Taking the Plunge – Home Embroidery Business to Store Front

Reprinted from Stitches Magazine – Written By Steve Freeman

First you outgrew that extra bedroom, and then your dining room. Now your home is bursting at the seams from your success as a “stay-at-home” embroidery professional. You can’t possibly squeeze another piece of equipment into your garage and you have no idea where to put the 50 cases
of polo shirts you just sold to your number-one customer this morning. You’ve reached a crossroads and made a brave decision to take your embroidery business to the next level – and open a retail storefront.This isn’t a decision to be taken lightly. You’re about to expose yourself to the world in a way you never have. When you were tucked into the privacy of your home-based business, you weren’t exposed to the same level of operational scrutiny as your contemporaries. This isn’t to imply in anyway that you weren’t already running a “real” business. However, you probably played by your own rules far more than other brick-and-mortar operations.

“You’re putting your freedom at risk more than anything else when you open that first retail store,” says Alan Strauss, a 30-year veteran of the custom embroidery and screen-printing industry. Strauss, having opened more than 150 stores in the course of his career, speaks from experience. “Don’t incur the overhead unless you’re prepared to incur the overhead,” he says. Seems simple, right? It’s not.

It’s impossible in a short article to expose a reader to all of the nuances of opening a retail location. So instead of attempting to provide you a comprehensive list of everything to expect when opening your doors for the first time, we’ve got some advice on the major hurdles you’ll encounter along the way. Here’s one piece of very valuable advice for embroiderers getting ready to make the retail leap: As you determine your budget for opening your store, put some money aside to hire a consultant who comes highly referred from a source you trust. We’ve all heard the cliché, “A defendant who represents himself in court has a fool for a lawyer,” which has some validity here as well. Your money will be well spent if you hire the right professionals to guide you through the intricacies of opening a retail store for the first time.

How to get started

1. Define who you are. Probably one of the most important things you can do before you venture out of your home and into the glare of the public eye is to have a complete understanding of the type of embroidery business you are.

Different profiles will have different location requirements, and it’s vital for you to understand the difference between what might be considered true retail, business to customer (B-to-C) or corporate buying business to business (B-to-B).

B-to-C businesses rely on the heavy foot traffic of high-volume locations such as malls or busy strip centers. B-to-B embroidery companies are typically more focused on the higher-volume business customer and set themselves up as destination locations that don’t rely on walk-in business. There’s also the hybrid operation that straddles the fence and services both types of customers. Fortunately there are locations well suited to any of these business types.

It’s important to remember that it’s not what you sell that determines the best retail location for you, but rather who you sell it to.

2. Define where you want to be. If you’re a true retail embroidery shop and the majority of your transactions are business to customer, you’ll want to be in the highest traffic volume location you can afford. You’ll find these locations in malls, strip centers, resorts and any location where there are large numbers of people who will pass by your storefront. For example, “Set up your shop in close proximity to a high-volume restaurant,” Strauss says.

A B-to-B embroidery company owner can afford to take herself a little farther off the beaten path and look at locations in light industrial business/office parks. While these locations don’t have the foot traffic of a mall, that’s perhaps more desirable. While small-ticket retail transactions can be very profitable, they may not fit the business model of the B-to-B embroidery professional.

The hybrid embroidery shop might want to locate its business in the types of strip centers that cater to other B-to-B establishments such as print shops, machine shops, sign shops and repair facilities. This type of exposure will tend to bring in the destination B-to-B customer as well as attract a number of customers who might be looking for the types of mid-volume retail order placed by teams and school groups.

3. Understand what your new expenses are going to be. No matter what, when you move from your home-based business to a retail storefront, your expenses will increase significantly. You need to be aware of this, and budget and plan for it. If you think the only additional expense you’ll have is rent and utilities, you’ll be in for a big surprise.

While your most obvious new expense will be rent, you’ll have a whole litany of other costs that may have been absorbed into your home but are now separate and additional expenses. And, for the uninitiated, you’ll find expenses such as telephone, Internet and utilities are far more costly to the business user than the home consumer. For instance, that nice speedy little Internet package you have for $39.95 a month at home might easily cost you $150 or more at a business address.

4. Negotiate the right lease. Remember, when it’s time to negotiate the lease, you hold all of the cards even though the leasing agent might try to convince you otherwise. The real estate agent’s job is to fill empty spaces with paying tenants like your business. It doesn’t mean he’ll take any crazy deal you throw on the table, but by no means should you ever assume the first price you’re quoted is where the lease will be signed. Almost everything is negotiable, so don’t be shy about asking for tenant improvements, signage, suite maintenance and even free rent.

Additionally, there are many things to consider in a lease other than gross rent. Depending on the type of property you lease, you could be exposed to other expenses such as triple nets, common area maintenance fees and percentage rents (see sidebar, “Real Estate Terms”), and other forms of published, but sometimes difficult-to-understand, expenses that are part of a lease agreement. It’ll be 100% your job to understand all of the terms of the lease. Speaking from experience, first-time embroiderers who’ve made the leap to a retail shop say that complaints about not understanding the fine print in a lease will fall on deaf ears when it comes to resolving a dispute with a property management company.

Some leases seem very straightforward and simple to read, while others appear from the start to be very complex. Tip: Have your lease reviewed by a competent real estate attorney before you sign it. Even the most basic lease can have land mines embedded in the body of what seems to be mundane, boiler-plate language. If you agree to it and then contest it later, you’ll almost assuredly lose.

Also, be sure that your location is properly zoned to allow an embroidery business to operate. While almost any space will allow a couple of smaller machines to perform light production, if you have large multi-head equipment, you might need to locate your business in an industrial park zoned for operations of this nature. Many malls will absolutely restrict the amount of noise being generated by your shop. Strip malls, while typically less uptight about noise, might have severe restrictions on the times when you can operate or the types of traffic loading and unloading product at your doors.

There are other issues that you’ll have to contend with before opening your first retail shop. These include tenant improvements, window displays, store layout, bringing employees into your company and marketing. Business owners who want to find additional information can find a host of resources on the Web at www.sba.gov. Also, almost every city has a chamber of commerce that’s stocked full of resources (human and printed) to help you get your doors open. You’ll find many friendly and helpful people who are interested in your success. But, it’s your job to ask.

The pride of ownership you’ll feel as the doors open and you frame your first dollar are almost second to none. As the proud owner of a shiny new store, you’ll most likely spend more time there than you will with the people you love.