Starting a retail business has been one of the harder ways to start a business, and the statistic that “98% of businesses fail in their first year” has a lot to do with this business model.
Here’s the reason why… Retail businesses usually require a large sum of money to start. I’m going to share a method with you for starting a retail business that isn’t that costly, but let’s first look at how retail businesses were usually operated before.
Other than having to pay for your monthly lease, you have to worry about hiring employees, hiring a manager (if you don’t want to be at the store every day), buying stock, getting a merchant service and computer system… not to mention having to worry about your employees taking you for whatever you got in your stock or your cash register.
All of these risks and expenses end up doing a number on the business owner if they’re not prepared to handle them… and unfortunately, 98% of business owners never think of the true importance of handling these things.
The basic rule of thumb is, if you’re trying to start a retail business, you need to have AT LEAST 6 months worth of your monthly overhead saved up and available for use.
The interesting thing is though, the majority of these obstacles can very easily be overcome… IF you think about them in advance and prepare yourself for each one of them.
And to bring this into better perspective for you, I’m going to tell you a story about a very well known business person by the name of T. Harv Eker.
He’s known for a wide array of accomplishments, but this one is going to be specifically about when he started up his first business, Fitness Land.
Fitness Land was a retail exercise equipment shop that systematically sold fitness equipment to people. With his system, he was able to open up 11 locations in less than 3 years and sold half of his shares to the Heinz corporation (the ketchup people) for $1.6 Million.
Here’s the full story…
When Harv decided to start up Fitness Land, he was dead broke. He had absolutely no money to start his business with… so he borrowed $2,000 from one of his credit cards to pay for the 1st month and last months’ rent on his retail space.
And since he didn’t have any money for his products, he went to the product manufacturer with a very clever offer.
He asked the manufacturer if they could lend him one of their machines for a couple of hundred dollars and he promised that he would come back with a large order soon.
So the manufacturer decided to try it out, and then lend him the one machine. Here’s what Harv did with that one machine… (this is the power of creativity)
He had about 600 square feet of space to work with, so what he did was he cut off the majority of the space so that people couldn’t access it. He put the machine behind the line that people couldn’t cross, put up a sign (which was just a piece of cardboard with permanent marker writing on it), and anyone who came in his store interested in the product would see a demonstration of how it worked.
Harv would get on the machine which was behind the dividing line, showed the potential customer how it worked and if they were interested here’s what he would say…
“Well, as you can see, we only have this one machine in stock because we JUST sold out… so here’s what I can do for you. There’s a shipment coming in tomorrow and you can have one of those machines for the full price of $567… or you can reserve one from the next shipment for $100 but that will come in two weeks”
So naturally, most people wanted the earlier shipment. He would collect full payment BEFORE he placed the order with his manufacturer and delivered the product to the customer. (This concept is very important… It’s called “no receivables”. Collect payment BEFORE you deliver your product)
He told every person who wanted the machine to come on Saturday between 1pm – 2pm to pick it up.
Now, here’s where the cool part comes in…
When the people showed up to pick up their equipment, they found themselves in the middle of a battle-zone type environment, trying to find an opening in the large crowd of people so that they can pick up their stuff. And I’m willing to bet that 100% of all those people were thinking in the back of their minds “Wow… I’m really glad I made it on time to get mine. This MUST be a good product if they have THIS many people here”
And everyone who hadn’t bought the product yet, was looking at the crazy crowd of people stuffed in a tiny 600 square foot space, thinking, “What the hell is going on over there? I should check it out once the dust settles”
Those two thought processes were EXACTLY what Harv was trying to build. An intense curiosity for what he was selling.
It gets better though…
Within a few weeks, the police told Harv that he couldn’t do business if he didn’t have a few police officers there to direct the traffic in and out of his little store. Can you imagine what that does for your marketing? To have police officers directing traffic in and out of your store?
So using this same system, he brought in several different pieces of exercise equipment and sold them all like clockwork. And seeing that his system was working, he decided to open up a similar location in a different part of town and have his managers run it.
Using this simple, yet ingenious system, he was able to open up 11 locations and the rest is history…
There are some amazing golden nuggets in this specific article. My recommendation is for you to go back and read the whole thing again… take notes where necessary.
If I were to ever start my own business in retail, I would follow this system. In my opinion, as long as you’re willing to put in the work, there really is no way that this system can fail a retail business.
You DON’T need a lot of cash laying around to start a retail business. All you need is some ambition and hard work.