How to Start a

Brick & Mortar Retail Business

SCORE Chapter One – Washington DC Metro Area

washingtondc.score.org 202-619-1000

SCORE Services

SCORE, a national, non-profit Association with over 10,500 volunteers in 364 chapters, is a resource partner of the US SBA. SCORE Chapter One has 60 Mentors, with diverse business and industry backgrounds, across the D.C. Area.

SCORE offers the following services:

• Low-cost workshops - washingtondc.score.org

• Individual free one-on-one counseling/mentoring

• Online workshops, tools, and more at www.score.org

SCORE teams provide counseling to assist you to:

• Increase the value of your business

• Identify and solve operating problems

• Recognize and capitalize on new business opportunities

• Develop business plans

• Find sources and qualify for financing

Disclaimer

SCORE does not provide legal advice.

The information contained in this presentation is for

general guidance on matters of interest only.

It is not a substitute for consultation with professional

accounting, tax, legal or other competent advisors.

Before making any decision or taking any action you

should consult a professional.

Richard Rose – SCORE Mentor

40+ Years in Retail Home Furnishings

President & CEO - Town House Furniture

Commercial Landlord – 30+ Years

B.S. University of Maryland

SCORE Certified Mentor - 10 Years

A Brick & Mortar Business is High Risk.

Do you have what it takes? • Adequate capital

• Ability to manage people

• Experience in the field

• Strong work ethic

• Effective time management skills

• Ability to multi-task

• Practical organizational skills

• Willingness to ask for input from others

Workshop Objectives

• Develop an understanding of the Important Issues to

consider in a brick & mortar business.

• Develop an understanding of the Right Process to follow

in starting a brick & mortar business

• Develop an understanding of different strategies used to

Mitigate Risk.

Prepare To Get Started

Create a Professional Team of Advisors

Contact Trade Associations

Visit Trade Shows & Conventions

So let’s begin!

Draft a First Class Business Plan

Your Business Plan will be a

road map for how you will

successfully reach your

goals.

You should write it yourself

rather then using a generic

template.

It must reflect your vision and

unique focus.

Start With a General Company Description.

Questions to Answer

• What business will you be in and who are your customers?

• What industry are you a part of.

• What kind of location will you have and how will it be designed?

• How large a space will you have?

• What are your company’s most important strengths?

• What specific factors will make your company succeed?

• What experience and skills do you personally bring to the company?

• What are your goals and objectives?

• What kind of Ownership Entity will you have?

What Are Your Products and Services?

• Who are the vendors that will

supply your inventory?

• What factors will give you a

competitive edge?

• Do you have proprietary products?

• What is your level of quality?

• What is your pricing?

• Show a few photos.

Describe in depth your

Products and Services.

What Is Your Operations Plan?

Day-to-day Operations

• How many employees will you

have?

• Identify employee positions,

duties, schedules.

• What are your hours and days of

operation?

• What is your estimated employee

payroll by position with totals?

• Explain your general operations,

policies and procedures.

Do Your Marketing Research.

What Is Your Marketing Strategy?

Advertising, Public Relations & Social Media

What Are Your Startup Costs?

Essential $$$ Considerations -

• Build-Out

• Leasehold Improvements

• Fixtures & Equipment

• Computer Hardware & Software

• Signage

• Licenses and Permits

• Professional Fees

• Initial Inventory

• Working Capital plus Reserve Fund

What Are Your Operating Costs?

• Payroll

• Rent

• Insurance

• Marketing & Advertising

• Payroll Taxes

• Professional Fees

• Loan Principal & Interest

• Travel Expenses

• Utilities

Monthly Cash $$$ Requirements -

What Are Your Sales Projections?

What are your Assumptions?

What Are Your Sources of Capital?

Write an Enticing Executive Summary

“What customer problem are you

solving in a unique way that your

customers are willing to pay for?”

-Hal Shelton

Ira Wolpert – SCORE Mentor

50+ Years as a practicing Attorney specializing in issues related to all forms of business.

Bankruptcy Trustee

Certified Bankruptcy Mediator

B.S. Cornell University

LLB Georgetown Law Center

SCORE Certified Mentor for 4 Years

The Organizational Options

Sole Proprietorship

Most Common Entity -

One Owner

Advantages:

• Owner is in complete control.

• Easiest and least expensive to

organize.

Disadvantages:

• Personal liability.

• Difficulty obtaining financing.

General & Limited Partnership

Two or More Persons Joining Together –

With or Without an Agreement.

Advantages: • Easy to establish.

• Profits & taxes to each partner

based on ownership interests.

Disadvantages: • Personal liability for yourself

and partner(s).

• Loss of one partner may

dissolve business.

• May be difficult to end the

relationship.

Limited Liability Company - LLC

Independent From Its Owners

Advantages: • Personal assets protected. • Profits and losses pass through to owners. • No limit on number of owners. • Ease of operations. • Fiduciary responsibility to each member.

Disadvantages: • Expense in establishing limitation of

operations through Operating Agreements. • May require legal assistance. • Fiduciary responsibility to each member.

Subchapter S Corporation

Independent From Its Owners

Advantages:

• Personal assets protected

• Avoids double taxation of corporate income.

• A general corporation.

• Special tax status.

Disadvantages

• Must be a domestic corporation.

• Shareholders must be U.S. citizens.

• Expensive to operate.

C-Corporation C-Corp

Independent From Its Owners

Advantages: • Personal assets protected.

• Ownership can change with transfer of stock.

• Can raise sash through sale of stock.

• Control by majority stockholder.

• No fiduciary duty to minority stockholders.

Disadvantages: • Expensive to organize.

• Legal formalities required to operate.

• Federal and state regulations.

• Double taxation of profit distributions.

• Control by majority stockholder.

• No fiduciary duty to minority stockholders.

Umm….

What liability is limited In a

Limited Liability Company?

How to avoid personal

liability when signing for

your LLC.

Why Do You Want a Partner?

The Most Important Characteristics:

Commitment, Competence, Compatibility

The Operating Agreement

• What is it?

• Why is it needed?

• Does a Sole Member LLC need an

Operating Agreement?

• What happens in the absence of an

Operating Agreement?

• Do I need an Attorney to write this

Agreement?

Operating Agreement Issues

• Initial Capital Contributions

• Additional Capital Requirements

• Admission of New Members

• Distributions of Tax Allocations

• Day-to-Day Management

• Indemnification

• Voting

• Transfer of Interests

• Withdrawal & Buyout

• Non Compete & Confidentiality

• Resolution of Disputes

• The Role of Counsel

Operating Agreements Resolve Conflicts!

10 Minute Break

How to Start a Brick & Mortar Retail Business

Selecting the Right Location

Retain a Leasing Agent

• Review your criteria.

• Assist in finding a space.

• Arrange visits to spaces.

• Present your offer.

• Negotiate your deal.

• Be paid by the Landlord.

Your Leasing Agent Will:

Determine What’s Right for You

Types of Retail Space

• Mall

• Town Center

• Shopping Center

• Commercial Zones

• Strip Centers

• Industrial Space

Analyze the Space

Consider . . .

• The Size

• The Cost

• The Traffic Count

• The Demographics

• The Condition of the Premises

• Proximity to Competition

• Adequate Parking / Other Transportation

• Revise Your Business Plan!

Retain an Architect & General Contractor

• Before or during the LOI process, you need to

consult with an Architect and/or General

Contractor.

• Prepare a preliminary plan drawing.

• Check out existing systems.

• Your General Contractor should provide an

estimate of build-out costs.

• Be sure you understand the process and time

line for obtaining Building Permits and an

Occupancy Permit.

The Time Line

• Finding the Right Space 1.0 Month

• Obtaining Contractor’s Estimate 0.5 Month

• Negotiating the Deal - LOI 1.5 Months

• Negotiating & Executing the Lease 1.0 Months

• Pre-Lease Execution 4.0 Months

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - -

• Obtaining Architectural Plans 1.0 Month

• Obtaining Building Permits * 2.0 Months *

• Construction Time 2.0 Months

• Permitting and Construction 5.0 Months

Negotiate the Deal

• Offers are typically in the form of a non-binding Letter of Intent (LOI) prepared by your Leasing Agent.

• The Landlord will ask for your Business Plan and/or Financials.

• If interested, the Landlord will negotiate the terms of your offer.

• Your Leasing Agent will negotiate on your behalf.

Now that you understand the build-out & time line,

you’re ready to make an offer.

The Important LOI Issues

Engage an Attorney

• The Lease Agreement is prepared by the

Landlord’s Attorney in favor of the Landlord.

• The terms agreed to in the LOI are

incorporated into the Lease.

• Your Attorney will review the Lease and

recommend changes and modifications.

• Your responsibility is to read the Lease

completely, understand it, and ask for

changes in your favor.

• And if negotiations go well, you will have a

Lease!

The Lease is Executed

The Dream Begins to Come Alive.

So much to do . . . So little time.

Construction Begins

Organizational Skills Will Be Essential

Credit Card Processing

Issues:

Fee Percentage

Fees by Unit

Deposit Time

Disputes

Equipment:

Buy or Lease

Design & Fixture the Interior

Stay Calm!

Selecting Vendors & Ordering Inventory

Finalize Your Marketing Plan

Advertising

Public Relations

Begin Your Social Media Campaign

Establish Policies That Save Time & Money

Employees

Now What?

Protect Your Business

You’re Almost There.

We Made It!

Questions?

Resource Listing

Richard Rose, SCORE Mentor

richard.rose@scorevolunteer.org

Ira Wolpert, SCORE Mentor

ira.wolpert@scorevolunteer.org

Score National: www.score.org

Score Local: www.washingtondc.score.org

SBA: www.sba.gov