New York City is a bustling urban metropolis with a population of roughly 8.4 million people. With so many potential customers at your doorstep, it can make sense to start a business in the Big Apple. However, before you even come up with a name or start looking for commercial space, you need to know what to expect.
So, let's break down what it takes to start a brick-and-mortar business in New York City in 2024. This guide will cover everything from ideation to opening day, although the specifics of your business plan will vary depending on what you want to sell and who your target customers are.
A brief overview of starting a business in New York City
No matter what, starting a business is a daunting task, especially when you're investing in commercial real estate. While it's never been easier to start an online business, brick-and-mortar storefronts are still the lifeblood of the local economy. However, when trying to start a business in New York City, there are a few things to keep in mind.
High rent costs
New York rents are something of a meme at this point, with apartments costing well over $2,000 per month for just a few square feet of space. As a commercial entity, your costs will be even higher, as the average price per square foot can easily exceed $800 annually. So, if you find a 1,000-square-foot shop, you can expect to pay over $800,000 in rent for the year, or almost $67,000 per month.
That said, if you're strategic about where you open your storefront, you can sometimes pay a lot less. Also, consider starting your business in a smaller location and expanding once you build a strong customer base.
Foot traffic and parking
Most New Yorkers don't bother owning a car because it's far too expensive and impractical. So, most of your customers will be walk-ins. However, if you're selling items that aren't easy to carry (like furniture or appliances), you must deliver them to their home address.
If delivery is a big part of your business model, you have to consider what it takes to keep delivery vehicles and drivers on hand. While you can outsource these services, consider how much that will eat into your bottom line.
Aging buildings and infrastructure
Because New York is an old city, it has a mixture of old and new construction. When searching for a place for your brick-and-mortar business, you may have to settle for an older building, which can come with various headaches and oddities. For example, you may not have a service elevator, so if you need to accept deliveries or move heavy equipment, you must plan accordingly.
Overall, starting a retail business in New York City is not impossible, but it comes with unique challenges that you won't experience in other cities. As long as you take the time to evaluate the pros and cons of each factor, you should be able to minimize any downsides so they don't upend your bottom line.
How to open a brick-and-mortar store in New York City
Now that we've covered the unique aspects of starting a business in NYC, let's break down the steps you have to take to get your company off the ground.
Develop your business idea
First and foremost, you must make sure your business is something about which you're passionate. Imagine working long hours on various details about your business every day, even on the weekends. Does it seem like a slog, or will the work keep you invigorated and inspired?
However, the idea must also be profitable. Since you'll have much higher overhead costs (like rent and utilities), you must be able to price your products or services accordingly.
As a rule, customers are okay with paying extra for added value, but you must make sure you provide the right amount of value that they expect. Otherwise, it'll be hard to get repeat business, which is essential for long-term success.
Finally, consider whether you'll need to hire employees. While you may be able to handle all business duties yourself at first, how quickly will you have to hire others to help with the workload? Also, will these workers have to be onsite, or can remote employees handle various tasks like accounting and marketing?
Location, location, location
As we mentioned, commercial rent prices in New York City are remarkably high, especially when compared to the rest of the country. However, it may be worth investing in high rent expenses if you're in a prime location with a lot of foot traffic and potential customers. For example, you may have to pay $80,000 monthly rent, but what if you could earn $200,000 a month from sales?
Other aspects of your location to consider include:
Parking - Is it easy for customers to park nearby if necessary? Will parked cars prevent customers from getting in and out of your business easily?
Crime and safety - Are there break-ins in the area? How safe are the streets after dark? Are there many homeless people nearby?
Adjacent businesses and buildings - Are you opening a business in a residential district or a shopping center? What other stores are around yours, and do they complement your business model? Does the area get crowded at a certain time of day or week?
Advertising - Can you put up signs in front of the building? What about on the sidewalk? How easy is it to promote your business to passers-by if necessary? Does your storefront have large windows you can use as billboards?
Infrastructure - What is the area around the building like? Are there cracks and potholes in the sidewalk and street? Are any of these conditions dangerous for pedestrians or vehicles?
Do demographic and market research
Another critical aspect of location scouting is to determine whether the people in the area are interested in your kind of business. For example, if you're in a commercial district, your foot traffic will likely be mostly office workers and other people working day jobs in the area. So, at night, the district might be a ghost town, meaning it wouldn't make sense to stay open late.
Conversely, if you're close to a residential neighborhood, it may make more sense to have later hours and be open on the weekend. Depending on the nature of your business, will people want to stop by your store on the way home?
Also, consider the types of people living and working in the area. Pay attention to demographic elements like median income levels, family status, cultural background, and education levels. Ideally, you can set up your shop in an area where many potential customers will take an immediate interest in what you're selling.
Don't forget competitor analysis
No matter which part of NYC you open your storefront in, there will be competition. If you're opening a convenience store, there's likely another store a block or two away. If you're opening a restaurant, there are literally thousands of restaurants within the city. So, you must look at what else is in the area and how you can compete with them.
For example, are most of your nearby competitors other small businesses or major chains? As a rule, larger companies can afford better ad campaigns and customer service, so you have to develop creative ways to increase your market share.
Perhaps you take a more customer-centric approach to your business, or maybe you offer unique products that one can't find at a chain store or restaurant.
Create a comprehensive business plan and model
A business plan should consist of the following elements:
Executive summary - A high-level overview of your business and why it will succeed.
Company description - A breakdown of how you plan to make money (i.e., selling food or retail products).
Market analysis - What is the market like in your area, and how much of the market share do you plan to capture?
Organization and management - Who are the members of your business, and what are their responsibilities and expertise?
Service or product line - A more detailed overview of what you plan to sell.
Marketing and sales - A breakdown of how you plan to promote your business.
Funding request - How much capital do you have on hand, and how much do you need to start and run your business in its first year?
Sales projection - How much do you expect to make in the first five years, and what kind of growth do you anticipate (and why)?
The more time and resources you devote to building your business plan, the easier it is to succeed. You'll also need all of these elements to secure a business loan or get funding from individual investors.
Create the right business entity and structure
When forming a business, you have four unique entity options:
Sole proprietorship - If you're the only person working and running the business, this may make sense. However, all business debts and liabilities pass through to you, so there's no separation.
Limited Liability Company (LLC) - LLCs offer a lot of flexibility regarding how you structure your business and how limited your liability will be. In this case, an LLC may make the most sense, especially if you don't have other partners helping you launch your company.
Partnership - A partnership only exists between two or more people listed in a partnership agreement. This option can get messy, particularly if one or more partners wants to leave or renegotiate their position within the company.
Corporation - Corporations offer the best liability protection, but they can also be the most expensive and complicated to set up. If you form a C-Corp, you have to pay taxes twice. An S-Corp allows pass-through earnings, but you must meet specific requirements.
Get business insurance
Since you're opening a brick-and-mortar store, you must get business insurance to protect your assets. Your policy should cover the retail space, your inventory (including any equipment you use like computers or machinery), and your employees.
You should also buy general liability insurance to protect against lawsuits. For example, if someone injures themselves while shopping in your store, you may be held liable. Without insurance, you'll have to pay legal fees out of pocket, which could derail your business.
Other types of business insurance that can provide peace of mind include:
Cyber Insurance - Protect your company online from cyberattacks.
Worker's Comp Insurance - If you have employees, you need protection in case they get hurt on the clock.
Auto Insurance - If you have workers driving company vehicles, you need a commercial auto policy.
Secure business permits and documents
New York has many different permits and certifications that your business may require. For example, running a liquor store requires different permits than running a furniture store. Similarly, if you sell live animals, you'll need unique documents compared to a store that sells fruits and vegetables.
Since each business requires different paperwork, the best option is to go through the "Step by Step" program offered by the City of New York. You simply answer a series of questions, and the site will tell you which documents you need to launch your business legally. Also, keep in mind that each of these permits comes with a fee, many of which require annual renewal.
Start promoting your business
Once you have everything set up and your business is ready, the final step is to start promoting your enterprise. You can use a mixture of physical and digital marketing tactics, such as social media advertising, storefront banners, signs, direct mailers, and more. As a rule, the more you invest in marketing, the faster you can build an audience and start earning a profit.
Overall, starting a brick-and-mortar business in New York City is a bit more challenging than doing so anywhere else in the United States. However, as the saying goes, if you can make it here, you can make it anywhere. With the right planning, funding, and preparation, success is inevitable.