So you want to set up a shop?

We've all thought about it, a few have tried, many have failed. A cautionary tale by Karen Falconer

Most of us have dreamt at some time of chucking in the job to start up our own business. And often that dream takes the form of setting up a shop. It seems as though there is a shop for everything, and a lucrative niche to suit every potential shop owner. What's more, you can be your own boss and move out of the city to a country town. It might be hard work, but for your own ends.

According to NatWest, there are now more new start ups in retail than in any other sector, and perhaps surprisingly for a nation which had long regarded shopkeeping as rather a inferior profession, a quarter of those taking the plunge come from managerial or professional ranks.

But, there's a risk that setting up shop is becoming a sort of modern- day equivalent to seeing the streets paved with gold, as Bernard Tennant, retail director of the National Chamber of Trade, warns. "A lot of people who've never been in retail think they'll open a little shop. It looks easy, but many people get their fingers burnt. A lot of people have lost a lot of money," he says.

Mr Tennant is not advising people to steer clear of retail. How could he? Everyone has seen the remarkable successes of Body Shop and a plethora of other new shops that have taken local high streets by storm. But, it doesn't alter the fact that 40 per cent of business start-ups collapse within four years - and the shop is no exception.

To succeed requires a more cautionary than cavalier approach, and however much you feel there's a market for the products you wish to sell, a clear- headed analysis is paramount: is the market you've chosen large enough to give you a living; who is the competition; what are the best profit margins you can achieve; how expensive will the right location be; can you afford any staff or can you cope alone; will you expand to achieve greater operating efficiency?

If you are after an easy life, forget it. The hours will be long; the weekends working.

Wax Lyrical

Majorie Bannister, co-owner of Wax Lyrical, has not had time to look back to her days as a banking consultant since opening a tiny candle shop in 1990. "I was fed up with banking and felt like pioneering something," says the 34-year-old who stumbled on the idea while working temporarily in Iceland for the national bank. "I was charmed by the way Icelanders used candles. Houses were completely lit by them, and were so much warmer than electric lights. In Reykjavik alone, there were two or three shops which just sold candles. But people in Britain didn't use them. I decided it was a supply problem: they were only available in grocery and back- street stores and were only promoted for use in emergencies."

Two months after her return to England, she left banking to open a 450 sq ft shop in the relatively inexpensive Richmond. Watching her costs, she spent a mere pounds 35,000 (from a government-backed loan for small businesses) on fitting out her shop and buying stock: she didn't even splash out on a computerised stock-control system. "You have to prove that you can afford to spend money by testing the idea," she says. "Three hundred people bought something on the first day. I was on my own, and couldn't work the cash register, so used a shoe box."

Within nine months, it was clear that Wax Lyrical (which launched the floating candle in the UK) had mass appeal, and she and partner, Mark Chessell opened another shop in Hampstead. Five years later, there are 30 Wax Lyrical shops, over 200 staff and a turnover of around pounds 8m. "Every year," she concludes, "I say we'll have it all sorted next year and we can relax, but it never changes. Now I've got a baby too, I don't even sleep."

Equinox

When Robert Currey set out as a commodity broker, it never crossed his mind that one day he'd be running his own astrology shop and mail order business. But as he began to climb the stockbroking ladder, he became increasingly interested in astrology and decreasingly motivated by trading sugar.

"One day I was walking across the room and it came to me. 'Why on earth don't I become an astrologer?' But, I couldn't work out how I could make a living," he says.

He carried on doing his day job for a few more months to raise some cash, and studied astrology as well as devising computer software in the evenings. Then, in the early Eighties, working from home with two staff, he set up a mail-order business to sell the astrological chart analysis he'd devised. "We were the first in the world with the concept," he says, proudly. Keeping his costs low, he built his business up over eight years to a regular client base of 20,000. He took a 300 sq ft shop in Neal St in London's Covent Garden. "It was ideal, as it had people from the West End, the City and overseas," he says. He extended his mortgage to pay for the premium of pounds 35,000.

His careful gamble paid off, and two years later, confident about Equinox's future, he bought the freehold on the shop next door, borrowing pounds 650,000 from a French bank. "Our overheads are very high," he says, "but you get what you pay for. If you have the right thing to offer, Neal St is a goldmine. If you don't, it's a nightmare."

For now, the 39-year-old is sticking with one shop, the mail-order business, and the royalties he gets on his chart analysis system. But is he glad he took the plunge? "It's very hard work and I'd have earned more money if I'd stayed in the City. But I'd have less security and capital and wouldn't have the benefits and freedom of doing my own thing."

Franchise owner

Five years after setting up a franchise, Francine Frazer (not her real name) is selling it. She has no plans to return to her previous job as office manager in a national newspaper. But she has decided that running a shop takes more than she is able to give: now she has two young children, she wants her Christmases and evenings back.

"Seventy-five per cent of the reason I'm selling is that I've got children; the rest because of difficult trading," she says.

Without a burning idea of her own, Ms Frazer and a business partner decided to try for a franchise. They were accepted. As their first preference for a location had been earmarked by an existing franchisee, they opted for an inner-city location.

Initially, in spite of the long hours and a bank loan of pounds 100,000 with a pounds 50,000 overdraft facility, everything was rosy: the business hit its sales targets and the partners opened another small shop for "economies of scale"."It's like being on a rollercoaster: once you get on, you don't think it's possible not to make it," says Ms Frazer.

But, then problems started. The franchisor opened a company-owned shop in a new out-of-town shopping centre. "We were down by the exactly the percentage they were taking," she says. To boot, as they were making staff redundant because of appaling Christmas sales (this period normally accounts for 40 per cent of annual turnover), she unexpectedly fell pregnant. She and her partner struggled on, working constantly, until Ms Frazer became pregnant again in November 1994. "The cost of going out to work was increasingly large," she says, and put the shop up for sale.

Ms Frazer is optimistic she's now found a buyer who will be able to raise the requisite pounds 200,000 for the franchise and also meet the franchisor's approval. "Perhaps I'll try again at some other stage," she says.

Useful information: Running a Shop by Gary Jones, NatWest Business Handbooks/Pitman Publishing, pounds 11.99; NatWest Bank, among others, runs a Small Business Unit to provide help with start-ups and business plans; most towns have a Chamber of Trade which can provide information on the local market place.

DOS AND DON'TS

Do:

- think hard: why do you want to be self employed?

- take a course in financial management.

- research your market carefully. Who are your customers? Is the market likely to change?

- draw up a realistic business plan; remember that profit is what you're left with after paying for everything.

- shop around to raise your cash. Interest rates vary widely.

Don't:

- rush into it

- borrow money to buy all the latest technology before you know it'll work.

- rush into a property. Ask yourself why the other person is selling.