Starting a sporting goods store can be an exciting venture for entrepreneurs with a passion for sports and fitness. The sporting goods industry offers opportunities to tap into the growing market for athletic and recreational products, though the path to establishing a successful sporting goods store extends beyond just a passion for sports.
To help evaluate whether this is the right business idea for you, this guide provides an overview of the business and steps to starting a sporting goods store.
Business Overview
A sporting goods store is a retail establishment specializing in the sale of all types of sports equipment and sports memorabilia for baseball, football, tennis, hockey, soccer, golf, and more. Products include balls, bats, pucks, hockey sticks, golf clubs, rackets, athletic apparel, shoes, protective equipment, outdoor gear, fishing gear, exercise equipment, and more.
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Industry Summary
The sporting goods retail industry generated $62.1 billion in annual sales during 2022, according to research from IBISWorld. The industry is expected to continue growing, driven by factors such as an increasing interest in health and fitness, a rise in outdoor recreational activities, and technological advancements in athletic gear.
Sporting goods stores serve a broad base of customers, from professional athletes to amateurs and weekend fitness enthusiasts. As such, the target market for sporting goods stores is vast and diverse. The stores appeal to people of all ages, genders, and socio-economic backgrounds who engage in various sporting activities. Regardless of the demographic you belong to, a sporting goods store is bound to have something that caters to your preferences. Sporting goods stores stock a variety of sporting equipment, which makes them a one-stop-shop for anyone who enjoys participating in sports or staying fit.
Stores range from small specialty shops to large format superstores like Dick’s Sporting Goods and Academy Sports + Outdoors. Independent stores make up the majority, along with regional and national chains. Competition is high, both from other dedicated sporting goods retailers as well as big box discount stores and online sellers. Success lies in offering quality merchandise, knowledgeable service, and a strong brand identity.
Steps To Start A Sporting Goods Store
Step 1: Research the Market
Starting a new business is always a challenging task, and when it comes to a sporting goods store, the challenge becomes even bigger. The sports industry is constantly evolving, and consumers have a wide range of options to choose from. To start a sporting goods store, your first step should be to assess the market demand and determine whether your store can meet the needs of the consumers. Let’s go over a few different ways to assess market demand and prepare you for a successful launch.
Identify the Target Customers
Before starting any business, you need to have a clear idea of who your target customers are. This is even more important for the sporting goods industry because there are several categories of sports enthusiasts. Do some research on the local community and identify the age range, income level, and interests of the people you want to target. Once you have identified your target group, you can design your store and products accordingly.
Study the Competition
What are your competitors offering that you can’t? What are the unique products and services that you can provide to attract customers? Studying the competition can help you identify the gaps in the market and fill them with your offerings. Take a walk around the local sports stores, look at their pricing, inventory, and marketing strategies, and take notes. This research will help you differentiate your store and stand out from the competition.
Analyze the Trends
The sports industry is never stagnated, and new products and services are introduced every day. You need to be agile and keep up with the trends to attract and retain customers. Learn about the latest sports trends, the events, and the tournaments happening in the local area, and the gear and products that are in high demand. By keeping up with the trends, you can stock your store with the products that your customers will love.
Step 2: Write a Business Plan
One important step in starting your new sporting goods store is to write a business plan. A business plan not only acts as a blueprint for the company and lays out the viability of the store, but it also helps in attracting investors and securing funding. While all of the sections are important, there are a few to focus on when approaching lenders or investors.
In the market analysis section of the business plan, demonstrate that there is a demand for the products you plan to sell. The section should outline the target market, identify key trends, and highlight how your business will stand out from the competition. This section should show that there is a gap in the market that your business will fill, making it more likely to succeed.
The management team section is used to see that the business has a capable and experienced team running the operations. This section should highlight the skills and expertise of the owners and any key employees to provide evidence of their previous successes in the industry or managing a retail store. Lenders are more likely to invest in businesses with a proven management team as this reduces the risk of failure.
In the location section, you should explain why the proposed location is ideal for your business. This section should include details on the local demographics, foot traffic, accessibility, and other factors that could impact the success of your business. Lenders want to see that there is a high potential for a return on investment due to the location.
The financial projections section may be the most important section for securing funding. This section should include detailed financial projections, cash flow statements, and revenue forecasts. Banks and investors will pay close attention to this section to determine the likelihood of whether the business will be profitable and can generate enough revenue to pay back any loans or investments. It’s important to have a deep understanding of these projections and be able to explain them.
Related: How to write a business plan
Step 3: Secure Funding
In the next step of starting a sporting goods store, there needs to be enough capital available to cover the startup costs. Funding can be one of the most challenging aspects of starting a business, and it’s crucial to explore all available options before moving on to the other steps.
The first source of funding to look at is the personal savings of the owners. The cost to start a sporting goods business can be high, so often, personal savings are not sufficient to cover the startup costs. In this case, outside funding sources will be needed. Some of the most common funding options for a sporting goods store include:
Lenders: Many entrepreneurs turn to lenders for funding. Banks and other financial institutions typically require borrowers to invest 15%-25% of their personal funds towards the total cost of the project, have a good credit score, and have sufficient collateral. If the bank feels the loan is too risky, they may require the entrepreneur to use an SBA loan guarantee.
Friends and family: Another source of funding is friends and family. While this can be a great way to receive financing, it’s important to put agreements in writing to avoid any misunderstandings down the line.
Microloans: For entrepreneurs who only need a small amount of funding or who don’t have access to traditional lenders, microloans can be a viable option. Some microloan organizations provide business training in addition to funding, which can be beneficial for first-time business owners.
Investors: Investors can also be a source of funding for a sporting goods store. However, it’s important to note that investors are typically local people who have an interest in your industry or support local businesses with higher net worth. It is rare for investors to invest in sporting goods stores as most investors are looking for high-growth and scalable businesses.
Related: Finding the money to start a business
Step 4: Acquire & Begin Setting Up the Store
After getting the funds and registering your sporting goods store, the next big step is finding and setting up your shop. This is when your plans start to become real, and you can see your vsion taking shape.
Getting the right spot for your store is important and it should match with the target market you identified in your business plan. Be sure your funding is in place before you sign any contracts for a property, as money can be denied or come in slower than expected. Also, check that the property can be used for a retail business like yours before moving ahead. This way, you avoid any legal problems later on.
Next, think about how you want to organize your store. You want to ensure that you make it easy for your customers to find the items they are looking for. Consider making a few mock layouts to determine which is most efficient for displaying your products. In some cases, you might want to follow a layout that resembles how your competitors organize their stores to keep a sense of familiarity for your customers.
Then, with the layout in mind, it’s time to start setting up the store. You’ll need shelves, display racks, a cash register, and other necessary items to make your store ready for customers.
Related: Choosing a business location
Step 5: Register the Business
After securing funds and getting the keys to the store, the next step is to ensure that the business is properly registered and made legal before opening the doors. The specific steps required to register a business can vary from state to state, but generally include:
Decide on your business structure: The first step is to decide on how the business is organized. Your business structure depends mainly on the number of owners, liability issues, and tax implications. As a business owner, you can opt for a sole proprietorship, Limited Liability Company (LLC), Corporation, or even a partnership. While each business structure has its own advantages and disadvantages, LLCs and corporations offer liability protection for their owners, meaning that the owner’s personal assets are generally protected in the event of legal action against the business. However, sole proprietorships are the easiest and least costly to set up.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Related: Finding a domain name for your business
Obtain business licenses and permits: While sporting goods stores don’t have specific licensing, they will need some general business requirements to follow. Depending on the location, these could include a business license, seller’s permit, occupancy permit, and Employer Identification Number (EIN).
Related: What licenses do sporting goods stores need?
Step 6: Source Suppliers & Purchase Inventory
Perpaps the most fun part of starting a sporting goods store is finding suppliers and beginning to purchase inventory. Finding reliable suppliers is crucial so you have the inventory needed to meet customer demand. Here are some tips for finding suppliers:
To begin researching suppliers, start with market research. This will help you identify the products that are in demand locally, and the price range for those products. Look at other sporting goods stores in your area and take note of the products they sell and the price range they offer. This research will help you identify gaps in the market and potential opportunities for your store.
To find suppliers, you can research online, but if the budget allows, attending trade shows can be a great way to meet suppliers and see their products firsthand. Establishing good relationships with suppliers can lead to additional startup guidance, recommendations on how much inventory to stock, and get better terms.
Step 7: Hire Staff
Hiring employees is a significant step in setting up your sporting goods store. Typical roles might include sales associates, cashiers, and possibly a store manager if the owner isn’t planning on managing the store themselves.
Before hiring employees, there are several legal requirements that need to be taken care of. These include obtaining an Employer Identification Number (EIN) from the IRS, verifying employment eligibility through Form I-9, and reporting new hires to the state. It’s important to note that every state has different requirements for reporting new hires, so it’s essential to research and comply with those requirements.
Worker’s compensation is required by most states which provides benefits to employees who are injured or become ill due to work-related activities. Additionally, there are various labor laws that must be followed, including minimum wage and overtime regulations, anti-discrimination laws, and workplace safety standards.
Related: Hiring your first employee
Step 8: Create a Marketing Strategy
Now that you’re close to opening your sporting goods store, it’s time to focus on marketing to attract customers. With so many competitors in the market, it’s important to stand out and make a name for yourself in the industry. Here are some popular ways to get the word out about your store:
Developing a brand identity should be one of your top priorities in marketing your sporting goods store. Your brand identity should be different from other sports stores in order to stand out. You need to consider the type of products you sell and the values you want to promote. To develop a strong brand identity, create a brand logo, choose a consistent color scheme, and establish an online presence.
Another way to market your sporting goods store is by hosting events. In-store events such as product launches or sports clinics can help attract new customers and retain previous ones. You can also sponsor local sports teams or events to help spread awareness in the community. This is an effective way to keep your store in the minds of potential customers while also showcasing your products.
Last, having an online presence is critical to reaching a wider audience. Your website should showcase your products and allow customers to easily make purchases. Additionally, create social media accounts to interact with customers and provide helpful content such as tutorials or product reviews. By having a strong online presence, you show potential customers that you are an established store in the marketplace.
Related: Low-cost ideas to market a new business
Step 9: Prepare to Open!
As we get to the end of starting your sporting goods store, this stage is about finalizing the groundwork. Every business owner will have different needs, but here are some of the more common tasks:
Business insurance: Protecting your business with appropriate insurance coverage is necessary to mitigate risks associated with owning a retail store. We recommend getting at least three insurance quotes, including local insurance agents and online providers like Coverwallet or Hiscox to get the best coverage and price.
Setting up bookkeeping: Establishing a reliable system for bookkeeping and accounting is essential to keep track of revenues, expenses, and taxes. You can utilize software like Wave Accounting (FREE) or Quickbooks or hire an accountant.
Opening a business bank account: Opening a separate bank account for your business will help you manage finances more efficiently and can be helpful come tax time.
Point of sale software: Investing in point-of-sale software tailored for retailers like Rain POS, Square, and Lightspeed Retail, help manage inventory, sales, and customer relationships effectively.
Joining industry associations: Consider joining industry associations such as the National Sporting Goods Association or the Sports and Fitness Industry Association. These associations can provide networking opportunities, educational resources, and industry insights.
Preparing for the grand opening: Planning a successful grand opening involves coordinating promotions, advertising, and merchandise displays. Additionally, it’s important to ensure adequate staffing and inventory levels for the opening.
Common Questions When Starting A Sporting Goods Store
How much does it cost to start a sporting goods store?
A rough range of the initial investment when starting a sporting goods store is between $80,000 to $300,000.
A prime retail location is key and usually requires the first and last month’s rent plus a security deposit equal to 2-3 months rent to secure the lease. This can range from $5,000 to $20,000 or more, depending on the market.
Renovations and outfitting of the store with fixtures, displays, and signage can cost $10,000 to $50,000.
Purchasing initial inventory can run between $50,000 to $200,000.
Obtaining business licenses, sales tax permits, and other requirements can cost up to $500.
Liability insurance, worker’s compensation, and other policies will be around $5,000 to start.
Initial marketing like branding, website, and grand opening promotions may require $5,000 or more.
Other costs like POS systems, security, uniforms, and supplies should also be accounted for. Figure on $5,000 +.
It’s also recommended to budget for 3-6 months of operating expenses as a cushion while the new business ramps up. This can mean having $100,000 or more available as a buffer.
These costs are broad estimates and the actual costs can vary based on the location, size of the store, and other factors.
How profitable is a sporting goods store?
Revenue will depend on the interest and accessibility to sports in your area, along with the level of local competition.
Industry research shows that there are 33,591 sporting goods stores, and in 2022, they generated a combined $6.23 billion. Using this data, we can calculate that the average store made $1.9 million in revenue.
Looking at industry expenses:
– Cost of goods sold (62% of revenue)
– Salaries (11% of revenue)
– Other operating expenses (19% of revenue)
Leaves an average owner earnings of around 8%
On the average sporting goods store that generates $1.9 million in revenue, a profit of $152,000 would be made.
Sales for sporting goods can be very seasonal, depending on the type of equipment being sold. Sales will drop off after the end of the season, however, holiday sales can provide a boost for out-of-season sports.
What skills are helpful in running a sporting goods store?
There are several specific skills that are helpful when running a sporting goods store.
Retail experience: Working in a retail setting, particularly in a management role, will be extremely valuable in understanding how a retail store operates.
Sales skills: Being able to sell products effectively is crucial for any retail business. This includes having excellent communication skills, being knowledgeable about the products, and knowing how to upsell.
Customer service skills: Providing exceptional customer service is essential for building a loyal customer base. Sporting goods store owners should be able to handle customer complaints and inquiries effectively and have a friendly and approachable demeanor.
Management skills: As a business owner, it’s important to manage finances, inventory, and employees effectively. This includes having good organizational skills, delegating tasks, and creating efficient systems and processes.
Product knowledge: Having knowledge about the products being sold can help you answer customer questions, recommend products, and provide better customer service.
Adaptability: The retail industry is constantly changing, so it’s important to be adaptable to new trends, technologies, and customer demands.
Passion for sports: A passion for sports can help you connect with customers who share similar interests and make your store stand out from competitors.
What is the NAICS code for a sporting goods store?
The NAICS code for a sporting goods store is 451110.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
