It is prevalent to quote failures; many ‘experienced’ people claim that the important thing is to learn from the failures. We observe many businesses start operating and go bankrupt in a short period of time. The bankruptcy of huge retailers such as Forever 21 has also become common. You might be worried about failing a business idea, but let me tell you this: your business is not destined to fail. The secret behind a successful business is a carefully thought-out retail business plan. By analyzing the current market and tapping the needs of your target audience, startup owners will ensure stable growth and constant cash flow.
Steps to Develop Effective Retail Business Plan
The retail business plan also serves as a guide for investors, helping them decide which businesses are worth investing in. Hence, entrepreneurs need to pay strong attention to every detail. In this article, I will explain the essential steps to create an effective plan to help you build a comprehensive and well-thought-out retail business model. Plus, I will provide you with additional tips in each section.
Have you ever watched the Entrepreneur Elevator Pitch? The basic idea of this TV show is that potential entrepreneurs should explain their purpose to investors and convince them of its effectiveness only in 60 seconds. If they cannot prove the reliability of their ideas in this short period, the investors will not be interested in the further discussion of the concept.
Executive summary of a retail business plan acts just like an elevator pitch. It defines whether your plan is worth paying attention to or not. In this section, you should describe the key points, give quick insights to grab the attention of readers quickly. Otherwise, readers or investors will not be willing to continue going through the rest of the plan.
Tip: For a compelling executive summary, it is wise to use a strong hook that captivates attention. For instance, you can tap the importance of the need that your retail targets to satisfy. Alternatively, you can explain the whole business idea quickly with the help of positioning statement:
ABC is a contemporary fashion store and targets people establishing their presence with an extraordinary clothing style that goes beyond the established industry standards.
Also, it is a good idea to write an executive summary after owners finalize all other sections and have a clear vision about operations, staff, and inventory management.
This section covers many details of your business, including the legal name, location, and detailed description of goods or services offered. Entrepreneurs should explain to readers how they will provide these products, information about suppliers, and possible product line extension for the future. Also, you should include different types of products, such as the availability of sizes and styles.
Another element to add is the operational strategy of the company. For instance, explain the supply chain. Where and how will you get items? How will you ensure the constant flow of inventory requirements? Also, you need to show the organizational structure, including the teams, supervisors, managers, etc. Besides, the technological needs of your business should also be discussed. Acceptable payment methods or hardware needs for completing transactions are necessary to indicate. For instance, you can talk about your POS solutions and explain how it will enhance your payment operations, and support inventory management.
Tip; While creating the plan, try to use simple wording. Sometimes investors do not have enough familiarity with technical words related to the retail industry. Also, they might not want to spend too much time trying to understand your plan. Therefore, easy-to-read, everyday words will be more useful rather than terms.
All the decisions made for a retail business plan should have a reasonable explanation. Besides, managers need to connect those decisions to a research outcome that they identified in the pre-analysis of the market. Otherwise, investors will be suspicious of the rationality and trustworthiness of the plan. The research should involve the matters related to market, customer, as well as the competitors.
First, let’s start with market analysis. This research will reveal the average prices in the market and potential partnership strategies. Second, if you conduct customer research beforehand, it will be easier to identify the unsatisfied consumer needs. It is not wise to sell to ‘everyone.’ Exact target market description makes your plan look competent. For instance, you should indicate the age, gender, educational level, geographical location, together with the lifestyle and psychographic characteristics of your target customer. Next, entrepreneurs need to analyze their rivals. Who are the main competitors? What is your differentiation from others?
Tip: Most of us do not like bulky readings. Try to conduct extensive researches but do not include every detail of it to the business plan. The graphs, tables that do not contribute to decisions directly create unnecessary volume and distract investors. It is better to include these elements in the appendices part that comes after you finalize the plan.
The marketing strategy section of the retail business plan defines 4P’s- product, price, place, and promotion, together with positioning the brand. In this section, product details are explained in more detail. You need to indicate the source of the product or the packaging information here. Also, based on the market analysis, you can develop your pricing strategy. Will it be a premium selection of clothing, or is it for mass-market? Next, managers and owners should explain the place or channels through which they will sell products. Some examples of channels can be online websites, individual stores, or superstores with multiple brands.
The promotion of the brand also needs special attention as it is not easy to survive in the industry nowadays. Even if your products create great value, not communicating with your customers will negatively affect your sales. You need to decide how you will market the products. Email marketing, social media, press releases - any method of traditional and digital marketing should have a clear explanation behind it. Besides, you should indicate how these marketing strategies align with your niche and the goals of the company. Lastly, the positioning statement of the brand should include information such as the exact demand it satisfies, target market, main rivals, and differentiation points from them.
Tip: Try to be creative in marketing and sales strategies. The robust plan should have fresh ideas. In this way, it will attract more customers and create higher sales. Additionally, try to justify the costs of marketing. It is not advisable to spend much on marketing without monitoring the expenses and indicating the key performance indicators.
Another section which will have a higher weight in the considerations of investors is the financials. Entrepreneurs might have excellent, creative, and innovative ideas. However, if they cannot prove the profitability and long term returns to investors, they will not be able to get funds. All the before-mentioned sections create a smooth workflow and effective operations in retail businesses. Without financial projections, it is highly probable that costs exceed profits, and businesses fail.
Managers and owners have to estimate the amount of capital they need to establish or run business. Plus, they should show how they will use those funds. Some useful concepts for financial projections are break-even analysis, demand forecasts, and accounting reporting sheets.
You should also make estimations of the business’s future revenue for several years as the profits might be low due to upfront costs.
Tip: Sometimes, people try to inflate the projections so that they get funds. It is an unethical practice that can have severe consequences in the future. If a retail business plan is stable, owners and managers will generate high cash inflows for their retail stores.