The Pitfalls of Starting a Sign Business: Part 3 - A Retail Store - The Online Magazine for the Sign Trade.
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The Pitfalls of Starting a Sign Busines: Part 3 - A Retail Store

To the average person a storefront or retail location may appear to be a piece of cake to get up and rolling, but little do they know the amount of stress, aggravation, effort and money that went into it.

By Daniel A. Keegan

All of the above just to be able to open the front door with no guarantees of success or survival. There are so many considerations to think about throughout the entire process that it’s not funny. Let’s not forget about those hidden expenses either. Be forewarned that hasty decisions can be costly and some serious research is required.

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  • In the retail business, it is said that “LOCATION IS EVERYTHING”, well this may or may not be true in the sign business. What the experts are saying is that to generate more business you need a high exposure to the general public and walk-in traffic. High visibility may payoff for the first few months, but how long does it really last? One of the major controlling factors for deciding upon a location should be your targeted client base and your goals as a sign company. What types of signs do you really want to produce? That new shopping center may sound good, but what restrictions will that location have on your business?

    What if you wish to produce and install vehicle graphics? It would be nice to have a drive-in bay where you could work on the vehicle without having to worry about the outdoor conditions. Many only deal with vehicle graphics as the weather permits. How much revenue is lost by telling a customer that you can get to it in a couple of months when the weather conditions improve? Do you really think that they are going to wait? Not likely! They will find someone that can do it.

    What if you wish to produce channel letters and box signs? Some of those can get fairly large and may not fit out of the back door. It would be nice to have that loading dock or drive-in bay. Let’s not forget about the workspace required to produce these items either. Yes, there are wholesale companies out there that will manufacture everything you need and drop ship to your location. What about storage until its ready to install and at what point do you decide to produce these items yourself?

    What if you wish to silkscreen? There could be some environmental issues to deal with in that new retail location or they may not allow it at all. That’s why it is necessary to do your homework. Why would you want a location that could potentially handicap your business? Locations that are off the beaten path generally charge less rent and can provide for a greater chance for future expansion without having to move to a new location. There is a lot to consider when choosing a location.

    We live in a world of high technology. Most correspondence with clients these days are handled by telephone, fax or Internet. You still need to think about some of the basics though. Is this location easy to get to? Can suppliers deliver without difficulty or additional expense? Is there adequate parking, preferably free of charge, for both employees and clients? Security: is it a high-risk area? Is it within a local calling area? Ok, enough about location. I think you get the point.

    Those hidden expenses can drain the bank account faster than you can imagine. You still have the same hardware and software expenses as if you were a home-based business, with the possible exception that you now need more office furniture. What most don’t realize until it’s too late is the fact that everyone wants a piece of your bank account.

    Cover your assets
    It is a must to protect yourself and your business in anyway possible. The home-based business may be able to get by as a “Sole Proprietor” to keep costs down, but the retail shop should consider their corporate status, at the least, a “Limited Liability Corporation” (L.L.C.), which seams to be the most popular these days. Keep in mind that the higher the corporate status, the more tax dollars and paperwork Uncle Sam wants from the owner(s). Check with your attorney to make sure the proper paperwork is filed and get their recommendation.

    Although, you can do it all yourself and save several hundred dollars, is the risk worth it if there is a problem? Keep in mind that if by chance there are legal issues down the road, the court system or whoever can go after the personal assets of the owner(s) of any non-corporation business. Maybe that extra paperwork is not so bad after all.

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    Let’s assume that you think that you have found the perfect location. It is advisable to pick and choose from at least two to three possible locations. Before you sign that lease (rental) agreement a little homework (research) is required. You have in mind a certain set of goals for both the present and future of your business that could be hindered by the fine print that may have been overlooked. Look for any restrictions in the lease and ask specific questions to the building owner before signing. Check with the city or township in which this property is located for restrictions and or ordinances that may affect your business. Though you may like location one better, location two may be the better choice due to fewer restrictions.

    Also, before signing the contract, check with the owner and the city to find out if the location meets all of the building codes. Request that the owner have an inspection done first. If it does not pass inspection, put the burden and cost on the owner’s shoulders. You do not want to find out at a later date that you cannot occupy the space and that you might be stuck with the expense of fixing it. This will also prolong the start of your business, which you may not be able to afford.

    Prior to opening the doors for business you must have an occupancy permit, fire inspection, building code inspection and who knows what else more depending upon local requirements. Let’s not forget a business license from the city. All of which may have fees attached to them. Also, there may be an additional city or township property tax that you might not find out about until sometime down the road. This could add up to thousands of dollars and is one of those additional taxes that are above and beyond state and federal taxes. It never hurts to be prepared, so ask questions before signing any document. Research is a must!

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    On the state and federal side of things for a retail business there is what is called a “Sales Tax”, which we have all heard about. As a consumer, you pay a sales tax on everything that you purchase, but for those that are not so business savvy may not be aware of the deposit that must be made ahead of time before you can sell the first sign. This deposit is based upon projected sales for one quarter (3 months) of a year. So, depending upon what you project as your sales volume taxes, will depend on how large of a deposit must be made, which could very well add up to hundreds to thousands of dollars. Generally, you will not see these funds again until the business is closed permanently. As the business grows and sales increase, the government can come back to you and request that an additional deposit be made. Besides sales tax, if you have employees, there are other out of pocket expenses (taxes) for a business such as Social Security and Unemployment which part comes out of the employees pay check and the other part comes out of your pocket. All of which has to be figured in on the monthly budget.

    Speaking of deposits, the utility companies that service this new location will more than likely each require a large sum of money to cover one or more months worth of services. This is usually based upon previous use of a tenant or similar statistics. You may incur additional expenses such as trash disposal or an annual building or grounds maintenance fee.

    As you can now imagine, the little things can add up quickly and the research alone can get overwhelming. Each area of the country is different and that is why it is so important to research before making that big leap into business. It’s the little things that can come back to haunt you over a period of time. Through planning and preparation, you can have a successful business and don’t be afraid to seek advice from others. There is nothing wrong with starting out small and growing your business.

    In closing, there are many local and federal programs that may be able to assist you in your endeavors if you are willing to ask. In many areas there are “Enterprise Zones” that assist startup businesses by providing reduced rent or tax benefits among other things. Your local government should be aware of such programs, if any for your area, and be able to advise you accordingly. IT NEVER HURTS TO ASK!!!

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