Top 5 Budget-Burning Mistakes By Retail Store Owners

According to the statistics website StatisticsBrain.com, less than half of all retail businesses are still in operation after four years (47% to be exact). This is a depressing figure that should serve as a real eye-opener to anyone who's thinking of launching a retail business. The fact is that far too many hopeful entrepreneurs assume retail is a profitable industry with minimal risk, but unfortunately this isn't the case. It takes lots of hard work, dedication, and a keen eye for business to succeed. To help you get started on the right track, we've compiled a list of the top 5 budget-burning mistakes by retail store owners and why you should avoid them.

Mistake #1) Too Much Overhead

You can't expect to run a profitable retail business if you're paying an outrageous amount in overhead expenses. Unfortunately, this is an all-too-common mistake made by thousands of store owners. Spending some of your time and resources into shopping around for lower rates with your utility bills, security monitoring system, and even store lease can drastically reduce your overhead expenses while putting more money in your company's pockets.

Mistake #2) Too Much Shrink

Another common budget-burning mistake in retail is allowing shrink to spiral out of control. By definition, shrink is defined as the loss of product between manufacturing and point of sale. This means the product is manufactured properly, but becomes damaged at some point in time before it's sold. Grocery stores and supermarkets tend to experience high levels of shrink; however, all retail stores are vulnerable to the costly effects of shrink.

Mistake #3) No Business Plan

As the name suggests, a business plan is an outline of your company's goals and objectives, along with a roadmap on how you intend to achieve them. Trying to run a retail store without a clear business plan is like driving at night without your headlights; you're essentially hoping that everything turns out your way.

Mistake #4) Not Enough Funding

Launching a retail store isn't cheap by any means. You'll need finances to cover everything from the lease and utilities to products and employee payroll. If you aren't able to financially cover these expenses, you could find your business struggling long before its grand opening. Thankfully, store owners can acquire loans from banks and other financial institutions to help cover these expenses.

Mistake #5) Not Analyzing Consumer Demand

A fifth and final budget-burning mistake made by retail stores and businesses is failing to analyze consumer demand. Keeping a close eye on your inventory, and how fast customers are purchasing it, is critical to running a successful retail store. This will allow you to purchase less of product that's in low demand and more of product that's in high demand.