How to Run a Retail Business From Home

Running a retail business from your home is not as complicated as it sounds, plus you don’t have to commute to a brick-and-mortar location or your warehouse for inventory management.  Once it takes off, you can decide the right move for your business and go the ecommerce route with warehousing and virtual staff, brick and mortar with in-person customers, an ecommerce store with an office, or a combination. There is no right or wrong way to do it, but you need somewhere to start and this guide will help.

• Picking your type of store 

• Legal documents and services 

• Tech and operations stack (ecommerce, point of sale, etc) 

• Marketing tools 

• Setting up in-home logistics 

• Financing 

Picking Your Type of Retail Store and Primary Products 

If you already know the type of retail store you want to open, you still need to pick which products to go to market with first. You could have a bakery and need to decide between breads, cookies, or cakes. If you go with cakes they can be divided into cupcakes, regular cakes, and custom order cakes, but not all three from the start as you may be limited on space.   

Novelty clothing shops with custom graphics could technically print on demand to increase storage and capacity, but the quality control and on-time shipping becomes an issue. Tie-dye shops will face issues with stocking inventory for each type of product as it becomes too expensive, and home-based tie-dye businesses may not have space for sweatpants, t-shirts, and hoodies until they begin to expand. This is where picking your primary products comes in. 

1. Figure out how much demand there is by using Google’s keyword planner to see total demand (short sleeve t-shirts vs. crew neck t-shirts vs. hoodies). The larger the number, the more people are actively searching. 
2. Talk to your current customers or people who have been telling you to go into business and see if you can find any similarities in the products they purchase. This includes colors, sizes, and the ways your customers use them so you can narrow down which products from your research have demand and that your current demographics (not future as you grow) will want to purchase. 
3. Take this information and look for upsell products and complementary products that don’t take too much floor space or storage and can help increase your profits on first sales.  They can also give a repeat customer something new to purchase when they come back. This could be handwritten messages on sugar cookies and cakes vs. the standard ones on sale. You only need to store the piping bags and tips. 

 This can help to determine which products you should start with so happy customers can start marketing you via word of mouth to their friends and family, and so you can find similar groups of people to turn into customers. 

Legal Documents and Services 

Once you know what you’re going to sell, you’ll want to protect your business and personal assets in case something goes wrong with the products and services. In addition, there will likely be licenses, permits, and paperwork that needs to be drawn up. This is when you’ll need to do the legal work to establish your business as a legal entity. Some of the types of documents and services you may want to evaluate are: 

• Forming an entity (becoming an LLC, C corp, or an S corp instead of being a solopreneur) which helps to separate business and personal assets to protect your personal assets if something happens. 

• Privacy policy and terms of use are going to be vital for your website as they’ll say how you protect and collect information, and the things people must agree to while they’re on your website.  

• Insurance policies are there in case something goes wrong as a way to protect and buffer expenses from damage, lawsuits, and potentially natural disasters like floods and fires.  

• Accounting and bookkeeping software helps you manage invoices, receipts, and expenses so tax time becomes easier. 

• An EIN is required when hiring employees, operating as a corporation, or paying taxes via your business.   

• Trademarking your business name and getting a service mark if you have a unique service can help to prevent others from trying to take the brand you’re building away from you because you own the rights to it once it is done. 

• Licenses, registrations, permits, and certifications may be required by the city, state, or federally for you to operate legally. Check with your local city website as well as the state and federal websites to see what is required for your retail business. 

Tech and Operations Stack  

Now it’s time to figure out how to power your business both physically and digitally. You’re going to want to look at a combination of the following: 

• Website providers and hosts if you have a service-based retail business or do custom orders, and ecommerce systems so customers can shop.  

• WordPress, Squarespace, Wix, and Webflow can all be good options for custom order and service-oriented home-based retail businesses. 

• Shopify, BigCommerce, and WooCommerce (with WordPress) all offer small businesses an easy way to build an online store, and they come with a point-of-sale system. 

• Point-of-sale systems are important as this is how customers pay you and keep parts of your operations going. They’re responsible for taking payments, managing inventory levels, and tracking sales data in real time. Some can store customer information for loyalty programs. 

• Shipping and delivery is the next operation to tackle as you want a provider that is dependable and affordable. Both local and national shipping companies offer specials and deals, so once you find a couple that are reliable, look who has an offer for new customers and give them a try as a way to save money.   

 Pro-tip: Free shipping is normally more attractive to customers than a percentage off, so having a shipping partner that works within your margins can be key to getting new and repeat customers to shop. 

Marketing Tools 

Your marketing budget will be tight and your efforts may be limited to word of mouth as you start, but that doesn’t mean you should bypass specific channels or services like email and SMS.   

Some ecommerce systems will come with built in email systems, but many won’t or they won’t be flexible, and your email and SMS list are the customers that love you and will likely come back to shop when you email them as they need more product. 

Here are some of the tools to look at first, then you can add more as your business grows. 

• Email and SMS (text messaging) systems like AWeber and MailChimp allow you to share when you have new product lines, are restocked, and when it’s time to reorder. 

• Customer Relationship Management (CRM) systems like Zoho manage your customer databases and may have this type of functionality built in. 

• Photography tools and lightboxes are going to make a huge difference when customers see your product on your website but have never seen them in person. The image helps to sell why they should trust a product they’ve never used, so at a bare minimum invest in a lightbox and you can always use your smartphone before buying an expensive camera. 

• Some tools like Canva make editing simple and have AI built in to enhance and show what your products or services can look like. This can include photo frames and wall art on a desk or shelf, and display platters or decor items on a dining room table.  

• Loyalty program software can be helpful for some types of retail businesses when there is a lot of competition and you cannot compete on prices for each individual order.   

• Social media scheduling tools like Hootsuite or Buffer are a time saver as you can load one image and message to the tool and schedule it to post to each platform automatically. 

Pro-tip: If you require local shoppers to pick up the product at your home vs. shipping, Google Business Profiles are free and can help bring customers to you. But this also means strangers arriving at your home. 

Setting Your Home and Business Up for Success 

As orders increase, your business will start to consume your home. Some entrepreneurs prefer to use a single room or a garage for their business, while others have an apartment and section off a dedicated space. It’s part of a practice called boundary management and can result in more productive work times as well as a better work life balance.  

Aside from setting up separate work and life spaces, keeping your inventory and supplies from eating away at your floor space is the next challenge. Here are a few tips for doing this. 

• Use vertical space vs. only floor space by incorporating floating storage and track shelving on your walls to keep floor space open.   

• Invest in flexible storage options that collapse and expand so you free up space when not in use.   

• Furniture that collapses like a desk that turns into a filing cabinet or folds flat against the wall when not in use keeps floor space clear for assembling packages before they ship. 

• The shape of your storage matters as well. Crates or square cubbies stacked in a rectangular arrangement reduce the surface area on top, compared to a pyramid stack, which reduces floor footprint but leaves more surface area exposed. 

• Build a small shed or workshop if you live in an area that allows it and you can help ensure it is climate controlled as a way to keep your work and home life separate, and your business from eating away at your living space. 

 Pro-tip: Make sure storage containers can withstand humidity, being banged around, and are durable to protect your inventory and supplies from getting damaged.  

Financing 

Bakeries need commercial ovens (including home bakers as they grow), and selling subscription boxes or crafts will need to restock inventory or bulk up on it as the first Q4 or seasonal shopping starts. Plan for your financing needs ahead of time so as the situations where you need extra cash arrive, you know exactly where to go. According to the US Chamber of Commerce website, funding and cash flow management are among the leading causes of a new business going under. 

 Self-financing, trade credit, and merchant cash advances may be difficult to access in the early stages since you’re just starting your home-based retail business, but these three funding options may be. 

• Small business loans can take a couple of days to a few weeks for approval (with large banks) depending on where you apply, and they spread the costs over a period of time making them easier to absorb cash flow wise, and they come in niche variations like inventory financing to let you increase stock that will take up to 6 months to clear or equipment financing where you want to spread the cost of the machinery over one to three years. 

• Business credit cards are perfect for smaller purchases that you will be able to pay back and don’t mind making an interest payment when you carry a balance. They also come with perks like cashback and points for travel that can be used to help your company grow.   

• Business lines of credit are similar to business credit cards with flexible spending for smaller purchases that get paid back quickly, but normally come with lower interest rates. Unlike a business credit card they cannot be used by a simple swipe or tap and may have a withdrawal fee for each usage.   

 Starting a home-based retail business is manageable when you have a plan from the beginning. The first step is to pick your products and inventory, then make your company legal. Now build your tech, marketing, and operations stack, and set up your home for operations while having a plan for getting the financing you’ll need at each stage. If you’re looking for financing, click here and tell us about your business, we’ll help get you the funding your new home-based retail business needs. 

National Funding does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors.