What to Consider When Renovating Your Retail Business
Contributed by Kim Perkins.
Every retailer, at some time or another, wishes that their store space could be modified, even if they planned the layout from day one. Maybe an extra dressing room would be helpful, or removing a wall would give you the space you need to expand a certain section. But before you take a sledgehammer and start swinging, there are a few things that need to be considered.
The first step is to determine exactly why you are renovating. What do you expect to gain and are your expectations realistic? Will the changes hurt or enhance the natural flow of your store? How much will it cost and how will you finance it? And, finally, will the changes you create make you more competitive in the marketplace?
Why are You Renovating?
The most common reason retailers remodel their store space is to make it fresh and new and to better utilize the existing space. Perhaps you are looking to update your brand, make space for new merchandise, widen your aisles to accommodate more customers during busy shopping times, or simply refresh old, tired flooring and fixtures. Whatever the reason, advance planning, including a written plan and timeline, can help you avoid unforeseen costs and time delays.
What Do You Want Your Store to Look Like?
Unless you are a seasoned designer or contractor, this is the time to consider professionals you might need to hire. Will you need an architect? A lighting expert? A contractor who can obtain necessary permits? Would you benefit from the services of a retail design specialist who can advise on the best store layout for what you want to accomplish?
Make sure that you also consult the “professionals” close to home, namely your employees and customers. Your employees can provide valuable input because they are on the front lines and in the space every day. They know what works well and what doesn’t. They are also a wealth of information about what changes your customers would appreciate.
The planning stage is the time to be aware of hidden pitfalls. For instance, if you were not involved in the original construction of your space, are you sure that the carpet goes all the way underneath the fixture you want to relocate? If not, you want to know that now, not when you are in mid-renovation mode and find that the flooring needs to be replaced.
How Will You Finance the Renovation?
After you receive construction bids and add up your anticipated costs for the project, you will need to determine how you will finance your renovation. I highly recommend that, even after you have added up every cent you foresee spending, that you add an additional 15% to the total. Renovation projects notoriously cost more than you think!
If you do not have the cash on hand, there are other financing options available. I do not recommend the finance-on-credit-card-option. Talking with your banker about a 3-to 5 year loan with a reasonable interest rate and monthly payment makes more sense. Depending on the amount of the loan you are seeking, if you have decent credit (680 or higher credit score) and no recent bankruptcies, foreclosures or bank liens, you may want to investigate an SBA guaranteed loan through your bank. These can be used for leasehold improvements and don’t have to be collateralized if under $25,000, although this type of loan may carry a slightly higher interest rate.
How Will it Affect Your Business?
In the early stage of the project, you’ll want to weigh the cost of remodeling against the benefit in increased sales you hope to attain. If you are adding a clothing section, then constructing a dressing room makes good sense and will most definitely increase sales. However, if your children’s toy section is generating great sales per square foot, there is no guarantee that if you double the square footage, the same level of sales per square foot will be generated in the larger space. Again, just be sure that what you hope to accomplish is realistic.
The right remodeling job can definitely increase your sales. Customers tend to spend more in a store that exudes quality and updated style. Renovating can also create a “buzz” that attracts new customers as well as generate excitement in your current customer base. Just by investing time and money in a renovation project, you send a message to your customers that you have faith in your business longevity. With the right marketing campaign, especially if you have to close for a short time to make the changes, you can create anticipation and have customers clamoring to be the first to experience the improvements. Statistics show that in a small independent retail store, the sales increase in the year after remodeling can be as high as 43% for new customers and 7% for existing patrons.
What About Your Competition?
When you offer customers a fresh and creative shopping experience, you are offering them more than the competition. Just like the message about believing in the future of your store that renovation sends to your customers, your competitors will get the same silent memo. It’s always a good idea to be perceived as an innovative leader in your community. People take notice and they want to be associated with, and spend money at, a winning enterprise.
Contributed by Kim Perkins, a business consultant, author and national speaker specializing in retail, employee relations, and streamlining workplace systems. She owned and managed an award-winning retail store for 23 years, writes for Fit Small Business and retail trade publications, and offers consulting services to small businesses throughout the US.