Nearly 3 million people in the UK work in the retail sector making it a bustling industry and one you might want to get into. However, opening your dream shop isn’t as simple as finding a vacant shop and getting things in to sell.
For one thing, these are challenging times for retail businesses, with the impact of lockdown followed by the cost of living crisis. But there are still more than 300,000 separate businesses powering on and recent years have seen an increase in independent shops on UK high streets.
So while there are challenges, there are also opportunities for savvy business people with a great idea. But how do you go about starting up your own shop? There’s lots to consider, like:
- Creating a business plan
- Finalising your structure
- Registering with HMRC
- Sorting out finances
Here’s our guide to opening a shop in the UK.
How to open a shop in the UK
Of course, the first thing you need before you open a shop is to have an idea. J. Sainsbury had an idea to open his first shop selling fresh foods with the ethos of ‘quality perfect, prices lower’, while John Lewis opened his first store as a drapery. Both of these have gone on to redefine the retail market in the UK.
Whatever your niche or USP, there’s a lot of hard work required to even get to the point of opening a shop in the UK. Here are some of the key areas that you need to consider:
Creating a business plan
A business plan is where a great idea gets turned into a functional framework for making money and it’s one of the most important documents you’ll create in your business journey. Just think of the popular television programme, The Apprentice, where the candidates have their business plans torn to shreds by brutal interviewers. This should give you an idea of how much effort and careful consideration needs to go into your business plan, even if it won’t be getting scrutinised on national television.
It needs to be detailed. Describing your shop, what it will sell and much more. It’ll typically include:
- Executive Summary - Introducing your business and highlighting the key areas you want to talk about.
Business Analysis - You need to show here that you’ve analysed the market you are entering, including your competitors and showcasing where your shop will fit in. You also need to show why you have chosen this market or sector and why you think it will grow enough for your shop to be a success. Identifying gaps or weaknesses that you can create an offering or service for will help to convince people that your shop has a chance to succeed.
- Marketing Strategy - We’ll cover this shortly, but this section needs to detail your plan to raise awareness of your shop and how you’ll make people want to visit. For example, which social media channels are you going to focus on, are you going to put flyers up in local restaurant windows or do you need to set up a website with an online shop?
- Products - What are you selling? Where will it come from? How will your supply chain cope if you start to grow and require more stock? You should also give some information here about why you have chosen to sell these products and how they will set you apart from the competition.
- Management - Here you need to talk about the roles and number of people needed to run the store, how you will recruit and pay them, etc. This is also a chance for you to sell yourself to people who may be considering investing in your shop, which is also an investment in you, so you need to convince them that you have the experience and knowledge to make this shop a success.
Finalising your structure
When going into business for yourself, you need to consider what legal structure your company should have. There are three main options for this:
- Sole tradership - This places you in sole responsibility for the shop, which is a position of great power and potentially great reward, but also a high risk. If everything goes wrong, being a sole trader means that the liability will fall solely on you.
- Limited company - A potentially safer option, setting up a limited company means that you are protected from being personally liable if there are any debts. However, the possible rewards aren’t quite as big as you’ll be taxed 20% on your profits.
- Partnership - If you’re looking to go into business with a spouse, family member or friend, setting up as a partnership helps to make things fair and creates a structure where everyone knows what is expected of them. The potential downside comes when one partner decides that they want out, so while no-one imagines this happening right at the start of the partnership, agreeing what should happen in this instance can help avoid difficult situations later on.
Usually the area where business plans fall apart on The Apprentice, this section of your plan needs to be detailed, considered and most of all realistic. Otherwise you may struggle to convince people to invest in your business. It should include profit and loss projections, sales and cashflow forecasts, a breakeven analysis and capital requirements. If you’re looking for investment, you’ll also need to consider how much you are giving to shareholders in dividends.
Registering with HMRC
There will be lots of people that you’ll want to tell about your exciting new venture, but don’t forget HMRC. Telling the taxman that you are starting up a new business is something you need to get done as soon as possible, and if you haven’t done it by the end of your first tax year, you risk being penalised by the law.
The first step is to submit your business name and address and then register for VAT, which means you’ll be able to recover tax on your business expenses. You’ll need to have lots of crucial information to hand (all of which should be in your business plan anyway) to tell HMRC all about your business. Any mistakes or misunderstandings at this point could be costly further down the line.
Sorting out finances
Before we get into things to think about, it’s important to recognise that finances can be quite stressful. There’s absolutely no shame in admitting this and it’s the case for many people. For this reason it’s always best to ask for help and get independent financial advice if you’re not sure how to get started or just need some help understanding financial jargon.
Existing capital you have access to
Firstly, there’s a lot to pay for when you’re setting up a shop. We’ll cover what those costs are shortly, but you need to be giving serious consideration to where the money is coming from. Ideally, you’d have a big stash of savings available to fund all of the purchases required to have a space and stock to sell in it, but this isn’t always realistic. It’s also risky if the shop fails and your savings are tied into its success.
An alternative, if you don’t have a cash sum, is to get a business loan from a bank or building society. This is where your business plan will be crucial. Having a clear, realistic business plan will help to convince the bank that your business is worth a loan because you’ll be able to pay it back. Take your time researching loans and make sure you fully understand how much you’ll have to pay back and when. This is where seeking independent financial advice can be really useful for helping you to understand the best options that are open to you and your business specifically.
You could also seek to bring in some investors, but again you need to have a business plan that will impress them enough to give them faith in your shop. After all, investors aren’t just looking for their money back, they want to make a profit too, so if there’s nothing special or unique about your shop, they may be reluctant to put their money into yet another entry into a saturated market.
That’s the traditional investor model (think Dragon’s Den) covered, but the internet has made it easier to find investment from non-dragons. If you have a particularly inspirational story or are good at getting people on your side, you could try crowdfunding to raise funds to get your shop up and running.
Setting up a business account
The next step is having somewhere to put all of that money, and we don’t mean under your mattress. You’ll have a personal bank account but this won’t work for the needs of a shop. Having a business account set up means that you can write off business expenses against your taxable income and receive a low interest overdraft and business credit card, all of which will help you in those tricky early days of running your shop. It’s worth shopping around before committing to a business bank account as different providers offer different benefits and incentives.
Setting up business insurance
And finally, you need to arrange for insurance. Your bank or building society may well be able to offer these, but again it’s best to shop around for the best offers. Here are the main types of insurance you need to be getting:
- Public liability insurance - Accidents happen and if someone gets injured while they’re on your premises you could be held liable for it. Having public liability insurance protects you from this and gets a lawyer working for you for free in case there are any claims.
- Employer’s liability insurance - It’s not just the public who can have accidents in your shop, but also your employees. If it does happen, having this insurance in place means you’re covered and can help them recover from their injuries without worrying about how to pay for it.
- Professional indemnity insurance - And finally, while you’ll no doubt be careful that you are selling products that are safe, there’s always the risk of someone getting injured by them after they’ve bought them from your shop and taken them home. This insurance policy would protect you from that possibility.
“If you build it they will come” might have worked out for Kevin Costner in "Field of Dreams”, but in the modern retail world, it takes more than just opening a shop in the UK to make it a success. You need a marketing strategy that will capture the attention and imagination of your target audience, which is ever more difficult in a world packed with distractions and competitors.
A key part of this is understanding who your audience are and how you can reach them. This will depend on their demographics and how they prefer to communicate, from TikTok for younger generations to Facebook ads, radio and local newspapers for slightly older customers.
You should come up with a brand that represents your shop and its purpose, which should both be reflected in your product offering and the audience you’re catering for. Lean on the market research that you did on this for your business plan - you already have this information so be sure to refer back and use it to your advantage. When you’ve got the brand and the right platforms, you’re ready to communicate with your audience. Remember you need to tempt them to visit and keep coming back.
A launch event with discount codes on certain items or limited edition offerings is a great way to whip up some excitement as well as giving your first day of operations the best chance of financial success, with plenty of people coming to check your shop out. Any incentives you can give them to come back again will also help ensure that there’s a bright future ahead.
How Much Does it Cost to Open a Shop in the UK
We’ve taken you on a quickstop tour of what you need to consider when it comes to opening a physical shop in the UK, but the last thing you need to know is the costs. If you’ve never started up your own business, this can be the most daunting stage, and the final reality check, but don’t shy away from this stage. Do your research and set yourself up for success properly so you can reap the rewards later.
On average a UK startup needs £5,000 to launch as well as needing a further £22,756 in their first year. But that refers to any startup business and the costs for opening a shop can be much higher. One study found that the first year’s costs for a new shop in the UK were around £172,000.
Two of the main charges you’ll need to pay will be the rent and business rates, which are very much the cost of doing business, while another major cost is buying and maintaining stock levels. You shouldn’t open a shop without checking out the solutions that Dojo has to offer to help manage income and expenses while taking payments quickly and efficiently.
Opening a shop in the UK may be a challenging idea but it’s also a potentially hugely rewarding one. If you follow our guide, you’ll have the chance to become one of the big success stories.