Business utility costs

Start Up Costs for Running a Retail Business

The greatest cost in lauching a retail store is the purchase of inventory.The greatest cost in lauching a retail store is the purchase of inventory.

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Different types of retail businesses will incur different types of start-up costs due to a diversity of inventory needs. Much of the financial calculation is based on whether you will run a brick-and-mortar business or an online venture. There are, however, typical start-up costs associated with setting up and running many aspects of a retail operation that all business owners will need to factor into their short- and long-term budgets.

Business Planning

A business plan serves as a road map for planning every detail of how a retail business will be launched and is a necessary tool for applying for business loans. A professional can be hired to write a business plan on behalf of a retail business. Anticipate fees ranging from $75 to $150 per hour. Another option is to purchase business plan writing software, which ranges from $50 to $250.

Business Bank Account

You can open a business account with as little as $50 in most banks, though the more money you are able to deposit, the better bank fees you can negotiate.

Licensing and Permitting Fees

Different licenses and permits will need to be obtained prior to start-up. These vary from state to state. Fees can be estimated by visiting your state's website and following links to departments of business, industry, licensing and permitting.

Business Entity Formation

After deciding what type of incorporation status best meets your needs, you can file incorporation paperwork by yourself, or hire a professional to do the filing for you. Costs range from $150 to $300.

Insurance

An insurance company that specializes in retail industry insurance can provide you with an insurance quote based on the size and scope of your retail business. Expect to carry general business, liability and worker's compensation insurance at a minimum. You may also consider insurance against theft and/or damage of retail inventory. Expect annual insurance premiums to range from $500 to $2, 000. If you run an online retail business, your insurance needs may be reduced, based on whether you have a warehouse location and employees or you work as a drop-ship merchandiser.

Professional Services and Employee Training

Attorneys and accountants can help negotiate paperwork and contractual agreements. Budget $500 to $1, 000 for basic accounting consultation and as much as $200 to $400 an hour for attorney fees. You should also anticipate the hourly wage paid to employees for pre-opening training.

Storefront and Utility Service

The cost of leasing a storefront will typically be based on a per-square-footage rate, which varies from city to city. A commercial real estate professional can help you determine pricing in your area. Required rent deposits are usually equal to the cost of one month's rent and utility deposits typically begin at $100 per utility. If you run an online retail business as opposed to a storefront, you will not likely have the overhead associated with a brick-and-mortar operation. You will, however, have additional fees related to web hosting and establishing and maintaining an online merchant account. Depending on the complexity of your product, anticipate these start-up costs to range from $750 to $1, 500.

Promotional and Collateral Materials

To promote your business and project a professional image, create, at minimum, a logo, professional signage for your building, if applicable, a website, letterhead, custom invoice forms and business cards. Anticipate $500 to $1, 500 for basic printing and promotional needs.

Technology

You can buy a simple cash register at office supply stores for as low as $100. Most credit card companies will provide you with card processing equipment for free and will charge a transaction fee each time the machine is used. Online merchant accounts work in a similar manner.

Inventory

The type of retail inventory you need will be based on the merchandise you offer. According to tax and accounting professionals at Chicago-based PFS Financial Services, the average cost for filling a 500-square-foot mid-range retail store is $20, 000. This cost can be substantially reduced if you are an online drop-ship merchandiser.

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