We frequently get e-mail questions from people who want to open their own store. They all have great ideas, lots of heart, and great enthusiasm... they seldom have much experience.

Since folks ask, I'll offer some comments, tips and experiences on the subject of opening your own store.

Let me start by saying that I'm not an expert. But I have started and run several businesses and I do have opinions.

You should also understand that there are some "cold and cruel" facts about starting a business. It's great fun thinking about being your own boss, but the fact is that most small businesses fail within their first few years. It's easy to dream... it's hard to make it work.

Business definition:

Lets start by defining what we're going to talk about here: small gift and craft stores. There are many variations on this theme so let's refine the definition as follows:

The shops we're familiar with typically occupy a small storefront with between 1,000 and 2,000 square feet of space. Most operators will lease or rent space, a few folks will buy their building. In some cases a person will use property they already own.

The shop will usually be open six days a week during normal business hours. During the fall "gift season" they may be open seven days a week and some nights.

In some cases these are family businesses with both "mom and pop" working. More often, "mom" will run the store alone and "pop" will have a regular day-job. In other cases, several women will get together to open a store. Probably because we're talking "gift and craft" shops, these are most commonly owned and run by women.

Most stores will be staffed by one or two people at a time. Usually it will be "mom" with a part time helper. In cases where several women get together, they can share the load and each work a few days. Once a store is established, it may well grow to have a few more employees.

Business model: Consignment vs. Wholesale:

There are two models for gift shops. The traditional store is one which buys their stock at wholesale and resells these products to the public. The other model is a consignment store. In that case, crafters and artist will place their work at the shop on consignment. They're paid only if the items sell.

Shops which buy their stock at wholesale need more operating cash than a consignment shop. Most vendors require that you pay for merchandise at the time it's ordered. Once you've established yourself, you may be given terms and allowed to pay up to 30 days after ordering.

Consignment shops have the advantage of not needing any cash to get started. In fact, most consignment shops will require artist to pay a small monthly fee just to have their work shown in the shop. When the items sell, the shop owner is paid a commission on the amount of the sale.

Craft malls:

A variation of the consignment shop is the "craft mall". In these cases the store rents space to the crafters. The monthly fees are usually higher than a consignment shop, but there may not be a sales commission. Some "malls" may require crafters to work a shift as part of the deal.

Getting Products:

If you're going to open a store then you need something to sell. That's not quite as easy as you may think. If you want to buy wholesale then you have to find vendors who will sell to you. Many suppliers will want some assurance that you're a real store. They may have minimum initial orders and other requirements.

If you're going to open a consignment shop or a craft mall, then you'll have to recruit crafters to put their work in your place. You can find crafters by frequenting craft shows and bazaars. Make up a printed flyer and a business card that you can pass out to likely candidates.

Actually, it's not hard to get crafters... what's hard is getting quality crafters. Be prepared to turn people down. Practice a good "line" for doing this. Having an established fee structure often helps in this area. Amateur crafters often don't understand the cost of business. Many think that it will cost them nothing to sell in the shop.

Once you get your crafters, you have to keep in touch with them and feed them ideas. Too many make just one thing. That can get stale over time. They need to think seasonally and have different things for each time of year.

The biggest problem with consignment craft sales is simply getting product to sell. You can plan wholesale and buy in advance from a broad selection of products. With consignment, the crafters are in the drivers seat, not you. It can be very scary to have Easter show up and you have no bunnies in the shop. It doesn't help to have your crafters say "Oh, I was busy this spring and just didn't get around to doing any Easter... I'm planning on doing more for Christmas".

Location:

If you're going to open a store, and you don't already own a building or have access to one, then finding a location is your first job.

When you find a good looking location, you need to evaluate it in real life; you need to park your car nearby for a few hours on various days of the week and watch the traffic. Notice the amount of traffic, the ease of parking, visibility of the location, etc.

It's important to think about your location and what it takes to physically get a shopper to come in. Separate buildings on a main street are very attractive for some types of businesses. For others it may not be so.

Look for areas with shoppers on foot. Stores in shopping malls have an advantage because shoppers come to the mall and walk. It's very easy to turn into a storefront and just browse. If you are in a free standing building on a major street, your visitors must pull in, park and come into your store. They need a good reason to do that.

Downtown areas, or neighborhood shopping districts are proving to be a good place for shops. There's a tendency to think that you don't want to be close to your competition. In fact, a small area with a number of arts, crafts, antique and other small shops is often a very good location. Shoppers will come to the area and walk from shop to shop much as they do in a shopping mall.

The hard cold facts - MONEY:

You need to think about several other things before opening the store. Number ONE is the cost of doing business. Take your rent, utilities, trash, snow removal, furnishings, etc. There are lots of little things that come up, so add 20% to whatever number you come up with.

And don't forget insurance. You'll need to cover your merchandise, including consignment goods, against fire at the least. Your landlord will probably require a comprehensive policy to cover slip and fall injuries. If you have employees you'll probably need worker's comp insurance too.

Credit cards:

You'll almost have to take credit cards if you have a storefront. The fact of the matter is that the public expects it.

Being able to accept credit cards is not automatic. You'll have to find a clearing house that will service your credit card sales.

Start with your bank. Most banks will have a credit card plan of some type. If your bank doesn't directly service your cards, they'll probably have an arrangement with a third party to do this. You may also find merchant associations and other groups that you can join and get credit card servicing as a benefit.

The thing to understand about credit cards is that they cost YOU. Anticipate a startup fee of some type. You may have to rent or buy a card machine and it may require a separate phone line. Most plans charge a monthly service fee. And count on it, everyone will take a percent of the action.

Don't be surprised if it cost between $250 and $500 to get set up for credit cards. Anticipate at least $25/month service charges. And then count on anywhere from 3% to 12% per transaction as a "discount fee" that they take.

Legal considerations:

In most areas there are laws and rules governing business. If you are selling products you'll most surely need a sales tax license. If you make up a name for your business you'll need to file an "assumed name" with your county.

Get good advice:

The rules are different around the country. It's important that you get good advice before you get in too deeply. Retaining a CPA or an attorney is a very good investment.

Don't be shy about asking advice of other shop owners. Some will be reluctant, some may be offended, but MOST owners love to talk business and will be willing to share their experiences with you.

Advertising:

At least a little bit of advertising is essential. People have to know you're in business, what your hours are, what you sell, how to contact you, etc. The problem is that there are just too many places to advertise. It difficult to pick the best place for your store to be seen. It's easy to spend a ton of money.

Your Building may be the most important advertisement you have. That's what people will see first when they visit. You must be easy to find. Decorate the building, have your signs professionally done. Make sure everything is visible and attractive.

Stationary and Business cards are next. Come up with a logo and theme. Follow through on everything with that theme. Homespun Peddler had an artist come up with our "peddler guy". We used him everywhere. Make sure that your name and logo appear on everything you send out. Get a rubber stamp and stamp every paper bag.

When you get your web site, be sure that the URL is on every piece of paper, every ad, every sign. (More on web sites later.)

Yellow Pages ads are the easiest, most universal, and most important form of outside business advertisement. If you are not in the yellow pages, some people won't consider you a real business. Vendors you want to buy product from will often look you up in the phone book to see that you're legitimate.

Fortunately, a yellow pages ad is easy to get. You'll want a business phone line anyway, and the basic ad comes free with that. Of course, the phone company rep will try to convince you that you need more. Like a FULL PAGE AD! (Guess who wins with THAT expense.)

Before you even talk to the phone company, you should study the phone book for your area. See who your competition is, where they're located, what types of ads they run. See what section of the yellow pages they're in.

When you talk to the phone company, have the book in front of you. Ask the sales agent for examples of what they want to sell. They'll give you page numbers to look at.

Web Sites are becoming almost as important as a yellow pages ad. As more and more people are getting connected, they are going to the web almost as frequently as they do the yellow pages. Like the yellow pages, consumers just expect a serious business to have a web site.

Web sites may be the most cost effective form of advertising. You can put a LOT of content on a web site for a very small cost. It's easy to change, it's available world wide, and it's up 24 hours a day.

The thing a web site cannot do is force people to see it. A newspaper ad is almost assured to get in front of some people. Even if they're not looking for it, the ad is hard to ignore as they read the paper. A person has to take action to see your web site. They must want to find you.

The most effective web sites are the ones that have outside advertising. Put your URL on every sign, every piece of paper, every receipt, every print ad you run. Do not rely on web search engines to tell people how to find you. It just doesn't work like that. Make sure your web site URL is on everything!

One other note on web sites: get professional help from an established web site developer. Web sites are fairly easy to set up which means that almost anyone can call themselves a web developer. That doesn't mean they know what they're doing, or that they will be around next month.

Newspaper ads can be effective, but you have to be smart. A little 3 inch block that appears just anywhere in the paper may not get noticed... unless you run it continuously. Local papers will do special sections and get many companies to advertise at one time. That can be good. Be smart and buy your newspaper ads carefully. Make sure your web site URL is shown!

Specialty Ad Papers like the Country Register can be very useful and cost effective. The ones we're familiar with list almost every craft shop in the state. The paper is divided geographically and it's well indexed. In our area you just have to be in that paper! Make sure your web site URL is shown!

Radio and Television ads may be worth looking at, but they can be expensive and you may not end up in a good time slot. Cable systems often offer packages where your spot will run on a group of their "900 channels". The other side of this is that cable has made "channel surfing" into a sport. People don't stick around to watch those ads unless the ad is tied to a program or channel they want to watch. Make sure your web site URL is shown!

Associations:

Think about joining the Chamber of Commerce, a local merchant's group, or similar groups. Your local Chamber is one of the best starting points. See what benefits they offer with membership and how they can help promote your business. Just remember that nothing is free... there will be fees and costs.

Do some networking. Find and visit any doll clubs, sewing circles, quilt guilds, craft groups, etc. Make up a brochure and take them to every bazaar or craft show that you can. Pass them around to invite both crafters and shoppers. Always have a handful of business cards handy. Make sure your web site URL is shown!

Homework and Analysis:

After you've at least thought about all the points mentioned here, write down all the costs you've identified and add them up. Now figure out how much you'll have to sell to cover the costs. Next, figure how much you'll have to sell to have some money left over.

Once you have the dollar requirements in hand, divide that by the number of days you expect to be open each month. That will give you the average daily sales that you need.

You can continue this process to whatever level you want. What you really want to figure out is how many customers you need to see each day and how much they need to spend. And keep in mind what you're selling. If it's $5.00 trinkets, you'll need lots more customers than if you're selling $500.00 appliances.

The last thing to consider, and the thing most people forget, is the cost of YOUR TIME. You have to decide if, after all expenses, you can have enough left over to equal what you'd get working a minimum wage job.

Conclusion:

It's great fun owning a shop and being your own boss. But the bottom line is, do you want to make money or do you want a hobby. If you know the answer to that, and you're comfortable with that answer, then you'll be happy with your business.

For more information send e-mail to the Peddler.

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