This article is meant to be a very rough outline in the process of starting up an e-commerce based clothing store or boutique. In the high-paced and competitive world of fashion retail setting up your store is just the first step and quite honestly has little bearing on how successful your store will actually be. For example, Bluefly.com has an estimated monthly traffic of 840K, but since going public in 1998 has never made a single year of profit. As of December 31, 2009, Bluefly has an accumulated deficit of $147,468,000. Your guess on how they remain in business is as good as mine, but think of it this way. Even if you only make $1.00 of profit your first year of business, then you are technically doing better than Bluefly.
Please note, many of these steps can be done concurrently. For example, while you are filing your legal forms, you can work on your web design. This is especially true if you are depending on a third-party to design and set-up your website. They may work on a longer time frame than you initially anticipated. I do highly suggest that you just focus on the business plan initially. For example, if you decide that you are going to design your website with a specific concept while you write your business plan, then you just might find after researching that your concept is not what you’re going to move forward with. In this case, you probably spent 40-60 hours on non-productive output.
1. Write a business plan.
To be honest with you, when my girlfriend and I launched our website, we did not have a business plan, but we did write one eventually. The simple fact is that if you are planning for success, then you must write a business plan sooner or later. In business school, you write it sooner than later. The business plan is important because it forces you to do research about the industry, your competitors, and your resources. Additionally, it forces you to think deeply about how you are going to succeed in this highly competitive industry. If you think that you are going to be just like Modcloth, then why would you expect to be successful compared to Modcloth when they are working with millions of dollars of venture capitalist funds for a workforce, marketing, inventory, etc. I don’t have an answer for you, but my point is that you have to come up with a plan before investing your life’s savings into this new venture. Also, the business plan is important because it also forces you to estimate how much money you will need and where that many is coming from. The reality is that unless you have no credit card payment methods Los Angels real background in finance, you will not be able to build a 5-10 year projected Discounted Cash Flow Model and figure out your WACC, but having some kind of rough idea of your cash flow is better than nothing.
You should also include a plan on how you are going to initially set-up your website. For example, using a subscription-based shopping cart will change your budget than if you decide to use an open-source shopping cart. Also, you should also do your initial research on web hosting companies since they can range from $10/month to over $300/month. My only suggestion is that you get the fastest and most reliable that your budget will allow. Please note, that all I’m suggesting is that you plan what you are going to do as far as web design and hosting is concerned, not that you go out and pay for these services right now. The only expense that you may want to consider at this moment is that for registering a domain name. That’s because they are relatively inexpensive to register and you don’t want to possibly miss out on registering your wanted domain.
You should come up with a budget and plan for marketing, public relations, and search engine optimization. These will most likely be your largest expense heading into the future. Remember, buying inventory is not an expense, it is an asset.
Last, but not least, you also want to plan on order fulfillment. This is just a fancy way of saying how you are going to pack and send your product, as well as what return procedure and policy you will have in place. Will you use USPS, UPS, FedEx, or DHL? Will you have free shipping, returns, and/or exchanges? These are all things that should be planned for, though will change over time.
2. Apply for a Employer Identification Number with the IRS
Once again, if you are planning for success in the future, then you are going to have to run your business legally. You will need an EIN to open a bank account, apply for a business license, and get a seller’s permit. Just search “EIN” in the Google search engine and the IRS website should be the first result. When applying for your EIN, you will need to know the legal structure of your business. For example, if your business is going to be a one man or woman show, then you are going to apply as a sole proprietor. If it turns out that you and your mom are going to run the business, then you may choose partnership or decide to incorporate.
Pick your fictitious business name, “Doing Business As,” and file it with your county clerk
One of the more exciting step in setting up your business will always be picking a name. My girlfriend and chose T.I.L. Darling because before we were officially a couple, she would tell me that in Thailand, her home country, that she and I could never go out alone as even friends. I told her, “This is London, Darling.” So, I guess our business name should technically be T.I.L., Darling, to be more grammatically correct. Once you have your fictitious business name, you need to make a pretty good attempt to make sure no one else is using that same name. Otherwise, years down the line when you are making money, you can expect a letter from a lawyer saying how they are going to sue the designer pants off of you.