How to Start a Clothing Boutique
If you love fashion, have a talent for identifying the best deals and helping people find garments that are flattering and stylish, starting a clothing boutique can help turn your skills and passion into a profitable business. Before planning to start a clothing boutique business, take a few minutes to understand what really goes into starting up a clothing boutique, the potential earnings, and how much you may need to get started.
Clothing boutiques typically cater to high-end and niche markets. Unlike the larger retail clothing chains, boutiques are smaller, independently owned stores, or run as an online boutique. Boutiques are rarely standalone businesses and are instead commonly found in plazas or small stores in smaller malls. While clothing boutiques carry less inventory than larger chains, they can specialize in carefully selected, quality goods and can offer excellent customer service to set themselves apart. With boutiques, a unique and desirable shopping experience is key to drawing in customers.
In 2018, the clothing boutique industry saw a total revenue of $21 billion, according to data from IBIS World. That total revenue had declined by 2% over the previous five years. However, over that same period of time, the number of boutiques grew by 1.9% to 154,730 businesses in the United States. Because boutiques often market to high-end and niche audiences, boutiques’ success largely depends on a healthy, thriving economy where people make high-end purchases.
Clothing boutiques face competition from other retailers. Because boutiques are specialized, they rarely face direct competition from big-box retailers. Instead, online retailers and online auction sites are more likely to compete with boutiques’ niche offerings.
Sustainability has recently come into focus, and according to Retail Dive, it’s affecting the retail clothing industry, too. This sustainability focus has led to an increased demand for businesses – both clothing manufacturers and retailers – to be honest, and upfront about their sustainability practices.
When it comes to e-commerce, the high cost of returned merchandise is reshaping the industry. Retailers who offer free shipping and free returns can drive sales with these offerings, but smaller retailers have to get creative in finding ways to cover those costs.
Target markets for boutiques vary according to the niche focus of each business. Generally speaking, the target market will be mid-to, upper-class adults. Your specific niche may target shoppers looking for formal wear, vintage clothing, sustainably made clothes, and more.
Checklist for Starting a Clothing Boutique
If you’re thinking about starting your own clothing boutique, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with a business idea, the next step in starting any business should be to write a business plan. Not only will a bank require you to have one to get funding, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Starting any business can be an intimidating process, but a detailed business plan can help to remove some risk from your new venture. It’s important to understand that clothing boutiques often undergo slow times of the year, such as after holidays, when sales slow down. Being able to weather these fluctuations is a skill that any successful business owner will need to have, and it’s something that needs to be planned for in your business plan.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a clothing boutique, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
Boutiques can be run in a retail storefront, or as an online boutique.
For boutiques with a physical operation, it’s generally beneficial to be located in higher-traffic locations, which typically equates to high rent or purchase price. An online clothing boutique can be run out of the owner’s home, though larger operations may need warehouse and packaging space.
Numerous factors will affect the cost of a lease, including the size of a store, its location, and the lease term. A prime retail location can help bring in business, but these ideal locations also carry higher lease fees.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Depending on your location, various licenses or permits will likely be needed to run a retail operation. Both your town and your state may require a business license or permits, and you’ll need these in place before you open your store.
Some of the common local, state, and federal registrations most retail businesses need to open include a sales tax permit, Employer Identification Number, and Occupancy Permit.
Step 6: Find Wholesalers & Suppliers
Staying up to date with the most current fashions can be a challenge, so be sure to find a few wholesalers, manufacturers, and clothing designers that carry the products or fashion brands your customers want. Sourcing your vendors is easier if you can attend trade shows and network with other boutique owners.
If you can get volumes high enough, you can work with designers to create a private label brand that can really set your boutique apart from the competition.
Step 7: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a fashion boutique is another. Fortunately, the cost to start a clothing boutique can be relatively low, with most of the costs going towards remodeling, garment racks, furniture, signage, and inventory. Funding for a new start-up can be difficult as banks will typically want the borrower to have good credit and personally invest 15-25% towards the project.
Step 8: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 9: Get your Marketing Ready
Now that you are getting close to opening, it’s time to get marketing materials planned and created. The ability to take great product photos is important, especially if operating all or a portion of your business via an online store.
Marketing, especially as you’re getting your business running, can be a significant expense. You will need to budget for a great logo, marketing efforts on social media platforms like Facebook, Instagram, Twitter, and Pinterest, advertisements, online store, and email marketing to help get the word out about your business.
The more marketing you can do on your own, the more money you can save, but finding the time to do your marketing well consistently can be a challenge, especially in the early days of your business.
Step 10: Obtain Business Insurance
There are several types of insurance to consider when starting a clothing boutique. A few of these include:
– General liability insurance will help pay for damages or medical expenses if a customer is injured while in the store, such as if they trip or fall.
– Commercial property insurance provides coverage in case a fire or other event damages the building or inventory.
– Theft insurance offers you additional coverage in case your store is ever burglarized. It’s not required but may be worth the investment, particularly if you stock expensive inventory.
A number of factors will affect your insurance policies’ cost, like inventory value and the store’s location. Because of this, it isn’t easy to estimate insurance costs. As you build your business plan, ask for quotes from at least three different insurance companies. Then, compare those quotes and consider the different coverage amount that each offers to get a sense of what you’ll need to pay for the insurance coverage your business needs.
Step 11: Hire Employees
You will probably need to hire at least one employee for your store as you start out, and as your store grows, you may need additional staff. While some stores operate with just the owners, bringing on additional employees helps as retail hours are typically long, and the owners will need a break or time off if sick. As clothing boutiques cater to higher-end consumers in creating an intimate experience, it’s critical to find and retain talented staff.
In addition to salaries, budget for expenses like payroll taxes and workman’s compensation insurance. A good rough estimate is 15%-20% of wages. You may also wish to offer your employees perks like paid time off, sick time, and health insurance.
Related: Hiring your first employee
Step 12: Set up an Accounting System
Setting up an accounting system for your clothing boutique is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a clothing boutique?
One of the major challenges of starting a clothing boutique is having sufficient startup funds available. Because of the amount of inventory needed and the expense of outfitting a store, startup costs can be a large investment. The below costs can help give an idea of the budget needed to get a store up and running.
A few common costs to consider to start a clothing boutique include:
– Point of Sale (POS) system or cash register ($100-$1,000)
– Chairs ($50-$200 each)
– Full-length mirrors ($50-$150 each)
– Garment racks ($50-$200 each)
– Mannequins ($45-$300 each)
– Security cameras ($200-$2,500)
– Clothes hangers (Price starts around $20 for 24 wooden hangers; -better pricing is available for bulk orders)
– Branded shopping bags (start around $200.00 for 150; the price per bag decreases with larger orders)
– Clothing and accessories (Price varies according to quantity, brand, and the specific pieces you order)
Costs to prepare a retail clothing business can be significant depending on the location’s current condition and layout. Commonly the store will need dressing rooms constructed, in addition to mirrors, flooring, and signage.
Any clothing boutique will need working capital to keep it operating smoothly. The common struggle is due to the high inventory cost and the time to turn that inventory into sales, which can take weeks or even months. There is also the balance of ensuring there is sufficient inventory on hand in the right sizes.
How much does a clothing boutique owner make?
Incomes vary significantly depending on many factors, such as a boutique’s size, location, target market, and more. Not much is published on boutiques’ profits, but according to Sageworks, privately-owned clothing stores saw a net profit margin of almost 7% in 2013. This profit margin was almost double the net profit margin seen in 2011 and 2012. Sales also grew by about 5% in 2013.
Keep in mind that many business choices will also affect income potential. Whether you accept consignment pieces or not, the clothing lines carried, and whether you offer online sales will all affect sales revenue. The effectiveness of marketing also plays an important role in your success.
Are there grants to start a clothing boutique?
It’s extremely rare to find a grant to start a clothing boutique. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a clothing boutique?
Running a clothing store requires certain skills and experience. You don’t necessarily need a formal business degree, but the following skills will help you open and manage your store.
Clothing industry knowledge. Knowledge of the clothing industry is a must for any boutique owner. You should be knowledgeable about the fashion trends in your store’s niche and be able to spot emerging trends to offer customers the products they’ll be looking for. Attending fashion industry trade shows will also be important in improving your knowledge.
Sense of style. Besides clothing industry knowledge, a sense of style will help choose appropriate inventory for your store and help customers select the most flattering products for them. Style is also essential when planning outfit pairings and creating displays. The better the displays, the greater the chance of being able to up-sell entire outfits or accessories.
Interpersonal skills. A large part of owning a boutique is working with customers, so interpersonal skills are important. You’ll need to be able to welcome customers into your store, offer assistance without coming off as pushy, and make the shopping experience enjoyable.
Organizational skills. From tracking inventory to managing your expenses, top-notch organizational skills are valuable when you own a boutique. If you plan to offer online sales, organizational skills will be particularly important for shipping and tracking orders.
Business skills. Basic business skills will also be useful. A business background can help locate and negotiate retail space, price inventory, hire employees, and more. Business skills will also help create strategies for meeting the unmet needs your store will fill in your community.
Marketing talents. Your boutique will require branding, marketing, and potentially some creative rewards programs or other incentives to get customers in the door when you’re just starting out. Marketing talents can help in spreading the word about the new business. If marketing isn’t in your wheelhouse, you could hire out part or all of your marketing needs.
What is the NAICS code for a clothing boutique?
The NAICS code for a clothing boutique is 448120, which is classified under Women’s Clothing Stores.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.