How to Start a Furniture Store
Furniture stores help consumers to express their individual style within their homes. These stores can be unique, follow different themes, and offer a curated selection of products to different audiences. If you have an eye for design, enjoy keeping up with the latest home decor trends, and want to build a business of your own, starting a furniture store might be an ideal option.
Business Overview
Furniture stores sell new and/or used furniture, including beds, tables, dressers, couches, and more. Some stores specialize in particular types of furniture, such as high-end designer models or modular furniture. Depending on the type of furniture a store offers, its audience can vary. Most of the time, customers will be homeowners or renters, though college students can be a secondary audience.
Currently, furniture stores face competition from online furniture stores and big-box chains that can offer discounted prices because of their higher volume purchases. However, furniture stores also offer the convenience of providing fully assembled pieces that can often be delivered to a customer’s home.
Starting a furniture store is a big undertaking, especially if you plan to sell new furniture. Opening a used furniture store will cost less than a new retail store, but it also requires a strategic plan to constantly acquire new and affordable used furniture. New furniture stores can purchase wholesale furniture from a variety of retailers, but the costs can be significant, especially when the business is just starting up.
Industry Summary
The furniture store industry has undergone recent growth and is spurred by increased consumer spending. From 2013 to 2018, the industry grew by 2.9%, resulting in $65 billion in revenue during 2018, according to research from IBIS World. During that time the number of furniture stores grew to 38,647, employing 227,728 staff. While no one company dominates the market, Inter IKEA Systems BV and Ashley Furniture Industries, Inc. hold the largest shares of the furniture market.
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Industry Trends
Independent furniture stores face competition from warehouses and supercenters (IBIS World). These major retailers have significant store space and are able to offer diverse selections of furniture, including tables, chairs, and more. Because these retailers can purchase in such a high volume, they can offer customers greater discounts than independent retailers can provide. This may prove a threat to the furniture industry.
Furniture purchases are closely linked to disposable income, but in 2019Â disposable income is predicted to increase, driving furniture sales (IBIS World). A thriving housing market also contributes to furniture sales as new homeowners tend to spend heavily to furnish their new homes.
Tarket Market
A furniture store’s target market will vary depending on the store’s location, the demographic the store markets to, and the type of furniture that the store stocks. A store in a lower-income area that stocks affordable, practical furniture can appeal to the general population, but homeowners, renters, and college students, in particular. Alternatively, a store in a higher-end area that stocks designer furniture will appeal to a different market, mainly adult homeowners.
Checklist for Starting a Furniture Store
If you’re thinking about starting your own furniture store, 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 or investor require you to have one in order to get funding, but multiple studies have shown that a business plan helps increase the odds of starting a successful business. A well thought out furniture store business plan will serve the entrepreneur as the road map for their business, helping them achieve their business goals.
Related:Â How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures 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 furniture store, 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.
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The corporation can be a good choice to minimize liability risk 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
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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 3:Â 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 4: Select your Location
It’s generally beneficial for a furniture store’s physical location to be in close proximity to higher-traffic locations and close to homeowners.
The lease costs of a storefront are often higher than typical independent retail businesses simply because of the square footage that a furniture store requires. Additional factors can affect the cost of a lease, including the location of the store. Store space in sought-after active retail spaces will cost more, but it can also increase foot traffic to the business.
Related:Â Choosing a business location
Step 5: Apply for Business Licenses and Permits
No special licensing is required to open a furniture store, but there are some general business registrations to research such as a business license, sales tax permit, Employer Identification Number, and Occupancy Permit.
Related:Â Common business licenses, permits, and registrations by state
Step 6: 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 furniture store is another. Fortunately, the cost to start a furniture store can be quite high, given the cost to remodel a retail building, delivery vehicles, and inventory. Funding for a new start-up can be difficult as banks are typically going to want the borrower to have good credit and personally invest 15-25% in the project’s total cost.
Related:Â Finding the money to start a business
Step 7:Â 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.
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Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Ready
Marketing costs will vary according to the type and volume of marketing. Expect to invest significantly in marketing the furniture store’s grand opening. Afterward, ongoing marketing can help to publicize sales, spread the news about special events, and show off new inventory to draw new customers to the store. Marketing options include social media platforms like Facebook, Instagram, and Pinterest, print advertising, radio and TV advertising, targeted online ads, direct mail, and more. The prices of each type of marketing vary.
Many existing furniture dealers still rely on traditional print marketing, which presents a new business opportunity. Developing a functional online store is critical as customers expect a business to have an online presence.
Related:Â Low-cost ideas to market a new business
Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.
Step 9: Obtain Business Insurance
There are several types of insurance to consider when starting a retail furniture business. A few of these include:
– General liability insurance helps to protect the business if a customer is ever injured while in the store. It can cover expenses like medical bills or legal fees if they occur.
– Commercial property insurance protects the business from losses in inventory or the store’s building cost in case of a fire, storm, or other events.
– Workers comp insurance is mandatory for any furniture store that employs staff. If an employee is ever injured while on the job, this insurance can cover related expenses, such as medical bills.
The cost to insure a furniture store will vary according to the value of the inventory, the number of staff employed, the store’s location, and other factors. Desired coverage limits and deductibles also affect policy costs. To get a better idea of what insurance may cost, request quotes from several companies and closely compare the policies to decide which plan is right for your needs.
Step 10: Hire Employees
It is possible to start out as the only person working in your furniture store; however, it’s more likely that you will need a sales team, delivery staff, and manager to run a store.
As stores grow in size, they need to be staffed by multiple employees. PayScale states that the average salary for a sales associate is $42,589, and a furniture store manager’s average salary is $52,381. In addition to budgeting for salary costs, full-time or part-time employees can require additional expenses such as paid time off, health insurance contributions, and workman’s compensation insurance.
Related:Â Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your furniture store 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.
Related:Â Setting up accounting for your business
StartingYourBusiness.comHow much does it cost to start a furniture store?
Because furniture takes up so much space, a store needs to be much larger than your typical independent retail store to offer a large amount of inventory. While a lease on a larger space will cost more, maximizing your storage space can help you make the most of every inch in the store, offering as much inventory as possible to drive sales. If you can find a quality that makes your store unique and sets it apart from competitors, you can leverage this unique quality to draw attention to your store and position it to be a success.
The cost to start a furniture store will largely be based on the size of the store and the expense of inventory. A smaller operation could get started for around $200,000, while a larger, high-end furniture showroom could see startup costs reach $5 million and more.
The majority of costs come from:
– Purchase of a location unless leasing
– Renovations to the facility
– Inventory
– Delivery vehicles
– Working capital to fund the first three to six months of salary, rent, internet, insurance, etc.
How much can a furniture store owner make?
According to Chron, furniture store sales and profits vary, but retail furniture stores experienced a 45% gross profit margin in 2018. This profit margin doesn’t include expenses like a lease, employee salaries, or other items noted above. Furniture stores averaged $185 in sales per square foot of floor space. More efficient stores achieved $210 in sales per square foot, while the top stores reached $371 in sales per square foot.
Sales and profits will vary according to many factors, including a store’s age, location, the type of furniture sold, and the presence of nearby competition.
Furniture stores require significant working capital to operate. A business needs working capital to purchase inventory, which can be a major cost in furniture stores. If inventory doesn’t move quickly, working capital can be tied up in those products, making it difficult to restock in-demand pieces.
Are there grants to start a furniture store?
It’s extremely rare to find a grant to start a furniture store. 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 furniture store?
Anyone can start a furniture shop – even with no small business experience – but the following skills and experience can make it easier to get a store up and running successfully.
An eye for design. When it comes to selling furniture, an understanding of current and evolving home furnishing trends will help to keep fresh and interesting inventory in the store. It’s difficult to run a sizable furniture store entirely on your own, so plan on hiring at least some part-time staff to assist with moving, assembling, and delivering furniture.
Being able to spot quality furniture that will be in-demand can help an owner fill a store with products that will draw in customers and sell quickly. Design skills are also necessary for creating attractive window and in-store displays. Pairing furniture together in sets and accessorizing with accents can help draw customers’ attention to furniture and even drive sales.
Customer service skills. Expect to engage with customers daily. Previous customer service experience is beneficial when owning a furniture store, especially since many purchases are expensive. Customers can quickly get upset if a product or delivery doesn’t turn out as planned.
Given the intense pricing competition from warehouse clubs and larger competitors, an emphasis on customer service is critical.
Management skills. Hiring, training and managing employees takes talent, and it’s a necessary and daily part of owning a furniture store. Previous experience as a manager is valuable in the furniture industry.
Marketing skills. A strong marketing plan is essential to launching a furniture store, but ongoing marketing efforts are important, too. Putting items on sale helps to drive the purchase of some higher-cost pieces, but you need to publicize the sale to get people in the door. Familiarity with email marketing, social media, and even print marketing will be important and can save you money over hiring a marketing professional.
Business skills. Furniture store owners don’t need a full business degree to start and manage their stores, but business skills are important. An owner of a furniture store should manage inventory, identify appropriate pricing, market the business, and more. While previous business experience will help, owners can also learn many of these skills through business classes and a business mentor’s help.
What is the NAICS code for a furniture store?
The NAICS code for a furniture store is 442110.
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.
Related: What is a NAICS code?
Resources
American Home Furnishings Alliance
Home Furnishings Association
National Furniture Association
