Starting a retail business has been one of the most difficult 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.
This is why… Retail Businesses usually require a large sum of money to start. I am going to share with you a method of starting a retail business that is not that expensive, but first let’s see how retail businesses were operated before.
Aside from having to pay your monthly rent, you have to worry about hiring employees, hiring a manager (if you don’t want to be in the store every day), buying stock, getting a business service and a computer system… not to mention having You have to worry about your employees taking you for whatever you have in your inventory or at your cash register.
All of these risks and expenses end up hitting the business owner if they are not prepared to handle them…and sadly, 98% of business owners never think about the true importance of managing 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 of your monthly overhead saved up and available for use.
However, the interesting thing is that most of these obstacles can be overcome very easily… IF you think about them in advance and prepare for each one of them.
And to bring this into better perspective for you, I’m going to tell you a story about a well-known business person named T. Harv Eker.
He is known for a wide range of accomplishments, but this one will be specifically about when he started his first business, Fitness Land.
Fitness Land was an exercise equipment retailer that consistently sold exercise equipment to individuals. With his system, he was able to open 11 stores 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 Fitness Land, he was completely broke. He had absolutely no money to start his business…so he borrowed $2,000 from one of his credit cards to pay the first month and last month’s rent on his commercial space.
And since he had no money for his products, he went to the manufacturer of the product with a very smart offer.
He asked the manufacturer if they could latest he gave her one of his machines for a couple hundred dollars and promised to be back soon with a large order.
So the manufacturer decided to give it a try and then lent him a machine. This is what Harv did with that machine… (this is the power of creativity)
He had about 600 square feet of space to work in, so what he did was he cut off most of the space so people couldn’t get to 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 written on it), and anyone who walked into his store interested in the product would see a demonstration of it. how did it work
Harv would get on the machine behind the dividing line, show the potential customer how it worked, and if they were interested, here’s what it said…
“Well, as you can see, we only have this machine in stock because we JUST sold it…so here’s what I can do for you. A shipment will arrive tomorrow and you can have one of those machines for the full price of $567. ..or you can reserve one of the next shipment for $100 but that will arrive in two weeks”
So naturally most people wanted the earlier shipment. You would collect full payment BEFORE placing the order with your manufacturer and delivering the product to the customer. (This concept is very important… It’s called “no accounts receivable”. Collect payment BEFORE delivering your product)
He told all the people who wanted the machine to come on Saturday between 1 pm and 2 pm to pick it up.
Now, this is where the cool part comes in…
When people showed up to collect their equipment, they found themselves in the middle of a battle zone type environment, trying to find an opening in the huge crowd of people so they could collect 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 so glad I made it in 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 packed into a tiny 600 square foot space, thinking, “What the hell is going on in 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 about 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 some policemen there to direct traffic in and out of his little store. Can you imagine what that does for your marketing? Have police officers direct traffic in and out of your store?
That’s great.
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 worked, he decided to open 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 11 locations and the rest is history…
There are some amazing gold nuggets in this specific article. My recommendation is that you go back and read it all over again…take notes where necessary.
If I were ever to start my own retail business, I would follow this system. In my opinion, as long as you’re willing to put in the work, there’s really no way this system could fail in a retail business.
You do NOT need a lot of cash to start a retail business. All you need is some ambition and hard work.