How to Start a Traditional or Online Boutique Clothing Business

Fashion and beautiful clothing have always been in demand, and if you have an eye for style, a boutique clothing business could be ideal for you. Rather than selling everyday garments, boutique businesses focus on specific garments, tastes, designs and customers. If you have a unique taste and can curate the perfect collection, you can certainly start a successful retail clothing business.

The question is, just where do you start? Here at Incfile, we know the answer, and we’ve shared it with more than 100,000 people who we've helped to form their businesses. Since 2004, we’ve supported retail entrepreneurs just like you, and we’re proud to have been a part of the business revolution.

Here is our simple guide to starting up a successful boutique clothing business. From researching the type of business you can start, through legalities of setting up your boutique and managing your operations, this guide is here to help.

clothing boutique

Read on for some insight into creating your own boutique business and becoming an entrepreneur. In this guide we will cover:

  • Facts and figures on the success of boutique garment businesses
  • Whether a retail clothing business could be right for you
  • Ideas for the type of boutique clothing business that you could form
  • How to validate your clothing business idea
  • Business plans for boutique clothing companies
  • How to choose whether your clothing business should be an LLC or corporation
  • How to start your boutique business with information on equipment, employees, location, permits, finances, taxes and more
  • Helpful software for boutique clothing business owners

Why You Should Start a New Boutique Clothing Business

Clothing is one of the most popular retail sectors. Here are some surprising statistics:

$20B

Clothing boutiques earn over $20 billion in the U.S. every year

150K

There are over 150,000 boutique clothing businesses in the U.S., employing over 250,000 people

$700K

Worldwide revenue for online clothing is expected to rise to over $700 billion by 2022

;
9 percent yearly growth in the U.S.
  • On average, a boutique clothing business earns over $130,000 a year and employs between one and two people
  • The traditional, brick-and-mortar clothing boutique is facing challenges, so more clothing entrepreneurs are selling online
  • Worldwide revenue for online clothing is expected to rise to over $700 billion by 2022
  • The average online customer spends between $280 and $300 a year on clothes
  • Online boutique revenue is expected to grow by around 9 percent a year in the U.S.

An Online Boutique vs. a Brick-and-Mortar Store

One of the biggest questions a boutique clothing entrepreneur will need to answer is whether to start a traditional, in-person boutique, an online boutique or a combination of the two. Each of these options has advantages and challenges.

Starting a Traditional Brick-and-Mortar Clothing Boutique

Advantages

  • You get visibility on the street, so passing customers can drop into your clothing store
  • It’s easy to browse a range of clothing quickly so customers can find something they like
  • Customers can try on clothing right then to see how they look
  • Returns of clothing are likely to be minimal
  • There’s likely to be less competition, depending on where you’re located
  • You can display clothes and create an atmosphere for your boutique to build ambiance

Disadvantages

  • Your startup costs will be high as you will need to lease retail space and pay for fixtures, fittings and other expenses for your store
  • Ongoing bills can be high, especially for lighting and heating
  • Staff should be onsite whenever you are open, which means you’ll likely need to pay someone else if you want to take a break or vacation
  • You will need to hold garments in a variety of styles and sizes, which locks up cash flow
  • The traditional clothing boutique business in the U.S. is shrinking at a rate of around 2 percent a year

Starting an Online Clothing Boutique

Advantages

  • Much lower startup costs, including expenses involved in setting up an ecommerce website, buying inventory and marketing
  • Your ongoing expenses will be much lower since you can run an online boutique by yourself
  • The online clothing boutique business is growing

Disadvantages

  • It’s more difficult for potential customers to browse items like they could in a store
  • There’s much more competition for online clothing sales, as they’re not limited by location or geography
  • Because customers can’t try clothing on before they purchase, return rates can be very high (some estimates indicate returns will be around half of what you sell!)
  • It’s much harder to distinguish yourself online than in a physical location

It’s vital to decide on the approach you want to take. The advice we present in the rest of this guide can apply to either type of clothing boutique, so please bear in mind the type you want to start when applying it to your own circumstances.


Is a Boutique Right for You?

Although it can be exciting to form a boutique clothing business, there will be significant demands on you as a small business owner. Here are some of the things you can expect.

starting an online boutique

A Day in the Life of a Retail Business Owner

Here are some of the typical tasks you’ll be performing for your boutique clothing business on a daily basis.

  • Seek out new clothing and garments that would fit well with your boutique
  • Build your brand and focus on your unique clothing styles
  • Provide advice to customers on clothes that match their personal taste
  • Sell clothing to customers and deal with customer service and returns
  • Handle the marketing for your boutique clothing business
  • Deal with clothing suppliers and distribution of your garments
  • Handle financial and administrative management

Skills Needed by a Boutique Business Entrepreneur

The following skills will be very useful in your role as a boutique clothing small business owner.

  • Ability to research new trends and tastes in the clothing marketplace and garment industry
  • A strong eye for style and branding so you can develop a unique niche for your clothes
  • Good insight into customer tastes to help you sell clothes and manage inventory
  • Financial management acumen so you can price items appropriately and pay bills
  • Excellent interpersonal skills to help you deal with and sell to customers

What Type of Boutique Clothing Business Should You Start?

You have plenty of options for the type of boutique business you could start. We’ve already explored the main differences between online and traditional retail clothing businesses, so let’s expand things a bit.

Boutique Bridal Business

Boutique Bridal Business

The wedding industry is huge, and providing boutique bridal and bridesmaid dresses can be a very lucrative sector. Because bridal gowns are so expensive, you will be holding up a large chunk of your money in stock.

Boutique Evening Wear Business

Boutique Evening Wear Business

If you’re serving a clientele that enjoys formal functions and dinner parties, an evening wear business could be just right. In addition to beautiful dresses, you could also offer tuxedos and other formal options for menswear.

Boutique Clothing for Gentlemen

Boutique Clothing for Gentlemeny

Although most boutique clothing is sold to women, it’s not the only market. If you can provide beautiful suits and other male clothing, you can develop a great range for the well-dressed gentleman.

Boutique Accessories and Bags

Boutique Accessories and Bags

Boutique businesses don’t need to limit themselves to clothes. Some entrepreneurs might decide that jewelry, bags or other luxury accessories are the perfect niche.


Validating Your Boutique Business Idea

Remember, the ideas above are just a starting point, You can define and tweak exactly what type of boutique clothing business you want to run by conducting your own research. Before committing too much time, energy and money into your new retail clothing store, it’s important to test the marketplace.

  • Identify your boutique clothing business’ unique selling points (USPs): Whether you’re competing on style, curation, clothing range or something else, your USPs set you apart from competitors and encourage customers to come to you.
  • Look at who your competitors are in the space: Having competitors is a good thing as it shows there’s a market — but if there are too many, you’re likely to struggle without a really good unique selling point. It’s vital to find your niche and build on your brand.
  • Understand your market: Clearly identify exactly who your customers are likely to be, where they hang out and how you’re going to reach them. This will be essential to your marketing, communications, sales and customer support.
  • Talk to clients: Speak with potential customers to understand what they want from your clothing, and validate this by asking if they would commit to spending real money on them.
boutique market research

Not every idea you have will make it through to becoming a boutique clothing business. There are all sorts of reasons to say “yes” or “no” to specific businesses, so think about what your strengths and weaknesses are so you can choose something you’d be great at.


Boutique Business Plans

You need to define how you’re going to run your boutique clothing business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight retail clothing business plan. It will help you get your thinking in order and show your commitment to your business.

You will also need to look at financial projections for your boutique clothing business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others?

Business plans do vary slightly, but they should all cover the following areas:

develop a business plan
  • 1 An executive summary with the most important points from your business plan
  • 2 Your goals and what you hope to achieve with your boutique clothing business
  • 3 A description of your retail clothing venture, background information and context
  • 4 A market analysis and likely demand
  • 5 An overview of how your clothing business is structured
  • 6 Your business model
  • 7 How you will market and sell your offerings
  • 8 Financial projections, revenue and profitability
  • 9 Appendices

We’ve got the perfect guide to writing your business plan.


Choose the Right Business Structure for Your Boutique Business

There are five main business structures you can have in the U.S., and it’s important to choose the right one. We’ve shared your options below. They are:

Sole Proprietorship

Sole Proprietorship

If you don’t choose to form a legal business entity for your clothing venture, you will be a sole proprietor by default. This won’t give you the legal protections you need, so we do not recommend this.

Partnership

Partnership

Similar to a sole proprietorship, if you go into business with someone else without forming a legal business entity, you will be treated as a partnership. This doesn’t give you limited liability protections, so we don’t recommend it for your boutique clothing business.

Limited Liability Company or LLC

Limited Liability Company or LLC

The Limited Liability Company (LLC) is ideal for most small retail clothing businesses. An LLC is easy and inexpensive to set up, and it has the least administrative requirements of any formal business entity.

S Corporation

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organizations.

C Corporation

C Corporation

These are the largest and most complex types of businesses and are typically far more than the average entrepreneur or boutique business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your boutique clothing business.

In most cases, our recommendation for a boutique business would be to create an LLC. We’ve got a complete guide to everything you need to do. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

Start your business with us, today!


Setting up Your Boutique and Business Operations

Once you've legally created your boutique clothing business, you’ll need to get some other things in place.

Location of Your Boutique

Location of Your Boutique

If you’re selling online, you can work from home or a shared working space, although you may need storage for garments. This is great as it reduces your office costs considerably. Don't forget that if you work from home, you can write off part of your utility and housing costs against your taxes.

If you’re selling in a traditional store, you’ll need to find the right location and pay for furniture, fixtures, utilities and everything else that goes into creating a desirable retail location.

Equipment for Your Boutique Clothing business

For an online business, you’ll likely just need a computer, laptop, tablet or smartphone. For a brick and mortar business you’ll need shop fixtures, a cash register, furniture and much more.

computer monitor
megaphone

Marketing Your Boutique

Branding and marketing will be a huge part of your boutique clothing business. Naturally, you will need an awesome website, but you'll also need to get newsletters, digital ads, social media accounts and other channels in place. You’ll want to focus on visual marketing, so Instagram and Pinterest can both be excellent channels.

Software and Processes

The right software and processes will make running your boutique clothing business much easier. See our list of the best apps and software at the end of this guide.

computer software
employees

Employees

Depending on the type of business you’re running, you might be able to take care of everything yourself. As you grow, you can look into taking on another employee.

Finances and Taxes

You will need a separate business bank account for your boutique clothing business, and you might also want to consider a business credit card. Additionally, you will need to keep careful bookkeeping records and file business and personal taxes. Here at Incfile, we can even help you file your taxes.

taxes

Our Start a Business Checklist will get your boutique business going in the best possible way.


Rules, Regulations and Taxes for Retail Boutiques

You will need to explore local, state and federal licenses and permits, and we can also help out with researching your business licensing needs.

Taxes

Taxes are a fact of life if you’re in business, and there are various ways you will need to file and pay them. This can include self-employment tax, state income tax and federal income tax. You will also probably be liable for sales and use tax.

As a rule of thumb, we recommend holding back around a third of your earnings to pay your taxes. We can also prepare and file your tax returns for you.

Maintaining Your Boutique Clothing Business

There are certain forms and legalities you need to follow to keep your boutique clothing business in good standing.

File an Annual Report

Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.

Pay Estimated Taxes

You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).

Renew Business Permits and Licenses

Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.

File Your Taxes

You will need to file your taxes once a year.

Pay Payroll and Sales Taxes

If applicable, you will need to make payroll and sales tax payments on a regular basis.

Prepare Your Taxes

You will need to work with your accountant to prepare all the taxes you need to pay.

Insurance for Your Boutique Clothing Business

Most boutique clothing businesses should have comprehensive business insurance. There are various types.

Workers Compensation Insurance for Retail Businesses

Workers’ compensation insurance provides coverage for job-related illnesses, disabilities or injuries that affect employees. Regulations for this insurance vary from state to state. It typically covers areas like medical costs, loss of earnings, compensation and retraining.

General Liability Insurance

This insurance protects your boutique clothing business from claims due to being sued. This may include injury to members of the public, property damage, personal liabilities, legal defense and more. It can help protect your business from financial penalties and bankruptcy. This type of insurance could be essential to your boutique clothing business if you run a physical store, since you'll have customers on your premises.

Home and Auto Insurance

If you are working from home on the administration of your boutique clothing business or driving a vehicle for work, check whether your existing home and auto policies cover you for work use of your home or car. If not, you should either expand your policy so you’re covered or get dedicated business insurance.

Useful Online Tools for Boutique Owners

Here are some really great online tools for managing your boutique clothing business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.

Project Management

Asana, Basecamp, Trello

Productivity

Todoist, Evernote

Collaboration

Google Docs, Dropbox, Box

Social Media Management

Hootsuite, Buffer, Sprout Social, BuzzSumo

Communication

Skype, Grasshopper, Slack, Yammer

Email Marketing

MailChimp, CampaignMonitor

Advertising

Google AdWords, Bing Ads

Marketing Automation

HubSpot, Hatchbuck

Customer Relationship Management (CRM)

SalesForce, Insightly, Zoho CRM

Customer Support

ZenDesk, GetSatisfaction, SurveyMonkey

Human Resources

Gusto, Hire Athena

E-Commerce

Volusion, Recurly, Vendio, Square

Website Development

Snapweb, SquareSpace,WordPress

Hiring

ZipRecruiter


Conclusion

With a strong eye for style and good business acumen, you can start a successful retail clothing company. If you can find a great niche, understand your competitors and put together a solid business plan, you will have every chance for success

Start your boutique clothing business with us, today!