These “malls” of consignment and antiques booths can be a terrific way to get your consignment business off the ground and out of your garage. Here’s how they work.

You rent a booth (or even just a shelf) in a large store that has lots of floor space and one to fifty-one other people selling antiques and/or consignment and/or used goods. You pay up to $300 a month or more for a large space, and possibly as little as $75 for a shelf or a bookcase.

In addition to the payment, your responsibilities include tagging all your merchandise according to store policies. You many also have to do some “shop time” working at the cash register of the main store. You will also have to update or rotate your inventory at least every two weeks, and preferably every week. Many Co-ops also require you to have seasonal displays.

While its great to not have to be in the store all the time, you will lose a few sales simply because you’re not there to make your great sales pitch. Some people can compensate for this by getting really creative with their inventory displays, but even clever displays can’t beat having a real person standing by to explain what things are. Finally, you’ll have to be available by phone at a moment’s notice in case someone makes an offer on your inventory. If you miss the call, you’ll miss the sale.

The good side about group shops is that you don’t have to be at the shop all the time. So if you’re a mom, or have an aging parent, or have a part time job (or even a full-time job), this may be the only way you can actually have a “store”. The cost savings are also a major benefit — your rent for having a small (very small… maybe 10 feet square even for a “large” space) is a heck of a lot less than what it would be if you had your own store. You also will not have to handle sales tax and the myriad other issues that a store owner would face, and that alone can be worth 20 hours a month of free time.

There are some ways to size up co-ops, and security is typically the first priority. Because you won’t be there, you need to trust these people, and their security systems, enough. Good signs include the store having security cameras placed thoroughout the store, and not allowing customers to bring purses or bags into the store while they’re shopping. They have to either leave their bags in their cars, or put them in a locked locker inside the store. Another good security tip is that the store managers go through other sellers’ boxes when they are taking inventory out of the store (so another seller can’t walk off with your stuff).

If you can get into a good place, these group shops can be really terrific. If they are located properly, you’ll have an excellent location, with good foot traffic, and then you’ll get even more foot traffic because customers are attracted to the “mall” factor. Just be aware about security, and get really good at making eye-catching displays.

Many consignment store owners do estate sales on the side, both so they can get first pick of potentially valuable items, but also as a way to make some extra money on the side. Even if you don’t decide to put on estate sales, they can be goldmine sources of new inventory for your store.

Because the term “estate sale” gets tossed around so easily, the first thing you should know is that a true estate sale happening when one member of a family has just died. If you are buying at the estate sale, that means you may be able to get stuff that would otherwise never have been offered.

But if you are selling at the estate sale (ie, managing the sale) you’ll need to be clear about what your responsibilities are. Do you want to be responsible for getting rid of the dozens of boxes of old memorabilia that may be worthless. Are you hoping to have dibs on a few documents worth $10,000 in a far corner of one of the boxes?

In fact, that’s ultimately the most noteworthy thing about running an estate sale. You’re going to need help, and a lot of it. It can take three to seven days just to get ready for the sale, and then when the sale happens, it will happen fast. You’ll need one person exclusively working the cash box and to write receipts, then you’ll need as much as one person per room in the house. There can be theft at estate sales, and you do not want already upset family members getting even more upset because something has been stolen. So do whatever it takes (hire friends, or smart and responsible teenagers) but make sure there are a lot of eyes on the scene. This also helps with sales, especially if your staff is even a little bit familiar with antiques and used goods.

Even if they dont steal, it is also quite common for estate sale visitors to switch price tags, so they can get an $80 vase for 50 cents. Doing a walk-through of all the items the day before the sale with your staff can help a lot with this, and also save your a couple hundred questions during the sale itself.

Another big difference with estate sales is advertising. You’ll need to do more than the usual pinned up sign at the nearest intersection. Buy ads in the local newspapers including the time, date, address and what’s going to be for sale. Then put up signs in a five mile radius, pointing people to where the estate sale is. Put a few extra signs up at major intersections as needed.

If the sale is large, or parking is going to be an issue, you may also need an extra person just to handle parking. They could also help a few people carry things to their cars.

With all this work and staff, you may wonder if you’ll earn any money at all. Well, consider that the usual cut for an estate sale operator is 10 to 30% of gross sales, and you may begin to see some hope. The real benefit to these sales, though, is that you aren’t wedged into an auctions price spikes and dives, and, above all, that you get to be the first eyes on the scene, so you can hand-pick what you want. As with any sale, and an item, expect some estate sales to be a headache that barely breaks even. But once in a while, ka-ching — you’ve found the mother lode.

Starting a consignment shop sounds like a lot of fun, especially if you love clothes or furniture, or whatever it is that you plan to sell.

It can be a great way to make a living at a hobby you love (like a consignment shop for photographers, for example), but there are a lot of management skills required, and a lot of other personal traits you’ll need. Here are some traits of successful consignment store owners.

1) Discipline. Its great to be your own boss, but there are trade-offs. You will be the one who has to fire people, for example, and that is not fun. You will be the one who has to make sure the accounting books are right, that the security lights really are coming on at night, that the landlord is not cheating you, and more.

There are a thousand little details that you’ll have to attend to every day, and you probably won’t feel like dealing with them. So you have to have the discipline to let go of the work you’d like to do, and do the work that has to be done. You’ll also have to have the discipline to not accept consignments you like, but you know won’t sell.

2) Thrift. Can you squeeze a dollar until it screams? Are you as tight as the bark on a tree? You may have to be. Consignment can be a lean business, especially as you are starting out. You may actually have to take a side job part-time to be able to keep your store going. And you may have to think of dozens of ways to get things done (like dressing store windows, like marketing, even like having store help) that require no money.

Consignment store owners that stay in business know every dollar they do not spend is actually a dollar they have just earned (thank you, Benjamin Franklin). Those of us who pay taxes also know that every dollar you do not spend is actually the equivalent of that dollar plus whatever your tax bracket percentage is, plus whatever it would have cost you to earn that dollar. You need to adopt that outlook fast.

3) Attention to Detail. Are you… um… a flake? Hopefully not, because the thousands of little details to managing a consignment inventory are not suited to flakiness. Even if you do get a great software system up, and you follow it religously, there are still going to be dozens of exceptional situations that you’ll need to remember.

That said, some “flakes” get by just fine — they know they can’t remember things, so they acquire the discipline to set up systems that overcompensate for their forgetfullness. To paraphrase Einstein on this concept, “why remember anything you can look up in a book?” All the personal mamagement systems available today, combined with a great PDA, may be able to make you a management star even if you weren’t born as one. But you are going to have to work to get there.

4) Good with people. Consignment store owners should be extroverts. The only possible exception is if you plan to do the bulk of your business online, but even then you will need to be talking to quite a few people. If you have a store, you must be outgoing and kind enough to be nice to customers even when they are being stupid and inconvenient (and unprofitable, and when you’re tired and need to be doing something else).

A lot of the success of your store depends on how much people like you, so if you are really good with people, you will have a major advantage from the start. For those of us who are not good with people, get yourself a copy of “How to Win Friends and Influence People” by Dale Carnegie.

5) An eye for merchandise that sells. This can be acquired with experience, but some people are just born with it. They know what sells, when most of us would just skip over the item at a garage sale.

Frequently these merchandise gurus are also gifted salespeople, though not always (what a great partnership for a store — one who can pick it, and one who can sell it). If that sounds like you, your consignment store may already be set up for greatness.

Picking the right name for your consignment shop is critical, but it should also be fun. Here are some things to keep in mind while you brainstorm.

There are some legal issues to be aware of with picking a name, but actually its not anything to get too paranoid about. If you really want to be 120% sure about your name, check with a lawyer. In fact, though a few hours with a lawyer may eat into a couple hundred dollars worth of your startup budget, it is definitely a good idea.

At your meeting you can talk about business structures, the name you want, things to look for in a lease, and your county and town’s business license requirements and more. However, if you’ve already picked one or two names you’d like to use before you meet with a lawyer, you’ll make much better use of their time.

Here are the rough rules for picking a business name: you can have any name you want, just so long as 1) no one in your state is already running a business under that name or 2) no one in the country is running a trademarked business under that name.

You can check to see if there is another business operating under the name you want by doing a few internet searches (try each of the three major search engines). Most states also offer free business name availability checks online. Google “check business name availability” and your state and you’ll probably find what you want. Be sure to print out the results of your research… just in case anyone ever challenges your name, at least you’ll be able to show that you did check if the name was available.

You usually do not have to register your business name. If your business structure is going to be a corporation, an LLC, or a limited partnership, your business name will be automatically registered when you file your paperwork.

You also probably do not need to get your name trademarked. But if you have any dreams of opening chain stores, or doing any kind of business beyond your state (maybe like an eBay store), you might want to consider it. Trademarking costs about $500 and takes a while. You will need to have a logo designed and registered as your trademark symbol. Generally this is way more than the typical consignment shop needs.

So… now that we’re past the legal issues — what makes a good name? It should be easy to remember, easy to understand, and easy to spell. It is very important that your shop name telegraphs what it is, so that anyone can immediately know what you do. Some stores have gotten away with obscure names, but it is an uphill battle. For 90% of the population, if they do not immediately understand what you do, they will immediately forget you.

Here are just a few sample names to get the brainstorming started:

- Your Town Name Consignment
- Your Town Name What You are Selling Consignment (ie, “Smalltown Clothing Consignment”)
- Your Name What You Are Selling Consignment (ie, “Cheryl’s Equestrian Consignment”)
- As Good As New Consignment
- Renewed Consignment
- Better Than Ever Consignment
- Like an Old Friend Consignment
- Lots of Wear Left Consignment

A recent survey by Business Plan Pro showed that startup companies that wrote a business plan were twice as likely to succeed as companies that wrote no plan.

You should take that with a grain of salt, because Business Plan Pro is in the business of selling its software, but the point holds, and business management professionals have said for decades that if you really want to succeed, you write a business plan. And if you want outside funding, like a loan or investor capital, don’t even bother without a business plan.

The business plan you write for your consignment shop does not have to be a book, and it does not have to be intimidating. If you can only manage five pages, that’s a great start. Here are the main parts of a standard business plan:

1) Executive summary. You actually write this last, but let’s talk about it first anyway. Think of this as an elevator speech that summarizes your business plan. In other words, if you had to summarize your entire business plan into a few paragraphs that would inspire and impress someone so much that they would give you money to start your business, that would be the executive summary.

2) Business analysis. This is where you outline what structure your business will have (LLC, limited partnership, etc) and give a high-level view of what you want to do, who your customers will be, how much competition there is and how strong or weak it is.

3) Marketing strategy. How will you promote this business? How much will it cost to promote? What advantages will selecting a specific niche give you? Frequently people do a SWOT analysis (strengthes, weakenesses, opportunities and threats) for both their business and their top 1-3 existing competitors.

4) Products and Services. Hopefully you really like what you’re going to be selling, and you are really excited about any other services you’ll be offering (like being an eBay consignment store, for example). Write about those in detail, including where you’ll get your goods and how you’ll manage inventory.

5) Management Plan. Who are you? Why would you be good at this? If you are going to have a store manager, and if you’ve already selected a couple of employees, now is the time to introduce them and sing their praises.

6) Financial Plan. Get help from an accountant if you’re anxious about doing this, but you can probably do it on your own. This is where you “do the math” to prove your consignment shop can be a financial success. You’ll need to know about costs for rent and other expenses, like advertising, payroll, electricity, a website, paying consignees and everything else. Include what you need to buy to start your shop.

And that’s it. Really, the main benefit of writing a business plan is not necessarily the final product — its the work it makes you do to get those final printed pages. By the time you are done writing your business plan, you will be keenly aware of all the details about your business. You will have a realistic idea of what you can and can not do, and you’ll know how much it will all cost. This is essential information for your first few months of business.

eBay is a terrific way for consignment store owners (and anyone else) to move some merchandise that might otherwise just sit around. Here’s how to get the most out of your efforts on eBay.

1) Build up your reputation. If you have no feedback ratings, almost no one will buy from you. To get feedback, start buying things on eBay until you have at least ten positive feedbacks. These are not as good as seller feedbacks, but you have to start somewhere.

Once you’ve got 10 positive feedbacks (no negative or neutral ones… clean those up if you have to), start selling a few small items. You are not going to get the best price on these because your feedback is low, but start anyway.

2) Choose the right things to sell. $10 to $20 items are best at this early phase. By the time you pay eBay fees, shipping and packaging, and spend your time listing, answering questions and shipping, your margins will be pretty small. But again, you have to start somewhere.

Do some research on what is selling and how much it is selling for before you list anything. This may mean having to do your research a week before you list something. You will want to “watch” related items so you can still find them and read their descriptions and stats after the listing has ended.

3) Describe your items in detail. If you are selling used CDs, this is not so important, but with clothing, sporting goods, antiques… anything in any way unique, you need to go into detail.

Use your research knowledge to describe your items so people can find them — brand names and model numbers are the basics, but if your item might have more than one word to describe it, use both words in the title (like “blazer” and “jacket”). I have been shopping for ultralight tents for months, and it is amazing how many people list their tent with the brand name and model, but never include “ultralight” or even “tent” in the title.

Take at least three pictures of your items, and more if you think it is warranted. You should include one picture that shows the whole item, one picture that shows the best detail shot, and one picture for the tag, or the model sticker or any other identifying marks.

If there is even a little damage to the item, take a picture of that. In fact, if there is any even tiny damage or wear to the item, be totally upfront about it. Go into detail about how the damage happened (if you know) or what the condition of the item is. People want to know details — is there rust? Do the parts move? Is the lining intact? Are there scratches anywhere?

If you are selling a $5 item, obviously you can’t write a book and still make enough money to keep doing your eBay business. My rule is at least one sentence per $10 expected sale price. Sometimes it ends up being a lot more. When I sold a Chanel suit for $890, I wrote over 700 words and took eight different pictures. When I sold a craft business for $5000, I went on for eight pages and had 20 photos.

4) List it the right way. Have your listings end at a time when people can bid on them. Around 9pm eastern time Sunday night is best, but Wednesdays 9pm eastern also work well to.

Its only a guestimate, but I bet you’ll get 30% more for a listing that ends at 9pm EST on a Sunday than you would for a listing that ends at 9:30am EST on a Tuesday. Use the eBay “schedule listing” feature if you want more control when your listings end… it costs a little, but sometimes it is nice to have Sunday evening off.

Pay for bold, and if your item has a starting bid of more than $100, consider buying a “featured” listing, too. Pay for extra photographs.

5) Ship it right. I almost always burn myself on shipping, so hopefully I will follow some of my own advice here. If you really have your act together, you will already have your items boxed (but not taped shut) and at their shipping weight when you list the item. Then you can just weigh the box and use the table on the post office site to make sure you do not underestimate shipping costs.

You can also just use the very handy priority mail boxes (get extras from the post office so you have them on hand) and calculate your shipping that way. You may still have to guess, because many times shipping depends on which zipcode the item is going to, and you won’t know that until its too late.

Also include enough of a charge to at least cover your packing materials. You must package your items so they will not break, and if you are shipping almost anything, there is a risk of this. Even shoes can get scuffed in a box.

On some items I have spent nearly $10 just on packaging to make sure something did not arrive broken. People do not like getting broken items when they paid for something unbroken. At the very, very least, even if you are shipping something that’s still sealed, wrap it in a plastic bag or a kitchen trash bag, just for an extra layer on protection.

6) Communicate. Let people know when their items shipped. Thank them. Consider including a little note in the box that says “thanks for buying from my eBay store. I hope you will leave positive feedback, and I plan to do the same. Please let me know if anything is not to your liking.” This is one of those tell-tale signs of an eBayer who knows what they are doing.

7) Leave feedback that is specific. Be positive. Be fair. Be kind. There are ways to mediate bad experiences on eBay, but they cost money and they take a long time. If you are serious about getting a good rating, be ready to return 100% of a buyer’s costs if they have even a semi-legitimate complaint.

I refunded one buyer’s entire payment because the dress she bought fell on the ground and got a whiff dusty before I put it in the box (I hadn’t noticed, or I would have not mailed it), but she sent photos and it was only a $12 sale. She gave me one of my nicest feedbacks as a result.

It is an extremely wise idea to get some real-world experience in the resale business before you attempt to launch your own consignment or second-hand store.

Even a few days spent at this effort will teach you volumes of critical information that you need to know to make your store a success. In fact, after writing the business plan, getting a bit of resale experience should be next on the list of your must-do consignment store planning.

So, where to get this experience? Here are several ways to go about it

1) Run one to a few garage sales

Almost anyone can benefit from clearing out their house for a garage sale. If your house is one of the very few that have no junk, try to help a friend or a relative. Hunt down used appliances, clothing, sports gear, gardening gear, tools and whatever you can find. Get some practice in marking items clearly and in getting people to come to the sale. See which kinds of signs work best, and carefully watch how people review the merchandise you have for sale.

2) Get a flea market booth

This is a terrific way to ramp up your business before you have to start paying for a retail location (OK, actually, you will be paying for a retail location, but a booth is cheaper than a lease). You will need several portable tables and a clothes rack if you are selling clothes.

Doing a booth for a month will teach you a tremendous amount about pricing and how people shop. If you have a website, or if you are gathering a list of email address to send a grand opening announcement to, be assertive about getting people to fill out their names and information. That customer list will become your best marketing tool.

3) Work in a Consignment Store

Even a short stay and a Salvation Army or a Goodwill Store is much better than nothing. You may run into some issues of competition if you are working in a consignment store that sells similar things to what you want to be selling. Its up to you if you discuss your business plan with your current employer, but honesty generally is the best policy.

Working in the rows will give you intimate knowledge of payment options, stocking, traffic flow, layaway policies, security and a bunch of other issues that you can not learn just doing a garage sale or a flea market booth.

4) Work at an Antique Store or a Antique Show or an Auction House

Antiques are a world unto themselves, but if you are going to be selling furniture or high-end housewares in your consignment store, the issues around antiques are going to come up, and you had better know about them sooner or later. Another nice benefit to doing these shows, or working in a store, is that you’ll meet all sorts of people “in the biz”. One of them who wants to unload a bunch of their inventory for cheap might be a goldmine for your stores startup inventory.

Many consignment store owners recommend buying an existing store rather than starting your own from scratch.

There are pros and cons to doing this versus starting up from nothing.

The Pros of Buying an Existing Store

- The location is already decided, and you have a good idea how well it works for the store

- The clientele are established, both consignors and buyers

- There are existing financial records, so you know much, much more about how the store is performing than when you do a startup.

- If you do an “asset purchase” you will be getting all the store’s inventory, the building lease (or the building, if they own it) and all the equipment uses to run the store. Getting all the inventory and all the marketing materials and all the equipment in one fell swoop is a gigantic time-saver, and you will probably spend much less to buy them this way than you would if you bought the equipment a la carte at retail prices.

- If you do a “stock purchase” you will be buying everything in the store and all the financial obligations and monies owed.

The Cons of Buying an Established Store

- You must do a thorough investigation of all parts of the current store, especially their legal and financial health and obligations, or you could be walking into a nightmare. You will need to hire a lawyer to review the terms of the sale, and a CPA to review the books of the store.

- If the store has a bad reputation, even with some customers, you are buying that bad reputation. Putting up an “Under New Ownership” sign may help a little, but once people have a judgment about a store it is hard to change it.

- The store may not be profitable, and you may end up spending a lot of money with a lawyer and a CPA and doing negotiations with an unrealistic owner before you have to let go and move on

- The store may have hidden legal or financial problems that (for whatever reason) do not turn up during your due diligence research

After you’ve weighed all those issues, it may still be a very good choice to buy a store. So how much should you expect to pay for a consignment store? It varies widely — typically business valuation can be 3 years profits or 3 years sales. If the building is owned instead of leased, that will also affect the price. Historically a consignment store can go for anywhere between $20,000 to $250,000, depending on how large it is, where it is, and how much business it is doing.

If you can, try to get a clause put into your purchase agreement that lets you work in the store for two weeks, then gives you the option to re-negotiate the contract after that period. Or, just ask the owner if they will let you help out for two weeks to really get a handle on how the store is operating. Those two weeks will be time well spent.

Another critical thing to know is why the current store owner wants to get out. Maybe they want to retire, or maybe their health requires them to work less. They may also have burnout, and while almost every business owner alive has had a case of burnout at one time or another, if there’s is severe, and they say they just want to get out of the business as fast as possible, you need to ask more questions about how they got so desperate.

Finally, if a current owner ever gives you any resistance about getting financial information, or any other information about the store, put up your problem radar immediately. If they flat out refuse to supply you with something, that is a serious red flag that could be the proverbial “deal-killer”.

Consignment sales can be very erratic. One day you will sell $50 worth of stuff, and the next $1000 worth.

And that $1000 may happen inside of one hour, while all the rest of the day you had nothing to do but polish furniture or fold clothes.

This can be particularly true for consignment stores that sell high-priced items, like furniture. If you have even a few really valuable, museum-quality pieces, it is not impossible that you could bring in an entire month’s worth of sales in one day.

To make up for how up and down things can be, some consignment store owners find it better to track sales on a weekly basis instead of day by day. You’ll need some way to track each sale of course, and it will probably make your CPA happier if you do track sales on a daily basis, but for inventory projections and sale planning, look at your business on a week to week level rather than a day to day level.

That said, there are trends in consignment sales, and while every store is different consensus among consignment store owners does sound a bit like this:

- Thursdays and Fridays are typically the strongest days of the week.

- Mondays are the worst. Some consignment stores find it gets so bad that they just close on Mondays. If you are in an area where a lot of other stores are closed on Mondays, this might not be a surprise to your customers at all. It would also be nice for you, because you’ll get a day off during a business day, which gives you an opportunity to run errands during business hours. A word to the wise about this theory, though: Just because the store is closed does not mean you won’t have work to do.

Holidays tend to work out like this:

- The week after Christmas may be huge for you, because many people have Christmas money to spend and want to make the most of it. Its also a nice opportunity to nudge your sales just one more bit before the year closes out.

- Don’t feel too bad if you close the store for July 4th and Labor Day. These holidays tend to be very quiet anyway, especially if you do not live in a tourist town.

- Do stay open for Memorial Day.

The best months of the year are, in order:

- April and October

- May and November

- June, September and December

- March and August (back to school sales help here)

The worst months are January, February and July. So there you go: do well enough to take that Caribbean cruise for two weeks in early February, and rent that cabin in the mountains for two weeks in July.

Catering Your Store to a Niche Market

When you start up your consignment store, one of the biggest decisions that you need to make is what kind of market you are going to cater to.

Many consignment stores choose to hit as many potential customers as possible by offering a wide range of items. While this is a good strategy, but it can be a lot of work managing every type of merchandise, rather than a few select types. For this reason, there are many consignment shop owners who choose to cater to niche markets, rather than offering a one-stop shop to all.

Types to Choose From

There are several different types of consignment store merchandise that you can sell. There is also no reason why you can’t sell a combination of a few types if you feel they fit together nicely.

1. Antiques: The sale of antiques is big in North America. What was once old is new again to many people. Many decors actually center on antiques and bargain hunters know that consignment stores are an antique gold mine. Some antiques that you may sell include furniture, glassware, collectibles, lamps, books and kitchenware.

2. Books: Everyone loves books and second-hand books tend to be widely sought after. Many readers would rather spend two dollars on a used copy of a book than buy it new for $10 to $20 at the bookstore. As a second-hand bookstore, or consignment book store, your life will revolve around books. There is a lot of business in books as people read more now than ever before.

3. Clothing: Probably the biggest area of business for any consignment store is clothing. By specializing only in clothing at your consignment shop, you can take in a lot of money without having to stock anything else. People need clothing and the bargain hunters out there know that there is plenty of nice clothing at consignment stores.

4. Music and Videos: As technology changes, what was once new is now old and easily replaced. That being said, there are many people out there who still buy vinyl records, or who prefer watching movies on VHS. Those who aren’t fans of new technology can be your biggest customers with this type of consignment store. However, that doesn’t mean you won’t still sell CDs, DVDs or even MP3 players. When new technology comes out, there are always those who buy it right away, and there are always those who are happy with older models of new technology.

5. Sporting goods: Every year, millions of kids, teenagers and adults enroll in sports programs. With each enrollment comes the need for equipment, and that is where a consignment store can come in. By stocking skis, hockey equipment, golf equipment, baseball equipment and anything else relating to sports, you can make good money by capitalizing on the bargain hunters out there looking for sports equipment. If someone wants to try golf for a year, they won’t buy new clubs, they will buy used clubs. You can do great business by stocking a year-round supply of sporting equipment.

By choosing to specialize in certain areas of merchandise, you can make it much easier for yourself to manage the consignment store. You will be able to know what you sell and what you don’t sell. You won’t have to worry about people seeing the consignment store as a place where anything and everything is dropped off to be sold. When you specialize, you make yourself a much more valuable shopping destination for those niche clients looking for a good deal.