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How to Start a Clothing Boutique

Updated on January 15, 2022

How to Start a Clothing Boutique

How to Start a Clothing Boutique

Serious shoppers tend to prefer stylish boutiques, with their unique products and personal service, over big department stores. The US clothing boutique industry has been growing steadily for years and is now worth more than $18 billion. If you’re a fashion lover with an eye for trends, you could get a piece of this vast market with your own boutique.

Challenges exist, however, when starting any business, and success requires a good plan, knowledge, and diligence. Lucky for you, this step-by-step guide provides all the information you’ll need to start your entrepreneurial quest into boutique clothing.

Fast Facts

Investment range

$34,650 - $134,100

Time to build

3 – 6 Months

Industry trend

Growing

Revenue potential

$730,000 - $1,460,000 p.a.

Profit potential

$87,600 - $175,200 p.a.

Commitment

Full-time

Step 1: Decide if the Business Is Right for You

white card with text Pros and Cons with metal pen on gray background

Pros and Cons

Every business has its pros and cons, and a clothing boutique is no exception. You should carefully consider these to help you decide if the business is right for you.

Pros

  • Scalable – One successful store can lead to more
  • Word-of-Mouth Power – Satisfied customers tend to spread the word!
  • Creativity – Your shop will be an expression of your style
  • Purchasing — Essentially, you’ll get to shop for a living!

Cons

  • Trends – You may be stuck with merchandise when trends fade
  • Staff Loyalty – Boutiques tend to have high turnover

Industry trends

Market analyst IBISWorld values the US clothing boutique industry at over $18 billion and expects 2% growth in 2021. Recent economic forecasts for the next few years envision sustained growth, which is positive for the industry, as boutiques tend to perform better in boom times.[1]https://www.ibisworld.com/industry-statistics/market-size/clothing-boutiques-united-states/

Stylish but practical clothing is one of the latest trends, items that are fashionable but comfortable, such as a light, loose dress or attractive shoes without heels. Streetwear, which is casual but fashionable clothing such as designer t-shirts or sneakers, is a fast-growing market segment and is expected to continue its expansion.

Celebrities like Rihanna and Maria Menounos are often seen in high-fashion streetwear, which is strongly influenced by pop culture. But the hottest fashion trend of the past decade is probably activewear, as leggings, yoga pants, sports bras, and crop tops have gone from the gym to the mainstream.

This segment has grown exponentially, and covid-19 only accelerated the trend, with people working from home driving more sales. Expect to see activewear and athleisure clothing to show up more and more in boutiques in the years ahead.[2]https://theconversation.com/sure-theyre-comfortable-but-those-leggings-and-sports-bras-are-also-redefining-modern-femininity-156956

How much does it cost to start a clothing boutique?

Startup costs for a clothing boutique range from around $35,000 to over $130,000. The largest expenses are for store preparation and initial inventory. Of course, the smaller your boutique, the lower your startup costs.

Start-up CostsBallpark RangeAverage
Setting up a business name and corportation$150 - $200$175
Licenses and permits$200 - $300$250
Insurance$100 - $300$200
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Location security deposit$3,000 - $10,000$6,500
Store preparation and decor$5,000 - $20,000$12,500
Initial Inventory$25,000 - $100,000$62,500
Total$34,650 - $134,100$84,375

How much can you earn from a clothing boutique?

The profit margin for retail clothing usually runs from 4% to 12%. But good news for you: high-end boutiques tend to have higher mark-ups, so we’ll assume a margin of 12% for your shop.

In your first year or two, you might make an average sale of $200 and do 10 sales per day, bringing over $600,000 in annual revenue. This would mean about $75,000 in profit, assuming that 12% margin. As your brand gains recognition, sales could climb to 20 per day. With expected annual revenue of nearly $1.25 million, you would make about $150,000.

You can use Step By Step’s profit margin calculator to examine the exact figures.

What barriers to entry are there?

There are a few barriers to entry for a clothing boutique. Your biggest challenges will be:

  • Startup costs – Building inventory and renting out space can be expensive
  • Location – Finding the right location is critical, and top locations are pricey
  • Building a brand — Drawing those initial customers is often difficult

Step 2: Hone Your Idea

Now that you know what’s involved in starting a clothing boutique, it’s a good idea to hone your concept in preparation to enter a competitive market.

Why? Identify an opportunity

Research clothing boutiques in your area to learn their offerings and prices, and what does well. Based on local and national trends, as well as your own personal tastes, consider which items might do best. Next, seek out a good location for your boutique. You should look for an area with other retail outlets but little direct competition. In general, you are looking for market gaps to fill.

What? Determine your products or services

You’ll need to determine whether you are going to carry men’s or women’s clothing, or both, and whether you’ll also sell shoes, jewelry, and other accessories. Then decide if you want to sell activewear, streetwear, evening clothes, vintage, business attire, or some combination of these. Your shop’s focus may need to change as fashion trends evolve.

How much should you charge for clothing?

Prices vary and will depend on what kind of clothing you’ll sell. A typical markup for clothing is 2-2.5 times the wholesale price. So if you buy a dress for $50 wholesale, you should sell it for $100-$125. You also need to consider other expenses, such as staff and rent, and determine your prices based on your target market and expected margin.

Once you know your costs, use the Step By Step profit margin calculator to determine your price points.

Who? Identify your target market

Your target market will be completely dependent on what items you decide to sell. If you decide to sell high-end women’s clothing, your target market will be more established women. You can most likely find them on sites like Facebook and LinkedIn. If your clothing is high fashion, you might also find younger customers on Instagram.

Where? Choose your business premises

Your location is absolutely critical. You need a location with high foot traffic, preferably with other shops targeting a similar demographic that aren’t direct competitors.

You’ll likely need to hire workers for various roles and will need to rent out a storefront. Find commercial space to rent in your area on Loopnet, Craigslist, Crexi, and Commercial Cafe.

When choosing a commercial space, you may want to follow these rules of thumb:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed
Should You Start a Clothing Boutique Business

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better
  • The name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “clothing” or “boutique”, boosts SEO
  • Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step business name generator

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names at a web cataloging site such as NameChk. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. And if you’ve exhausted all your creative juices but still don’t have a business name, don’t stress! Instead, check out our business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your offerings in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer on Fiverr to create a professional business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to a clothing boutique.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your clothing boutique will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the four main options:

  • Sole proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. 
  • Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the pre-tax profits and are liable for losses.
  • Corporation – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
Business structure comparison infographic

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online. It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
  • Crowdfunding: Websites like Kickstarter and GoFundMe offer an increasingly popular low-risk option, in which donors fund an entrepreneur’s vision.
  • Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.

Step 8: Apply for Licenses/Permits

Starting a clothing boutique requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.

You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. You could also check this SBA guide for your state’s requirements.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.

Step 9: Open a Business Bank Account

Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your clothing business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Step 11: Prepare to Launch

Red pen marking on checklist box in a spiral notepad on red background.

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

You can create your own website using services like WordPress, Webflow, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You can use industry specific software to manage things like inventory such as Manhattan, Brightpearl, or ApparelMagic.

Marketing

Some of your business will come from the casual passerby or online visitors, but still you should invest in marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Equipment

You’ll need a handful of items to successfully launch your clothing boutique. Here’s a list to help you get started:

  • Stylish clothing and accessories
  • Racks and shelves
  • Checkout counter
  • Point-of-sale (POS) system

Step 12: Build Your Team

With a clothing boutique, you’ll likely need workers right off the bat to fill various roles. Potential positions for a clothing boutique would include:

  • Store Clerks – make sales, stock clothing
  • General Manager – order inventory, scheduling, staff management
  • Marketing Lead – SEO strategies, social media, other marketing

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Step 13: Start Making Money!

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your clothing boutique meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.

Some signature USPs for your clothing boutique could be:

  • Fine clothing and personal styling
  • Great style, for work and play!
  • Streetwear to keep you going
USP venn diagram

Kickstart Marketing

Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

  • Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as 20% off for the first 3 customers.
  • Optimize calls to action – Experiment with text, color, size, and position of calls to action such as “Buy Now”. This can sharply increase purchases.
  • Signage – Put up eye-catching signage at your store and website
  • Flyering – Distribute flyers in your neighborhood and at industry events
  • In-Person Sales – Offer your products/services at local markets, trade shows

Build Affiliate Relationships

Affiliate marketing is advertising in which you compensate third parties (i.e. your affiliates) in order to generate traffic to your website. You can develop long-term relationships with these affiliates and generate traffic for each other on an ongoing basis.

Wrap-up

Starting a clothing boutique is exciting! You have a lot of profit potential, and you get to shop, and sell clothing, for a living. You could eventually open other stores and build a fashion empire. It’s a big industry, and with the right plan in place you can capture your share of the market. You’ve taken the first step and gathered the right information, so now you’re ready to start your entrepreneurial journey and build a thriving clothing boutique!

Clothing Boutique Business FAQs

Do I need a license to have a clothing boutique?

There is no specific license required for a clothing boutique. Your state and local governments may require certain licenses and permits, so you should check with them for requirements. You will at the very least need to have a sales tax license.

How much does it cost to start a clothing boutique?

Your startup costs will depend on the size of your store, your cost of inventory, and your location. You may be able to start a small store for as little as $30,000 if you keep costs low.

What kind of location should I choose for my clothing boutique?

You should choose a location that has other retail stores that cater to your target market, but are not direct competitors. High foot traffic is essential.

How do I choose products for my clothing boutique?

You’ll want to follow trends in the market. A good way to do this is to keep a close watch on pop culture, because fashion tends to follow the latest pop styles. You may need to regularly update your products to stay on trend.