maternity, for example, could mention that they’re planning to establish their store in an affluent part of town.
Take some time to talk about what you plan to sell. If you’re purely an inventory-based retailer, this is the part where you describe the products that you’ll have in-store, what makes those items special, and how you plan to source them. (Are you making them yourself or do you intend to purchase from suppliers?)
3. Market research
This component of your retail business plan describes your target market and customers. It should outline the size of the market as well as the demographic and psychographic profile of the people who would buy your products. Consider including the following information:
Size of the market
Do some research on how big the market is. Luxe Maternity, for instance, could look into the number of pregnant women in Neptune, CA each year, then make assumptions on the size of the market from there.
It’s also important to look at companies that sell similar products and cater to the same market. Who are they? Where are they located? This part of your plan should answers those questions.
Market trends and forecasts
Based on your market and competitive research, you’ll need to forecast where the market is going. How much will the market be worth a year from now? What about in 5 to 10 years? What are the notable news or movements in the industry that you can capitalize on?
Demographic information of your target customers
Talk about the demographic profile of your customers. Make sure to have the following information handy:
- Annual income
- Education level
- Where they live and work
Psychographic information of your target customers
You’ll also want to dig into the psychographic profile of your customers. What makes them tick? What would prod them to seek out your store? What are their burning needs? The answers to these questions will not only beef up your business plan, but it can help you determine the right positioning and strategy for your retail business.
4. Marketing plan
Now it’s time to talk about how you’re going to engage and sell to your market. This part of your business plan should outline:
Your position in the market
Discuss the niche that you plan to carve out. It may be helpful to come up with a graph that shows your exact position in the market, relative to your competitors. Here’s a sample graph of what Luxe Maternity’s positioning might look like:
Your competitive edge
Talk about your store’s unique qualities. Get clear on what sets you apart from competitors and how you plan to take them on.
This section should detail the specific branding strategy that you’ll implement, along with the style, language, and tone you plan to use in your messaging.
Discuss your pricing structure. Readers of your business plan would want to know the price ranges you plan to offer and the margins you intend to set. Your pricing structure should also be mentioned. For instance, do you intend to sell items at the suggested retail price? Are you looking to implement keystone pricing? Whatever the case, now is the time to discuss it.
This section should give readers an idea of how you plan to put your business out there. What advertising and marketing channels do you intend to utilize? How will you get people through the door?
Sales process and retail experience
You’ve talked about how you plan to get people to your store, now it’s time to discuss how you intend to convert them. Describe your retail experience and sales process. What will visitors see and do when they enter your store? How will you turn them from lookers into buyers?
5. Management plan
You should also talk about how you intend to run your business. This section should give readers insights into the people you will hire and what your management structure would look like. You should discuss:
This section should outline your organization’s hierarchy. Consider adding a flowchart showing what your org structure would look like — e.g., who sits at the top, who answers to whom, etc.
If you already have an executive or management team in place, you can use this section to talk about who the members are and their backgrounds. If you don’t have a team yet, you can still outline the roles that you want to bring on.
Discuss the different positions you need to fill. If you’re looking to hire managers and associates, mention how many people you need to bring on, what their job descriptions are, and the qualifications you’re looking for.
You should also discuss the compensation and benefits you plan to offer, as well as the staffing policies and procedures you’ll have in place.
This is one of the most important parts of your retail business plan. You need to outline how the company will make money and how much you’ll earn over a certain time period. This component of your business plan should include:
Capital and startup needs
Talk about how much money you need to get off the ground. This section should also detail where you intend to spend the capital. In the case of our fictitious example, Luxe Maternity could say that they need X amount of capital and plan to spend it on leasing expenses, hiring, inventory, etc.
The numbers don’t have to be exact, but they do need to make financial sense, particularly as you move into your more detailed sections like your break-even analysis and forecasts.
A break-even analysis should show the point at which your company will break even. Factor in your costs and sales and plot out when you’ll start to break even. This section will be most helpful if you created a chart illustrating your break-even analysis. Consider the following example:
You should also project your profit and loss over specific time periods. How much revenue will you earn in your first year of business? What about years 2, 3, 4, and 5?
Cash flow projections
Cash flow is critical to any retail business, so be sure to forecast how cash will flow in your company. Create a table explaining how much cash balance you’ll have for month 1, 2, 3, etc of your business, then use your projected sales to calculate cash flow.
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Creating a business takes work. There’s a ton of research involved, and you’ll have a fair amount of calculations and projections to make. But when done right, your retail business plan can set you up for success. A well-developed plan brings clarity in your business and can attract the funding you need to get started.
So don’t shy away from the work. Get down to business and starting mapping out your plan for success.
About Francesca Nicasio
Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.