Whether you’re a longtime shoe collector, are enthusiastic about footwear or are just looking for a unique business idea, starting your own shoe or sneaker store might be an ideal marriage of your interests. As is the case when launching any business, there’s much to consider, including tax considerations, whether you should own or lease your space, how to find and pay for your merchandise and hiring concerns. Fortunately, with a thorough plan and adherence to relevant laws, you can get your business up and running successfully.
Determine Your Niche
The most important element of your shoe store is, of course, the shoes you intend to sell. This means you’ll want to consider who your target audience is as you develop your business plan. For instance, if you’re planning to sell only women’s shoes, then you’ll want to ensure that you have a variety of shoe types and sizes that are popular among women.
However, if you only want to sell high-end women’s shoes, then you’ll need much less inventory, but you will also probably have to spend more money on the products you supply. To keep from spending too much at the get-go, you can often save by buying in bulk. That said, you don’t want to buy too much inventory at the very beginning of your company’s life, lest you risk bankruptcy.
Ultimately, you’ll need to look around in the area where you plan to sell so that you can understand your potential market to the best of your ability. This includes everything from demographics to affluence to weather. If you live in a very rainy area, for instance, stocking rain boots rather than an excess of open-toed shoes would likely be a good idea
Obtain Permits and Licenses
When building your sneaker store business plan, you’ll need to look into the required licenses and permits for retail establishments in your state. Some commonly needed documents are resale permits, state tax identification numbers, employer identification numbers and an assumed name certificate. You’ll also want to open wholesale accounts with larger and local distributors so that you can establish working relationships together.
Sneaker Store Tax Return Considerations
If you’re only reselling shoes and not planning to open an official storefront, don’t fret —you can still make money. This is because, technically, you’re a self-employed business owner and will need to fill out information on the Schedule C section of your tax form. Depending on what your tax advisor suggests, you may wish to structure your finances differently, though, and incorporate.
Of course, running a business can be costly. Fortunately, you will likely qualify for business deductions, such as costs of cleaning and materials or supplies, that will lower your taxes. You should carefully track your expenses throughout the year and ask your tax professional for help applying those figures to your tax return.
Sneaker Store Sales Tax
Anyone running their own business must determine whether they need to collect sales taxes. Once you register your business with your state’s tax department, you can determine your area’s sales tax rate and how much you should charge buyers. Typically, you can either add sales tax to your item prices and charge customers (this is generally recommended, as it allows you documented proof of your collection of sales tax) or charge item prices only and remit the tax out of your profits. Either way, you will need to maintain careful records.
Whether you’re selling online, in-store or both, you’ll need to determine what products and services are taxable. Depending on where you’re located and who you are selling to, some items won’t be eligible for sales tax. For instance, products that are purchased for resale and raw materials are not taxable. In addition, nonprofits are usually exempt.
Opening a Sneaker Store
Depending on what type of sneakers or shoes you’re selling, you may be considering either buying or leasing a retail space. Ultimately, this decision should come down to the cost of buying versus renting, and as expected, your credit score will likely come into play when determining how much you’ll need to spend if you do want to purchase.
If you plan to stay in the same location for multiple years in a row, you might end up saving more money if you buy a space. However, if you don’t think you’re going to stay in the same location for more than a few years, then you’ll likely be better off renting.
Purchasing a Retail Location vs. Renting
When you buy a commercial space, you’ll benefit from building equity from your purchase through loan payments, since your monthly payments will end up paying down your loans. With leasing, however, you will pay directly to a landlord and won’t pay anything down. You’ll also be able to take advantage of your asset appreciating over time, so when you aim to sell the space, you’ll be able to capitalize. Additionally, you’ll also be able to make tax deductions for interest expenses, depreciation expenses and non-mortgage related expenses.
Another benefit to buying your space is that you can always rent out part of your location to other tenants and generate some extra capital. On top of your active business income, you’ll also be able to take advantage of having a passive income source as well. As the owner, you get final say over what you want to do with your rental space, whereas with renting, you have rules to abide by or may have to run many decisions past a landlord.
When renting, however, you have to commit fewer upfront expenses. You’ll also enjoy tax deductions, such as lease payments, property taxes, property insurance and utilities and maintenance. Additionally, though your monthly payments will likely be higher when you rent a space, you’ll have a lot more flexibility in being able to pick up and move to a larger space, if so desired.
Sneaker Store Franchise Options
If you’re not interested in starting your own sneaker store, you might instead like to buy an existing franchise. However, how do you figure out which is the best option for you?
Though it only requires one purchase to be your own boss and own a business, there is a lot of value to be found in starting your own store. You won’t have to pay royalties or other fees to a franchise, for instance. Doing so could mean a large deficit at the outset. You can also create your own rules, mission and values and create a business that’s run completely under your ideals. With a franchise, there might be pre-existing rules and procedures that you’ll have to follow, depending on your contract.
However, purchasing a franchise is a straightforward way to run a business, since you just sign the agreement and pay fees to start with an established name and location. You don’t have to reinvent the wheel to be profitable, though you will need to pay those royalties each month. In addition, franchises have their own set of challenges, including market saturation and linked reputations that you don’t completely control.
Sneaker Store Success
Depending on the types of shoes you’re looking to sell, you can turn quite a profit by owning and operating a sneaker or shoe store (especially if you’re stocking the latest Air Force Ones). By coming up with a cohesive business plan and recognizing your target audience, you’ll be sure to be a success.
- To reduce theft, add a security system. Consider purchasing a website for your store from GoDaddy.com or a similar site. When in doubt about a business, refer to the Better Business Bureau. Contact the IRS immediately after incorporating to learn what your tax responsibilities will be. Visit your local tax commission office and incorporate your business. Then obtain a sales tax permit, a building or occupancy permit, a federal tax identification number and a business license, if your state requires it. Get all required legal signage for your back room, such as minimum wage and employment laws.
Danielle Smyth is a writer and content marketer from upstate New York. She has been writing on business-related topics for nearly 10 years. She owns her own content marketing agency, Wordsmyth Creative Content Marketing (www.wordsmythcontent.com) and she works with a number of small businesses to develop B2B content for their websites, social media accounts, and marketing materials. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent.