How to open a shop and start a retail business

Many start-up owners dream of opening a brick-and-mortar shop.

Whether selling beauty products, tools, clothing, or speciality food, interacting with customers in person can be satisfying and fun.

With government plans to revitalise the British high street and support smaller businesses, now might be the perfect time to turn your dream into reality.

There has also been a resurgence in physical retail shopping in recent years.

Although 28% of shoppers buy mostly online, 36% shop both online and in-store, and another 36% prefer shopping in physical stores.

This shows that while online shopping is popular, physical shops still have a strong future, leading many retailers to increase investment in stores.

Want a piece of the action?

Read on to find out how to open a shop and become your own boss.

Step 1. Market research

Market research means gathering information about your target market and customers to boost your business success.

Skipping this step could lead to costly mistakes.

Through market research, you can discover:

• the size of your potential market
• where your customers are
• demand for your products and services
• what your competitors are doing
• how much customers are willing to pay
• customer likes and dislikes
• market trends
• effective advertising methods.

Market research could also help you get funding since your business decisions are based on solid data.

There are two main ways to conduct market research – desk and field research.

Desk research involves using online tools and industry statistics to assess competitors.

It could also include analysing industry statistics.

Field research includes surveys, focus groups, and networking to gather insights directly from your target audience.

Read our complete guide on how to conduct market research.

Step 2 - Location

Choosing the right location for your shop is crucial for its success.

Here are some things to think about when picking a spot:

• foot traffic – areas with lots of people passing by, like busy streets or shopping centres, could attract more customers
• the competition – consider how many similar shops are nearby. More competitors can make it harder for your shop to stand out
• residential areas – being close to residential areas could be helpful, as locals might become regular customers
• business type – the type of shop you have could influence your choice of location. For example, stores selling tools or homeware might do well near homes for convenience
• available spaces – check if the available commercial spaces fit your needs in terms of size, layout, visibility, and accessibility.

Renting an existing shop space might be cheaper and more convenient than setting up a non-retail space, but you’ll need to pay business rates based on the property’s value.

When renting, you’ll sign a business lease with your landlord that outlines rent, lease length, and other costs.

Step 3. Create a business plan

A business plan is essential for guiding your shop towards success.

It is a flexible document that outlines the path for your start-up, including:

• objectives – defining what you want to achieve, such as growth targets and market share goals
• timeframes – set deadlines for your goals to help track progress
• operational plan – describe daily operations, staffing, and logistics needs
• market research – analyse competitors and highlight your business advantages
• financial projections – include estimates of revenue, expenses, and profits to show financial health
• funding plan – detail the financial needs of your business and how you’ll use funds
• marketing plan – outline strategies to reach customers, including advertising and online marketing
• SWOT analysis – identify strengths, weaknesses, opportunities, and threats to understand your market position.

Find out how to write a business plan for a Start Up Loans application.

As your business grows, your business plan will need to be updated to accommodate your evolving goals.

Download our free business plan template.

Step 4 - Calculate costs

Starting your own retail store business comes with several costs.

Common start-up costs include:

• the premises – this includes rent, renovations, and necessary licences and legal fees
• utilities – you’ll need to pay for water, electricity, and gas to keep your store running
• equipment – you’ll need items like display shelves, payment systems, tables, shopping bags, decor, lights, stationery, and kitchen supplies for staff
• inventory – this is the stock you need to sell to customers, usually stored in a back room
• staff costs – paying your employees is an ongoing expense and includes salaries and benefits like health insurance
• marketing – set a budget for marketing to attract customers, which could consist of online and local advertising
• insurance – consider getting business insurance to protect your store.

Step 5 - Licences and legal requirements

Depending on the type of retail business you want to start, you may need specific licences to operate legally.

For example, if you’re opening a wine shop, you’ll need a premises licence and a personal licence to sell alcohol legally.

If you’re converting a space used for another type of business into your shop, you’ll need a change of use permit.

Accidents can happen, so you may want to get public liability and employer’s liability insurance to protect you and your business.

You’ll also need to meet specific legal requirements as a business owner.

First, you’ll need to choose a business structure, such as a sole trader, limited company, or partnership.

Each has different legal and administrative requirements, so you may want to research which is best for you and seek specialist advice.

You will then need to choose a brand name for your company and register it with Companies House if you choose to be a limited company.

All UK businesses must register with HMRC.

You may also need to register and pay VAT if your shop’s annual turnover exceeds £90,000.

Limited companies pay Corporation tax, while sole traders pay income tax.

You should keep accurate financial records and may want to work with a financial expert to comply with regulations.

Read our guide to small business bookkeeping tips for success.

Step 6. Interior design and equipment

Designing a retail store is a mix of functionality – helping customers purchase – and providing a great shopping environment that brings your brand to life.

It’s a good idea to plan your shop’s interior strategically to boost brand appeal.

Think about creating an accessible, effective layout that suits the products you’re selling.

For example, fashion boutiques might use elegant displays and ambient lighting, while tech stores could have interactive elements and a modern look.

You may want to consider fixtures that can be easily changed for promotions or seasonal updates.

An accessible point-of-sale system could make transactions more manageable and, if linked with your online store, provide a place for customers to ask for help.

Step 7. Hiring and managing staff

Hiring staff can be an exciting sign that your business is growing.

Before starting the hiring process, consider the qualities you want in an employee, such as a friendly personality and good communication skills.

You might hire sales assistants and managers for daily store operations.

Offering trial shifts could help you see if potential hires fit well with your team.

As an employer, it’s important to remember you have legal responsibilities.

You must:

• comply with National Minimum Wage or Living Wage laws
• offer employment contracts
• provide time off
• ensure staff breaks
• maintain workplace health and safety standards.

Read our first-time employer’s guide to hiring staff.

Creating a positive work environment could improve customer experience, as happy employees tend to stay longer and provide better service.

Consider offering competitive pay, employee discounts, sales commissions, and ongoing training.

Employers must pay National Insurance Contributions (NICs), but you can reduce this by up to £5,000 annually (rising to £10,500 in April 2025) to ease the financial strain as your team grows.

Read about how employers can manage the increase in NICs.

Step 8. Funding your shop

There are several ways to fund a retail store business.

You could use bank loans, personal savings, or borrow from friends and family.

If your retail store business focuses on innovation or sustainability, you may be eligible for government grants – which do not need to be repaid.

You may also want to check with your local council to see if they have any new business grants available.

You might consider a Start Up Loan, which offers personal loans for business purposes of up to £25,000 at a fixed interest rate of 6% and includes 12 months of free business mentorship.

Remember to seek independent specialist financial advice when deciding if a financial product is right for you and your business.

Step 9. Marketing and attracting customers

You’ll need to market your start-up to keep customers coming to your shop.

You can make a big impact even with a small budget as a start-up business.

Read our guide to marketing on a shoestring budget.

With a strong marketing strategy and brand identity, you could entice more target customers to visit and purchase.

Effective tactics might include:

• using paid and organic social media
• email campaigns
• collaborations with other local businesses
• affiliate marketing
• flyers and posters
• local community groups
• advertising in the local press.

You might also wish to create a website for your business to provide information about your shop and attract customers.

Read our essential guide to marketing.