CHECK-LIST FOR GOING INTO DOLLAR STORE BUSINESS OR RETAIL BUSINESS
Friday April 30, 2010
CHECK-LIST FOR GOING INTO DOLLAR STORE BUSINESS OR RETAIL BUSINESS
INTRODUCTION
IDENTIFY YOUR REASONS
A SELF-ANALYSIS
Personal Characteristics
Personal Conditions
PERSONAL SKILLS AND EXPERIENCE
FINDING A NICHE
IS YOUR IDEA FEASIBLE?
MARKET ANALYSIS
PLANNING YOUR START-UP
Name and Legal Structure
Your Business and the Law
Protecting Your Business
Business Premises and Location
Merchandise
Business Records
FINANCES
AFTER START-UP
CONCLUSION
APPENDIXES
A. Income Projection Statement
B. Information Resources
INTRODUCTION
Owning a business is the dream of many Americans ... starting
that business converts your dream into reality. But there is a
gap between your dream and reality that can only be filled with
careful planning. As a business owner, you will need a plan to
avoid pitfalls, to achieve your goals and to build a profitable
business.
The Checklist for Going into Business is a guide to help you
prepare a comprehensive business plan and determine if your idea
is feasible, to identify questions and problems you will face in
converting your idea into reality and to prepare for starting
your business.
Operating a successful small business will depend on
* a practical plan with a solid foundation;
* dedication and willingness to sacrifice to reach your goal;
* technical skills; and
* basic knowledge of management, finance, record keeping and
market analysis.
As a new owner, you will need to master these skills and
techniques if your business is to be successful.
IDENTIFY YOUR REASONS
As a first and often overlooked step, ask yourself why you want
to own your own business. Check the reasons that apply to you.
YES
1. Freedom from the 9-5 daily work routine. ______
2. Being your own boss. ______
3. Doing what you want when you want to do it. ______
4. Improving your standard of living. ______
5. Boredom with your present job. ______
6. Having a product or service for which you feel
there is a demand. ______
Some reasons are better than others, none are wrong; however, be
aware that there are tradeoffs. For example, you can escape the
9-5 daily routine, but you may replace it with a 6 a.m. to 8 p.m.
routine.
A SELF-ANALYSIS
Going into business requires certain personal characteristics.
This portion of the checklist deals with you, the individual.
These questions require serious thought. Try to be objective.
Remember, it is your future that is at stake!
Personal Characteristics
YES NO
1. Are you a leader? _____ _____
2. Do you like to make your own decisions? _____ _____
3. Do others turn to you for help in making
decisions? _____ _____
4. Do you enjoy competition? _____ _____
5. Do you have will power and self discipline? _____ _____
6. Do you plan ahead? _____ _____
7. Do you like people? _____ _____
8. Do you get along well with others? _____ _____
Personal Conditions
This next group of questions though brief is vitally important to
the success of your plan. It covers the physical emotional and
financial strains you will encounter in starting a new business.
YES NO
1. Are you aware that running your own business may
require working 12-16 hours a day six days a week
and maybe even Sundays and holidays? _____ _____
2. Do you have the physical stamina to handle the
workload and schedule? _____ _____
3. Do you have the emotional strength to withstand
the strain? _____ _____
4. Are you prepared if needed to temporarily lower
your standard of living until your business is
firmly established? _____ _____
5. Is your family prepared to go along with the
strains they too must bear? _____ _____
6. Are you prepared to lose your savings? _____ _____
PERSONAL SKILLS AND EXPERIENCE
Certain skills and experience are critical to the success of a
business. Since it is unlikely that you possess all the skills
and experience needed you'll need to hire personnel to supply
those you lack. There are some basic and special skills you will
need for your particular business.
By answering the following questions you can identify the skills
you possess and those you lack (your strengths and weaknesses).
YES NO
1. Do you know what basic skills you will need in
order to have a successful business? _____ _____
2. Do you possess those skills? _____ _____
3. When hiring personnel will you be able to
determine if the applicants' skills meet the
requirements for the positions you are filling? _____ _____
4. Have you ever worked in a managerial or
supervisory capacity? _____ _____
5. Have you ever worked in a business similar to the
one you want to start? _____ _____
6. Have you had any business training in school? _____ _____
7. If you discover you don't have the basic skills
needed for your business will you be willing to
delay your plans until you've acquired the
necessary skills? _____ _____
FINDING A NICHE
Small businesses range in size from a manufacturer with many
employees and millions of dollars in equipment to the lone window
washer with a bucket and a sponge. Obviously the knowledge and
skills required for these two extremes are far apart but for
success they have one thing in common: each has found a business
niche and is filling it.
The most critical problems you will face in your early planning
will be to find your niche and determine the feasibility of your
idea. Get into the right business at the right time is very good
advice but following that advice may be difficult. Many
entrepreneurs plunge into a business venture so blinded by the
dream that they fail to thoroughly evaluate its potential.
Before you invest time effort and money the following exercise
will help you separate sound ideas from those bearing a high
potential for failure.
IS YOUR IDEA FEASIBLE?
1. Identify and briefly describe the business you plan to start.
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
2. Identify the product or service you plan to sell.
______________________________________________________________
3. Does your product or service satisfy an
unfilled need? Yes _____ No _____
4. Will your product or service serve an
existing market in which demand exceeds
supply? Yes _____ No _____
5. Will your product or service be
competitive based on its quality,
selection, price or location? Yes _____ No _____
Answering yes to any of these questions means you are on the
right track; a negative answer means the road ahead could be
rough.
MARKET ANALYSIS
For a small business to be successful the owner must know the
market. To learn the market you must analyze it a process that
takes time and effort. You don't have to be a trained
statistician to analyze the marketplace nor does the analysis
have to be costly.
Analyzing the market is a way to gather facts about potential
customers and to determine the demand for your product or
service.
The more information you gather the greater your chances of
capturing a segment of the market. Know the market before
investing your time and money in any business venture.
These questions will help you collect the information necessary
to analyze your market and determine if your product or service
will
sell.
YES NO
1. Do you know who your customers will be? _____ _____
2. Do you understand their needs and desires? _____ _____
3. Do you know where they live? _____ _____
4. Will you be offering the kind of products or
services that they will buy? _____ _____
5. Will your prices be competitive in quality and
value? _____ _____
6. Will your promotional program be effective? _____ _____
7. Do you understand how your business compares
with your competitors? _____ _____
8. Will your business be conveniently located for
the people you plan to serve? _____ _____
9. Will there be adequate parking facilities for
the people you plan to serve? _____ _____
This brief exercise will give you a good idea of the kind of
market planning you need to do. An answer of no indicates a
weakness in your plan so do your research until you can answer
each question with a yes.
PLANNING YOUR START-UP
So far this checklist has helped you identify questions and
problems you will face converting your idea into reality and
determining if your idea is feasible. Through self-analysis you
have learned of your personal qualifications and deficiencies and
through market analysis you have learned if there is a demand for
your product or service.
The following questions are grouped according to function. They
are designed to help you prepare for "Opening Day."
Name and Legal Structure
YES NO
1. Have you chosen a name for your business? _____ _____
2. Have you chosen to operate as sole proprietorship,
partnership or corporation? _____ _____
Your Business and the Law
A person in business is not expected to be a lawyer but each
business owner should have a basic knowledge of laws affecting
the business. Here are some of the legal matters you should be
acquainted with:
YES NO
1. Do you know which licenses and permits you may
need to operate your business? _____ _____
2. Do you know the business laws you will have to
obey? _____ _____
3. Do you have a lawyer who can advise you and help
you with legal papers? _____ _____
4. Are you aware of
* Occupational Safety and Health
Administration (OSHA) requirements? _____ _____
* Regulations covering hazardous material? _____ _____
* Local ordinances covering signs snow removal
etc.? _____ _____
* Federal Tax Code provisions pertaining to
small business? _____ _____
* Federal regulations on withholding taxes and
Social Security? _____ _____
* State Workmen's Compensation laws? _____ _____
Protecting Your Business
It is becoming increasingly important that attention be given to
security and insurance protection for your business. There are
several areas that should be covered. Have you examined the
following categories of risk protection?
YES NO
* Fire _____ _____
* Theft _____ _____
* Robbery _____ _____
* Vandalism _____ _____
* Accident liability _____ _____
Discuss the types of coverage you will need and make a careful
comparison of the rates and coverage with several insurance
agents before making a final decision.
Business Premises and Location
YES NO
1. Have you found a suitable building in a location
convenient for your customers? _____ _____
2. Can the building be modified for your needs at a
reasonable cost? _____ _____
3. Have you considered renting or leasing with an
option to buy? _____ _____
4. Will you have a lawyer check the zoning
regulations and lease? _____ _____
Merchandise
YES NO
1. Have you decided what items you will sell or
produce or what service(s) you will provide? _____ _____
2. Have you made a merchandise plan based upon
estimated sales to determine the amount of
inventory you will need to control purchases? _____ _____
3. Have you found reliable suppliers who will assist
you in the start-up? _____ _____
4. Have you compared the prices quality and credit
terms of suppliers? _____ _____
Business Records
YES NO
1. Are you prepared to maintain complete records of
sales income and expenses accounts payable and
receivables? _____ _____
2. Have you determined how to handle payroll records
tax reports and payments? _____ _____
3. Do you know what financial reports should be
prepared and how to prepare them? _____ _____
FINANCES
A large number of small businesses fail each year. There are a
number of reasons for these failures but one of the main reasons
is insufficient funds. Too many entrepreneurs try to start and
operate a business without sufficient capital (money). To avoid
this dilemma you can review your situation by analyzing these
three questions:
1. How much money do you have?
2. How much money will you need to start your business?
3. How much money will you need to stay in business?
Use the following chart to answer the first question:
CHART 1
PERSONAL FINANCIAL STATEMENT
____________, 20___
ASSETS
Cash on hand __________
Savings account __________
Stocks, bonds, securities __________
Accounts/notes receivable __________
Real estate __________
Life insurance (cash value) __________
Automobile/other vehicles __________
Other liquid assets __________
TOTAL ASSETS __________
LIABILITIES
Accounts payable __________
Notes payable __________
Contracts payable __________
Taxes __________
Real estate loans __________
Other liabilities __________
TOTAL LIABILITIES __________
NET WORTH (Assets minus Liabilities __________
Chart 2 will help you answer the second question: How much money
will you need to start your business? The chart is for a retail
business; items will vary for service construction and
manufacturing firms.
The answer to the third question (How much money will you need to
stay in business?) must be divided into two parts: immediate
costs and future costs.
CHART 2 - START-UP COST ESTIMATES
Decorating, remodeling __________
Fixtures, equipment __________
Installing fixtures, equipment __________
Services, supplies __________
Beginning inventory cost __________
Legal, professional fees __________
Licenses, permits __________
Telephone utility deposits __________
Insurance __________
Signs __________
Advertising for opening __________
Unanticipated expenses __________
TOTAL START-UP COSTS __________
From the moment the door to your new business opens a certain
amount of income will undoubtedly come in. However this income
should not be projected in your operating expenses. You will need
enough money available to cover costs for at least the first
three months of operation. Chart 3 will help you project your
operating expenses on a monthly basis.
CHART 3 - EXPENSES FOR ONE MONTH
Your living costs __________
Employee wages __________
Rent __________
Advertising __________
Supplies __________
Utilities __________
Insurance __________
Taxes __________
Maintenance __________
Delivery/transportation __________
Miscellaneous __________
TOTAL EXPENSES __________
Now multiply the total of Chart 3 by three. This is the amount of
cash you will need to cover operating expenses for three months.
Deposit this amount in a savings account before opening your
business. Use it only for those purposes listed in the above
chart because this money will ensure that you will be able to
continue in business during the crucial early stages.
By adding the total start-up costs (Chart 2) to the total
expenses for three months (three times the total cost on Chart 3)
you can learn what the estimated costs will be to start and
operate your business for three months. By subtracting the totals
of Charts 2 and 3 from the cash available (Chart 1) you can
determine the amount of additional financing you may need if any.
Now you will need to estimate your operating expenses for the
first year after start-up. Use the Income Projection Statement
(Appendix A) for this estimate.
The first step in determining your annual expenses is to estimate
your sales volume month by month. Be sure to consider seasonal
trends that may affect your business. Information on seasonal
sales patterns and typical operating ratios can be secured from
your trade associations.
(NOTE: The relationships among amounts of capital that you invest
levels of sales each of the cost categories the number of times
that you will sell your inventory (turnover) and many other items
form financial ratios. These ratios provide you with extremely
valuable checkpoints before it's too late to make adjustments. In
the reference section of your local library are publications such
as The Almanac of Business and Industrial Financial Ratios to
compare your performance with that of other similar businesses.
For thorough explanations of these ratios and how to use them
follow up on the sources of help and information mentioned at the
end of this publication.)
Next determine the cost of sales. The cost of sales is expressed
in dollars. Fill out each month's column in dollars total them in
the annual total column and then divide each item into the total
net sales to produce the annual percentages. Examples of
operating ratios include cost of sales to sales and rent to
sales.
AFTER START-UP
The primary source of revenue in your business will be from sales
but your sales will vary from month to month because of seasonal
patterns and other factors. It is important to determine if your
monthly sales will produce enough income to pay each month's
bills.
An estimated cash flow projection (Chart 4) will show if the
monthly cash balance is going to be subject to such factors as
* Failure to recognize seasonal trends;
* Excessive cash taken from the business for living expenses;
* Too rapid expansion; and
* Slow collection of accounts if credit is extended to
customers.
Use the following chart to build a worksheet to help you with
this problem. In this example all sales are made for cash.
CHART 4 - ESTIMATED CASH FLOW FORECAST
Jan Feb Mar Apr May Jun etc
Cash in bank (1st of
month ___ ___ ___ ___ ___ ___ ___
Petty cash (1st of
month ___ ___ ___ ___ ___ ___ ___
Anticipated cash
sales ___ ___ ___ ___ ___ ___ ___
Total receipts ___ ___ ___ ___ ___ ___ ___
Total cash receipts ___ ___ ___ ___ ___ ___ ___
Disbursements for
month (rent, loan
payments, utilities,
wages, etc. ___ ___ ___ ___ ___ ___ ___
Cash balance (end of
month ___ ___ ___ ___ ___ ___ ___
_______________________________________________________
CONCLUSION
Beyond a doubt preparing an adequate business plan is the most
important step in starting a new business. A comprehensive
business plan will be your guide to managing a successful
business. The business plan is paramount to your success. It must
contain all the pertinent information about your business; it
must be well written factual and organized in a logical sequence.
Moreover it should not contain any statements that cannot be
supported.
If you have carefully answered all the questions on this
checklist and completed all the worksheets you have seriously
thought about your goal. But . . . there may be some things you
may feel you need to know more about.
Owning and running a business is a continuous learning process.
Research your idea and do as much as you can yourself but don't
hesitate to seek help from people who can tell you what you need
to know.
APPENDIX A: INCOME PROJECTION STATEMENT
Industry J F M A M J J A S O N D Annual Annual
% total %
Total net sales
(revenues) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Cost of sales _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Gross profit _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Gross profit
margin _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Controllable
expenses
Salaries/wages _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Payroll expenses _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Legal/accounting _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Advertising _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Automobile _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Office supplies _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Dues/subscriptions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Utilities _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Miscellaneous _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Total controllable
expenses _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Fixed expenses
Rent _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Depreciation _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Utilities _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Insurance _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Licenses/permits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Loan payments _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Miscellaneous _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Total fixed
expenses _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Total expenses _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Net profit (loss)
before taxes _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Taxes _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Net profit (loss)
after taxes _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
The income projection (profit and loss) statement is valuable as
both a planning tool and a key management tool to help control
business operations. It enables the owner-manager to develop a
preview of the amount of income generated each month and for the
business year, based on reasonable predictions of monthly levels
of sales, costs and expenses.
As monthly projects are developed and entered into the income
projection statement, they can serve as definite goals for
controlling the business operation. As actual operating results
become known each month, they should be recorded for comparison
with the monthly projections. A completed income statement allows
the owner-manager to compare actual figures with monthly
projections and to take steps to correct any problems.
Industry Percentage
In the industry percentage column, enter the percentages of total
sales (revenues) that are standard for your industry which are
derived by dividing
cost/expense items by total net sales x 100%
These percentages can be obtained from various sources, such as
trade associations, accountants or banks. The reference librarian
in your nearest public library can refer you to documents that
contain the percentage figures, for example, Robert Morris
Associates' Annual Statement Studies (1 Liberty Place,
Philadelphia PA 19103)
Industry figures serve as a useful benchmark against which to
compare cost and expense estimates that you develop for your
firm. Compare the figures in the industry column to those in the
annual percentage column
Total Net Sales (Revenues)
Determine the total number of units or products or services you
realistically expect to sell each month in each department at the
prices you expect to get. Use this step to create the projection
to review your pricing practices.
* What returns, allowances and markdowns can be expected?
* Exclude any revenue that is not strictly related to the
business.
Cost of Sales
The key to calculating your cost of sales is that you do not
overlook any costs that you have incurred. Calculate cost of
sales for all products and services used to determine total net
sales. Where inventory is involved, do not overlook
transportation costs. Also include any direct labor.
Gross Profit
Subtract the total cost of sales from the total net sales to
obtain gross profit.
Gross Profit Margin.
The gross profit margin is expressed as a percentage of total
sales (revenues) it is calculated by dividing
gross profits by total net sales
Controllable Expenses
* Salary expenses -- Base pay plus overtime.
* Payroll expenses -- Include paid vacations, sick leave,
health insurance unemployment insurance and social security
taxes.
* Outside services -- Include costs of subcontracts, overflow
work and special or one-time services.
* Supplies -- Services and items purchase for use in the
business.
* Repairs and maintenance -- Regular maintenance and repair,
including periodic large expenditures such as painting.
* Advertising -- Include desired sales volume and classified
directory advertising expenses.
* Car, delivery and travel -- Include charges if personal car
is used in business, including parking, tolls, buying
trips, etc.
* Accounting and legal -- Outside professional services.
Fixed Expenses
* Rent -- List only real estate used in the business
* Depreciation -- Amortization of capital assets.
* Utilities -- Water, heat, light, etc.
* Insurance -- Fire or liability on property or products.
Include workers' compensation.
* Loan repayments -- Interest on outstanding loans.
* Miscellaneous -- Unspecified; small expenditures without
separate accounts.
Net Profit (loss) * Subtract total expenses from gross
(before taxes) profit.
Taxes * Include inventory and sales taxes,
excise tax, real estate tax, etc.
Net Profit (loss) * Subtract taxes from net profit
(after taxes) (before taxes)
Annual Total * For each of the sales and expense
items in your income projection
statement, add all the monthly
figures across the table and put the
results in the annual total column.
Annual Percentage * Calculate the percentage by dividing
annual total by
total net sales x 100%
* Compare this figure to the industry
percentage in the first column
IF YOU HAVE ANY QUESTION PLEASE EMAIL ME.