How to Start a Thrift Store
Are you interested in starting your own business? Although thrift stores and resale shops are not considered new business ideas, they do seem to flourish in every economy. They tend to do very well when the economy is down or unstable. These types of stores can generate a lot of sales, and can be considered for-profit or non-profit businesses. Thrift stores that are stocked with quality merchandise at a reasonable cost may find that their parking lots are always full of customers.
Thrift stores and resale shops are not dependent on one supplier for all of their merchandise, so it can take the owner determination, skill and planning to locate and maintain an inventory for shoppers. If you are a skilled buyer, and you are passionate about the retail industry or charitable causes, you should consider opening a thrift store of your own.
Preparation
The first thing you will need to decide is if you plan to operate the thrift store as a for-profit or a non-profit business. If you decide on for-profit, you will operate the store like any other retailer and pay taxes every quarter. You will also need to obtain a sales tax license from the secretary of state’s office in your jurisdiction.
If you want to operate as a non-profit, you will need to apply for a 501 c3. Your tax consultant can help you prepare the necessary information to receive tax-exempt status.
Creating a business plan will help explain how your store will operate. Be sure to include sections with the business plan that will stipulate how you will acquire inventory, your estimated payroll and projected profit margins.
The next thing you will need to do to prepare is find a location for your store. The location you select should have enough room to hold inventory, as well as a staging area for preparing merchandise for resale.
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Operation
Always make sure that your store has a steady supply of merchandise that is in good condition to sell. Items that are less desirable should be placed on clearance or discarded.
Donors should be provided with a tax receipts for their donations. The receipt should contain the estimated value of their donation. Also, check with larger retailers to see if they would be willing to donate distressed or discontinued items to your store in exchange for a donation receipt.
Look for stores that may be going out of business and are trying to get rid of merchandise. If you can purchase all of their remaining merchandise, they may be willing to give you a huge discount.
Tips and Warnings
If you receive a donation that you believe to be $500 or more, have a professional, certified appraiser value the donation for you. There are IRS statutes that must be followed for larger donations. The donor must be given an IRS form 8283. They will file this form with their tax return. For donations $5000 or more, you must offer an appraisal for the donors so it can be included with their tax forms.
Thrift stores are recession proof businesses. Keep a large inventory of saleable merchandise, thank donors for their contributions with tax receipts and follow the tax rules for your business to minimize stress and maximize your return.
