A woman working in a clothing boutique
ComplianceMay 14, 2024

How to start a clothing boutique business

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Small businesses are the nation’s largest employers, and boutique clothing and other retail stores make up a significant number of these companies. Unlike their larger competitors, boutique owners hand-pick and curate brands and designers unique to their location and marketplace. Local clothing businesses also offer more personalized customer service and can advise their clients about the best products for their needs.

If you are interested in starting a clothing business and have business acumen, access to capital, and fashion expertise, then all you need to know is how to get started and grow.

Here are key steps to starting a clothing boutique business.

Find your fashion niche

A niche can help you stand out in a crowded market and match your merchandise to the people who want what you sell. For example, your niche could be sustainable clothing, kids clothing, beach clothing, or fashion from local designers.

As you consider your niche, think about your values, and get to know your customers and your chosen market. What are your competitors offering? What is their price point? How are they marketing their business? Use these insights to craft a business concept that is unique and meaningful to you, but also conscious of consumer needs and preferences.

Develop a brand

Your brand needs to be relatable and easily recognized by shoppers. It should shape how your customers feel when they enter the store, visit your website, and interact with you on social media. And it should touch everything from your displays to your logo and shopping bags.

As you craft your brand, think about your mission, your niche, and your customers. For instance, a baby clothes store brand will be quite different to a sustainable clothing brand.

Write your clothing boutique business plan

Because you’ll have a lot of competition — both online and in-store — do your homework and develop a well-researched business plan. This will help guide your sales, marketing, staffing, and competitive strategy, and is essential if you want to secure financing.

Here’s a suggested outline for your clothing boutique business plan:

  • Executive summary: A brief overview of your business and why it will be successful
  • Company description: Provides detailed information about your business and explains your competitive advantages.
  • Product line description: Provide a list of your clothing store’s products. Explain their unique qualities, who they will appeal to, and why. Also detail how you will source your merchandise, names of suppliers and vendors, and wholesale costs.
  • Organization and management: How will your company be structured, and who will run it? For example, will it be a sole proprietorship, LLC, or S corporation? Who will be responsible for day-to-day management?
  • Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against? (Use the information you uncovered when deciding on your fashion niche.)
  • Financing plan: A description of your funding requirements, your detailed financial statements, and a financial statement analysis.
  • Marketing strategy: The sales and marketing section of your business plan is where you outline strategies to promote your business and to keep customers coming back.

Pick a business structure

The business structure you choose for your clothing business — whether it’s a limited liability company (LLC), corporation, or partnership — will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a structure that balances legal protections and benefits.

The four most common are:

  • Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
  • General partnership: A general partnership is the simplest variety of partnerships and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
  • Limited liability company (LLC): This is one of the most popular forms of a business entity in the retail trade. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
  • Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.

Tip: Choosing a legal structure for your clothing boutique is important, especially if you plan to borrow money to fund your business. Many business owners don't consider these points until the questions appear on the loan or licensing applications.

For more information on business entity structures, read Comparing company types.

Choose a business name

Naming your clothing store business may not be as straightforward as you think. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.

For more information on naming rules for different entity types, read Naming your startup business.

Register your business

Based on your location and business structure, you may need to register your business with your state and/or local government.

To do this, LLCs and corporations must register (online or through the mail) with the Secretary of State or business agency where they conduct business.

Importantly, if you choose to operate your business under a name other than your personal name — even if you are a sole proprietor — you will need to register that business name with state and/or local governments in a process known as filing a “doing business as” (DBA) name.

Get federal and state tax IDs

Before you can pay business taxes, you may need to register your clothing store business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)

An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.

You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.

File a beneficial ownership information report

If you decide to form an LLC or corporation for your clothing boutique business, you may also need to file a beneficial ownership information (BOI) report with FinCEN (U.S. Department of Treasury’s Financial Crimes Enforcement Network). This is a new federal requirement that went into effect on January 1, 2024. A BOI report contains information about the company and its owners. Take this quiz to see if your business may be subject to the new BOI filing requirement.

For more information, visit: Beneficial Ownership Information Report.

Open a business bank account

A business bank account and credit card keep your personal and business transactions separate. If you operate an LLC or corporation, maintaining a business bank account helps you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.

A bank account and credit card also help build business credit — something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.

Get licenses and permits

Most small businesses need some form of business license or permit to operate. These vary by business type, location, and regulations.

Typically, your clothing store business may need to obtain the following licenses and permits:

  • Basic business operation license: This is a license from the city in which your business will operate, or from the local county (if the business will be operated outside of the city's legal boundaries).
  • Sales tax license/sellers permit/resellers permit: This license/permit has many names and hose names vary by state, but it is required for the selling of almost all products and services.
  • Building permit: If you plan on remodeling or building a commercial space, you'll need to get a building permit.
  • Certificate of Occupancy: This document specifies what the building or facility where you locate your store will be used for and ensures it complies with all building codes.
  • Alarm permits: These permits are required for businesses having an alarm that is connected to a monitoring service.
  • Home occupation permit: Your local government may require this permit if your business is home-based.
  • Garment/apparel registration certificate: If you are involved in any part of the garment manufacturing process or hire employees or contractors to do so, you may be required to register with the state.

Visit your state and local websites to determine which licenses and permits you need. And be sure to manage your licenses over time, keeping track of when you’ll need to renew them.

Get insurance

Retail stores generally need to obtain general liability and commercial property insurance. These policies protect your business against risks and incidents, such as customer injury and property damage. Some landlords require proof of insurance before they agree to lease property.

If you have employees, most states require that you have workers’ compensation insurance.

Set up a point-of-sale (POS) system

Before you can accept payments from customers and deposit proceeds into your bank account, you’ll need to set up a POS system. Do your research. Modern POS systems can do much more than transactions. They can help you track customer loyalty, manage inventory, monitor sales performance, manage staff, and support your marketing efforts.

Market your business

There are many ways to market your clothing business. Revisit your business plan and match your marketing strategy to your target market. Here are some ideas to incorporate:

  • Build a stand-out website: Be sure the site is search engine optimized (and thus more likely to show up early on Google search results). Use high-quality images. Make sure the website has the ecommerce capabilities you need in order to run your store efficiently and securely.
  • Claim your business profile online: Whether it's Yelp or Google, claim, monitor, and manage your business listing.
  • Be active and engaged on social media: Build a presence on Instagram, Facebook, Tik Tok, and/or Twitter. Share your latest fashion products and information about special events and promotions. Use hashtags so that you and your customers can cross-promote your products and engage as much as possible. Consider using paid ads to promote product lines and link them to your ecommerce site.
  • Leverage email marketing: Email remains one of the most successful marketing tools in any small business owner’s toolkit. Your subscribers have signed up, they want to hear from you, and their inbox is less likely to be as full as their social media feeds. This is your chance to shine. Share product announcements, email exclusive offers to subscribers, solicit reviews, and tease upcoming happenings.

Frequently asked questions about clothing boutique businesses

How much does it cost to open a clothing boutique store?

The average cost of starting a clothing store business is $50,000. However, the actual amount depends on where your business is located, the goods you sell, your marketing spend, and so on.

To calculate the true cost, consider how much money you’ll need to purchase inventory, pay rent, obtain insurance, fund your marketing activities, furnish and decorate your store, buy equipment, and make payroll.

How profitable is a clothing boutique business?

Gross profit margin in the retail clothing business is around 50%. But the number that really matters is net profit margin. This is the number you arrive at after deducting all the costs of doing business (taxes, bills, inventory, payroll, etc.). Typically, this number fluctuates between four and 13%.

When it comes to salary, ZipRecruiter finds that most boutique owners claim a salary between $31,500 and $98,500.

Where do I find clothing suppliers?

You have several options for finding suppliers.

First, research supplier directories, wholesaler or manufacturer websites, and supplier matching agencies (who can hook you up with the right supplier). One example is Makers Row, a well-known platform that connects retailers with vendors and suppliers in the fashion, clothing, and jewelry industry.

Another option is to attend trade shows so you can meet vendors in the retail industry, sample their products, and network. If you’re trying to keep costs low, limit your trade show attendance to your local area or region. These events will often feature suppliers in your area, which will reduce logistics costs when it comes time to place an order.

How do I price my clothing?

Retail clothing is typically priced using the keystone markup method where you multiply the wholesale price by 2 or 2.5 to cover taxes. For example, if you buy a range of dresses wholesale for $10 per garment, the retail price would be $25.

Another option is to arrive at a recommended retail price that considers your desired profit margin. If the cost price for a dress is $10 and you want to make 50% profit, then your mark-up on that item would be $10 and the retail price $20.

Learn more from BizFilings

BizFilings is dedicated to making starting a business easier so you can focus on doing what you love. For more information, check out our state guides for LLCs and corporations.

small business services

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Molly Miller
Manager, Customer Service
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