Evaluating startup costs can be difficult for new retailers. If several of the steps to planning a business require you to have a retail business license, how will you obtain the necessary information to determine whether or not your retailing business plan is a viable one? The bottom line is many of the figures for the business plan will need to be estimates.
Luxury items and hand-crafted merchandise generally allow for higher markups, while your basic and essential products may have a smaller profit margin. Retail markup typically runs between 30 and 40 percent, depending on the industry segment.
Let's say you plan to sell a $19.95 item to your customers. That item will probably cost between $14 and $15 wholesale. Industry research, especially reports from trade associations, can offer some insight on what markup your retail segment uses. Shipping, handling, and any other expenses related to obtaining the merchandise should be considered in determining inventory costs.
