Having experience and knowledge of the business in mind is one of the factors to consider when setting up a retail business. Lack of that experience can reduce the success rate of the business, since you won’t be able to deal with the problems of that branch of retail. Therefore, it pays to work as an employee first. The branch of retail trade contemplated is another factor to consider.
You have to take into account if your financial sources are adequate and if you know enough about the business. For example, to set up a coffee shop, you might need something like $200,000, while to set up a small concession stand, you might only need $2000. On the other hand, there are other factors to consider as well and they are numerous. in number, such as the location of facilities, capital adequacy, sources of supply of goods, the law of comparative advantage, and lastly, laws and regulations.
To decide on the location of premises or on a particular area, for example; in the center of the city or in any urbanization or even on which side of the street to set up a place and for this you have to take into account factors such as:
• The “demand” for your product. For example, if you are thinking of opening a jewelry store, it would be more profitable to have one in town. The market is much larger since people from the suburbs and the city converge there.
• The “competition” of stores that sell similar products. Normally, it would be wise to stay away from areas where there is competition, unless you can offer better service at lower prices or demand expands in the near future.
Rents in the city would certainly be higher than in the suburbs. If you intend to buy the premises instead of renting it, you will surely need more capital. If you don’t have the necessary capital, you can get it through friends, family, banks, or other financial institutions. Examples, financial companies.
It is important that you know which wholesalers to go to. Some may give better discounts and others may give longer credit. Does the law of comparative advantage make it more profitable to stay in your current job earning your monthly salary plus interest on the savings you have accumulated? Remember, if you become a retailer you have to give up your salary and interest on your savings. Therefore, your net profit from the retail sale must be greater than the amount you have given up.
Laws and regulations are another factor to consider when setting up a retail business. You should do a study of the business laws regarding the line of retail you want to venture into. Do you need to get a license? Can you trade the goods specified and in the place selected by you?
