Buying

When buying merchandise for resale, you need to answer questions such as:

Who sells the line to retailers? Is it sold by the manufacturer directly or through wholesalers and distributors?

What delivery service can you get and must you pay shipping charges?

What are the terms of buying?

Can you get credit?

How quickly can the vendor deliver fill-in orders?

You should establish a source of supply on acceptable terms for each line of merchandise and estimate a plan for purchasing as follows:

 (1) How many days or weeks does it take the supplier to deliver the merchandise to your store.
(2) Who pays? You, the buyer? The supplier? Freight or transportation costs are a big expense item.
(3) What is the supplier's policy on fill-in orders? That is, do you have to buy a gross, a dozen, or will the supplier ship only two or three items? How long does it take for the delivery to get into your store?

Stock Control

Often shoppers leave without buying because the store did not have the items they wanted or the sizes and colors were wrong. Stock control, combined with suppliers whose policies on fill-in orders are favorable to you, provides a way to reduce "walkouts".

The type of system you use to keep informed about your stock, or inventory, depends on your line of merchandise and the delivery dates provided by your suppliers.

Your stock control system should enable you to determine what needs to be ordered on the basis of: (1) what is on hand, (2) what is on order, and (3) what has been sold. Some trade associations and suppliers provide systems to members and customers, otherwise your accountant can set up a system that is best for your business. Inventory control is based upon either a perpetual or a periodic method of accounting that involves cost considerations as well as stock control. When you have decided what system you will use to control stock, estimate its cost. You may not need an extensive (and expensive) control system because you do not need the detailed information such a system collects. The system must justify its costs or you will just waste money and time on a useless effort.

Stock Turnover

When an owner-manager buys reasonably well, you can expect to turnover stock several times a year. For example, the stock in a small camera shop should turnover four times to four and a half times a year. What is the average stock turnover per year of your line of merchandise? How many times do you expect your stock to turnover? List the reasons for your estimate.

Behind-the-Scenes Work

In a retail store, behind-the-scenes work consists of the receiving of merchandise, preparing it for display, maintaining display counters and shelves, and keeping the store clean and attractive to customers. The following analytical list will help you decided what to do and the cost of those actions.

First list the equipment (for example a marking machine for pricing, shelves, a cash register) you will need for: (1) receiving merchandise (2) preparing merchandise for display, (3) maintaining display counters and shelves, and (4) keeping the store clean. Next list the supplies you will need for a year, for example, brooms, price tags, and business forms.

Use this format to figure these costs:

Who will do the back-room work and the cleaning that is needed to make a smooth operation in the store? If you do it yourself, how many hours a week will it take you? Will you do these chores after closing? If you use employees, what will they cost? On a worksheet describe how you plan to handle these tasks. For example:

Back-room work will be done by one employee during the slack sales times of the day. I estimate that the employee will spend _______ hours per week on these tasks and will cost ________ (number of hours times hourly wages) per week and _____ per year.

I will need ________ square feet of space for the back-room operation. This space will cost _______ per square foot or a total of ________ per month.

List and analyze all expense items in the same manner. Examples are utilities, office help, insurance, telephone, postage, accountant, payroll taxes, and licenses or other local taxes. If you plan to hire others to help manage, analyze these salaries.

How Much Money Will You Need

At this point, take some time to think about what your business plan means in terms of dollars. This section is designed to help you put your plan into dollars.

The first question concerns the source of dollars. After your initial capital investments in a retail store, the main source of money is sales. What sales volume do you expect to do in the first twelve months? Write your estimate here ________, and justify your estimate.

*Transfer your figures from previous worksheets.

Whether you have the funds (say in savings) or borrow the money, your new business will have to pay back start-up costs. Keep this fact in mind as you work on estimating expenses and on other financial aspects of your plan.

Expenses

In connection with annual sales volume you need to think about expenses. If, for example, you plan to do sales amounting to $100,000, what will it cost you to do this amount of business? How much profit will you make? A business must make a profit or close.

The following exercise will help you to make an estimate of your expenses. To do this exercise you need to know the total cost of goods sold for your line of merchandise for the period (month or year) that you are analyzing. Cost of goods sold is expressed as a percentage of sales and is called an operating ratio. Check with your trade association to get the operating ratios for your business's. The following is the format for an Income Statement with operating ratios substituted for dollar amounts.

Finding the Cash Required to Starting a New Small Business. Now that You have calculated your first capital requirements, where
are you going to receive the money? The primary source is the personal savings. Subsequently relatives, friends, or other
individuals may be found who would like to"enterprise" their savings in your business. Before obtaining too large a share of money
from external sources, remember that you should have private control of enough to assure yourself possession.

After you can show that you have carefully exercised your fiscal Requirements and can demonstrate experience and integrity, a
lending institution may be willing to finance part of your working requirements. This could possibly be done on a short-term basis
of from 60 days to up to one year. Any institution that has money to give is primarily concerned with security. The security may
be a business asset, but when you're just starting the best safety is usually your home or any other private advantage.

The second thing the lender will want to see is some sort of Business program. If you complete a business strategy - which
includes a cash flow forecast - the lender will see you have completed some serious and realistic thinking about your business and
be more inclined to consider your request.

Be familiar with your banker. In picking a banker consider Progressiveness, mindset toward your company, credit services provided,
and also the size and direction policies of the bank. Is the bank innovative? The physical appearance of the lender may give you
some indication. When the workers are pretty youthful, considering your issues and active in civic affairs the bank is likely to
be progressive. The character of the bank's advertisements might also be a clue to its progressiveness.

To succeed the banker Ought to Be interested in Assisting You to Become a better manager, and build a continuing relationship
which will mean rewarding business for you as well as the bank through the years.

Will the lender offer you the kind of credit you want? For example, If seasonal accumulations of inventory become an issue will
the lender make a loan against field or public warehouse receipts? If your capital is tied up in accounts receivable throughout
your hefty selling season, will the lender take these receivables as security for a loan? Will the lender contemplate a term loan?

Finally, know the size and management policies of the lender. Will Your maximum requirements fall well inside the lender's"legal
limit"? If you plan to do some export company, does it have a currency department? If you or your dealers sell on installment
terms does the lender have facilities for handling installment paper? How profoundly is the lender concerned with the rise and
prosperity of the local community?

When you deal with your banker, then sell your self. Whether or not you Want a bank loan, make it a practice to visit your banker
at least once a year. Openly discuss your plans and problems. It's the bank's business not to betray a confidence. If you need
financial assistance carefully prepare, in written form, complete information that will present a comprehensive comprehension of
your whole proposal. Many business-people or prospective small business operators ruin their chances of getting financial aid by
neglecting to present their proposal properly.

Trade creditor or gear manufacturer, Firms from which you Buy equipment or merchandise may also provide capital to you in the kind
of extended credit. Manufacturers of store fixtures, cash registers, and industrial machines frequently have funding plans under
which you may buy on an installment basis and cover from future earnings. You don't need to cover the merchandise simultaneously.
If products are for resale, then no security aside from repossession rights of the unsold goods is involved. However, too long a
use of credit can prove expensive. Usually money discounts are offered when a bill is paid in 10, 30, or 60 days. By way of
example, a term of sale offered as"2-10; net 30 days" signifies that a cash discount of 2 percent will be granted if the bill is
paid within 10 days. If not paid in 10 days, the entire amount is due in 30 days. If you do not take advantage of the cash
discount, you are paying 2 percent to use money for 20 days, or 36 percent each year. This can be high interest. Prevent it.

Among the principal causes of failures among companies is Inadequate financing. If you do go into company, remember it is your
responsibility to provide, or obtain from other people, sufficient money to provide a firm foundation for your business.

Sharing Ownership With Other People. Now that you have determined what Business to start and about how much capital will be
required, you may find it necessary to join with one or more partners to launch the enterprise.

If you lack certain management or technical skills which are of Major importance to your chosen business a partner with these
skills may prove a most satisfactory means to cover the deficiency. If you're extremely proficient in your particular area but
lack management training and skills, you may search for a partner using a background in direction. If you might want more start-up
money, then sharing the possession of the business is 1 way to get it. Fantastic care ought to be taken in deciding upon a spouse.
Personality and character, as well as capability to render technical or financial aid, affect the achievement of a pa333ship.

A partnership may be a mixed blessing. A partner who places in time Or money has got a right to expect a share in conducting the
business.

In a partnership the accountability for the debts of the firm is Infinite, just as it's in a single proprietorship. Therefore, the
owners are Personally responsible for the firm's debts, even in excess of the sum that they Have invested in the organization. In
a corporation the accountability of the proprietor is limited To the amount they pay for their shares of stock. A partnership,
like a single proprietorship, lacks continuity. This means the Company terminates upon the Death of the owner or a partner, or
upon the withdrawal of a partner.

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