Guide
Retail business plan for a Jeddah shop
Retail plans live or die on two numbers: sales per square metre and inventory turns. Rent and stock absorb cash faster than most founders expect.
A retail plan has to show three things: that the location produces enough footfall, that the margin per sale covers rent and staff, and that inventory does not consume the cash the business needs to operate.
Footfall is an assumption, not a fact
Unless you have counted, footfall is an estimate. Count it. Two hours on a weekday and two on a weekend, at the times you expect to trade, gives a far better basis than a broker's opinion.
Then convert:
| Input | Value |
|---|---|
| People passing per hour | |
| Share entering the shop | |
| Share of visitors buying | |
| Average transaction value | |
| Resulting sales per hour |
State conversion assumptions openly. A plan claiming 30% conversion in a mall with heavy passing trade will be questioned.
Margin per square metre
Rent is usually quoted per square metre, so revenue should be too. That comparison reveals whether the category can carry the location.
| Metric | Formula |
|---|---|
| Sales per sqm | Annual revenue ÷ retail area |
| Rent per sqm | Annual rent ÷ retail area |
| Rent as % of sales | Annual rent ÷ annual revenue |
| Gross margin per sqm | Gross profit ÷ retail area |
If rent takes a share of sales that leaves nothing after staff and stock, the site is too expensive for the category — regardless of how good the position looks.
Inventory and cash
Stock is cash in another form. The plan needs:
- opening stock budget by category;
- supplier lead times and minimum order quantities;
- reorder points;
- expected sell-through and markdown policy;
- seasonality and end-of-season clearance.
A shop that sells well but reorders badly still runs out of cash. The cash flow statement should show inventory purchases and the timing of receipts.
Staffing the floor
Coverage depends on the format: assisted selling needs more staff than a browse-and-pay store. The plan should show:
- headcount by shift;
- peak trading hours;
- security and cash handling;
- returns and after-sales handling.
Location and lease
The lease is a multi-year commitment. Before signing, the plan should test:
- rent escalation clauses;
- service charges and fit-out contribution;
- permitted use and exclusivity;
- exit and assignment terms;
- the fit-out period before trading starts.
Commercial registration, municipal licensing and sector-specific permits should be confirmed with the relevant authority. This page does not assert specific requirements.
What the plan should contain
- Concept and category positioning.
- Location analysis with counted footfall.
- Range and pricing architecture.
- Supplier terms and lead times.
- Inventory plan and markdown policy.
- Staffing and operating hours.
- Fit-out budget and timeline.
- Three-year projections with monthly cash flow.
- Downside case at lower conversion.
- Risks: lease, stock obsolescence, competitor entry.
Common failures
- using broker footfall figures without checking;
- ignoring markdowns and shrinkage;
- ordering too much opening stock;
- modelling a full year of trading from day one;
- forgetting the fit-out period, when rent is paid but nothing is sold.
See financial modelling for the cash-side build, or business plan writing for the full document.
The three numbers that decide a shop
| Number | Why it matters |
|---|---|
| Sales per square metre | Whether the location can carry the rent |
| Inventory turns | How much cash is trapped in stock |
| Gross margin after markdowns | The real margin, not the sticker margin |
A shop can hit its sales target and still fail because the stock bought to achieve it consumed the working capital.
What to prepare before commissioning a plan
- the lease terms, including service charges and escalation;
- counted footfall at the target location;
- supplier price lists and minimum order quantities;
- an opening stock budget by category;
- expected markdown and shrinkage rates;
- fit-out quotes.
The footfall count is the input most often skipped. Two hours with a clicker on a weekday and a weekend will change the plan more than another page of market description.
Markdown and stock ageing policy
Inventory loses value with time. A plan should state the policy rather than leave it to instinct:
| Age | Action | Margin effect |
|---|---|---|
| 0–30 days | Full price | Planned margin |
| 31–60 days | Bundle or modest discount | Slight reduction |
| 61–90 days | Markdown | Reduced margin |
| 90+ days | Clearance or write-off | Loss |
The financial model should include a markdown provision, not assume everything sells at full price. A shop that sells 85% at full price and 15% at a 40% discount has a materially different gross margin from one that assumes 100% full price.
Shrinkage and security
Shrinkage — theft, damage, administrative error — is a real cost in retail. The plan should carry an allowance based on the category and the location, and the operating plan should describe the controls: stock counts, tagging, cash handling, camera coverage.