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April 9, 2006

Q-I am thinking of starting a new retail business. What type of courses would you recommend to help me learn about running a small business? Also, how do I figure out how much money I’m going to need to start up the business?

First, I applaud you for your willingness to learn. I see so many folks rush way too fast into starting a business without taking the time to master the subjects that are so critical to their success. There are plenty of short courses available but you really do need in-depth training.

I would recommend that you take college-level courses in the areas of managerial accounting, management, marketing and finance. Most community colleges and universities offer these courses. If you can take these four courses you will have the depth of knowledge that is necessary to be successful.

While such learning is certainly valuable, I also encourage you to work in the industry you plan to enter for at least six months. The mistakes spawned by owners’ inexperience are what kill so many startups. An apprenticeship of sorts will help you learn as much as you can before you go out on your own. It’s much better to make mistakes on someone else’s nickel than on your own.

Also, please, please make sure that you have a boatload of passion for the industry that you want to enter. Without the passion, the probability for success diminishes tremendously.

In terms of funds that you need for start up, the amount is always a lot more than you think. Here is a rough list of categories to help you determine the funds you need.

First you need initial funds for the build-out of the rented space as well as some front-end lease payments. You’ll probably have to put in shelving, finish walls, and just generally get your display cabinets and the overall space ready to welcome customers.

On top of this, you need basic office equipment such as computers, faxes, cash registers and a phone system, as well as a way to process credit cards.

Then you need funds to build up your inventory and funds to keep you going until revenue is sufficient to cover all of your expenses.

Finally, there is that miscellaneous list. You will need signs for your store, business cards, stationery, and a host of other miscellaneous expenses.

Here is a good web site that reviews these expenses in much more detail: http://www.powerhomebiz.com/vol14/startup1.htm.

Overall, I have found that when people calculate their initial costs they tend to underestimate by more than 50 percent. So make sure you include enough funds to pay for all of the expenses you might have overlooked or that end up being higher than you thought.

You are doing the right thing by proceeding very slowly and learning as much as you can in starting your business.