How to start up a carpet shop

Sales of carpets and other floor coverings are linked to the number of housing transactions and to how much money consumers have in their pockets. Our practical guide will help you start up and run your own carpet shop.

• Research your target market
• Why will customers choose your shop
• Decide what carpet and floor coverings you will to sell
• Establish your customer profiles
• Promoting your carpet and flooring shop
• Decide which flooring services to offer
• Price your flooring products
• Offering finance
• Buy an existing carpet and flooring business

Research your target market

Estimating demand

You will need to find out whether there is enough local demand for your carpet shop. The two main factors affecting demand are the number of potential customers and the amount of existing competition.

Customers

Think about how many people are likely to use your business. Depending on the focus of your business, you may have both domestic and commercial customers.

Domestic customers

Pay attention to the type of housing in your area. For example:

• are houses large or small
• do they appear well kept or run down
• are they expensive or cheap to buy
• is accommodation mainly owner-occupied or mainly rented - if it's mostly rented you could try to find out who owns the property and approach them instead of the current occupiers as they may be planning refurbishment
• is some accommodation owned by the local authority or by a housing association

Think about the types of people who live in your area. Focus on their:

• level of affluence
• age - are they mostly young or old
• employment status - professionals, working people, students or unemployed

Try to match the range of carpets and floor coverings that you offer to the type of demand you think there is likely to be.

Work for other businesses and organisations

Think about other buildings in your area. Offices, shops, pubs, hotels, nursing homes, schools and public buildings may all require carpets and floor coverings at some point. Decide whether you will try to supply businesses and organisations like this. You might also consider targeting property developers or residential and commercial landlords.

Once you have identified who your potential customers are, this will help you to develop a targeted marketing campaign.

Try approaching other businesses in your area that may arrange or facilitate the purchase of floor coverings for their own customers. You could leave your details with:

• carpet fitters
• shopfitters
• interior designers and decorators
• local building contractors

Consider approaching your local authority - they may be prepared to include your business on a list of 'approved suppliers'. Housing associations may also be potential clients.

Large organisations that invite firms to tender for big contracts may be reluctant to use a newly established business. But it may be worth finding out who is responsible for putting floor covering work out to tender in large organisations such as housing associations, local authorities and construction firms. Try to find out how the tender process works and what you would need to do if you wanted to tender for a contract.

Establishing the level of competition

Once you have decided who your customers might be, you need to find out how well they are already served. Count how many outlets are already selling carpets and floor coverings in your area. A look online at www.yell.com (try classification 'carpet & rug retailers' and perhaps also 'flooring services') and other similar directories will help to establish this as will making a physical count of existing businesses in your area.

Remember to include:

• large specialist chain stores such as Carpetright
• department stores such as John Lewis
• large DIY stores such as B&Q and Wickes
• home furnishings shops, including IKEA
• other independent carpet shops

Bear in mind that you may also face competition from specialist and non-specialist online retailers and firms that sell certain items by mail order through magazines such as Homes and Gardens or Ideal Home.

It may be that only some of the above will be your direct competitors because you will be targeting a particular segment of the market or selling very unusual carpets that are hard to find elsewhere.

Look at your competitors' advertisements and try to visit their shops to find out:

• what kinds of carpet and floor covering they sell and the prices they charge
• which services they offer (measuring, fitting, interior design advice and so on)
• whether they advertise special features such as interest free credit, free fitting, out of hours measuring service, and so on
• whether they belong to a trade association, for example the Contract Flooring Association
• what sort of impression they give (does the firm come across as small and friendly, large and efficient, good value, traditional, upmarket)
• how knowledgeable and helpful their staff are

Research current trends, plus legal and tax issues

• Shopping in carpet shops
• Legal issues for carpet shops
• VAT rules concerning carpet shops

Why will customers choose your shop

You need to make sure that enough customers will choose your shop rather than your competitors'.

Your market research might indicate that there is a gap in the market that your shop can fill. For example, perhaps no one in your area is specialising in high-end carpets and rugs - or maybe in industrial floor coverings such as hygienic safety flooring. Alternatively, you may have identified a demand for budget priced carpets.

High quality service

One of the independent's great strengths is providing a high quality, personal service. An in-depth knowledge of carpets, floor coverings, fitting and so on will enable you to provide helpful advice to potential customers. Make sure that customers are aware that you are pleased to discuss their flooring choices with them and take time to offer advice - remember that word-of-mouth recommendation can be an exceptionally good way of attracting new business.

Stores that are part of large national chains often have difficulty in providing such a personal level of service so make the most of this potential strength and ensure your customers are aware of the help you can offer.

Additional assistance

Carpet suppliers will often visit their customers' homes to discuss requirements with them, take measurements and show a range of samples. Think about offering an evening or weekend visiting and measuring service for customers' convenience. You could also offer interior design advice - suggesting paint schemes, wallpaper, curtains and so on to match the carpet. You might even branch out into supplying these goods yourself. When visiting a customer's home with samples, you could use a digital camera and interior design software to produce images of how the room might look with various carpets fitted. Offering helpful extra services like this can make all the difference to the success of your business.

Shop location

The location of your shop is important. Ideally there will be ample and easy parking nearby and also lots of passing trade. It is not essential that the shop is particularly large; many carpet suppliers hold few, if any, rolls of carpet in stock - instead they display samples and simply order the amount required as necessary. Whatever the size of your shop, try to make it welcoming and attractive.

Decide what carpet and floor coverings you will to sell

The budget and mid-range floor coverings market is heavily targeted by major retailers such as Carpetright and B&Q as well as online suppliers of laminate and solid wood flooring like flooringsupplies.co.uk and hardwoodfloorstore.co.uk.

Although you probably can't afford to ignore this market you will come up against stiff price competition. As a result, you might decide to have a greater focus on more expensive or unusual carpets and floor coverings, or on industrial carpets for businesses.

However, there is no need to restrict yourself too much. The range of carpets that you supply could be very large and need not be limited by the size of your outlet. Most carpet retailers keep a wide range of samples, but many hold little or no rolls of carpet in stock. Customers will expect to be able to look through sample books showing all the different colours and patterns available for each range. When a customer chooses a particular carpet, the right amount can be ordered straight from the supplier.

Some examples of the types of carpets and floor coverings you might sell include:

• domestic carpet in various grades, patterns and colours
• industrial, commercial and contract grade carpet (very heavy duty)
• remnants, roll ends and discontinued lines
• rugs and mats
• smooth floor coverings such as linoleum, vinyl, rubber or cork
• laminate and solid wood flooring
• carpet tiles, hard tiles and wood strip
• cushion flooring, anti-static and non-slip safety flooring
• hygienic safety flooring

You will also be expected to supply ancillaries such as underlay, gripper and door bars.

In addition, you might decide to stock some other items, for example, curtains, window blinds, wallpaper, cushions and throws. You may also consider stocking electric and water underfloor heating packs.

Establish your customer profiles

Your customer base is likely to be made up mostly of people from your local area and its exact nature will be influenced to a certain extent by the type and cost of carpets you sell. Most of your customers will be people who have gone out specifically to shop for carpets and other floor coverings, although you may also attract people who are just passing your shop and who pop in on impulse.

The extent to which your shop specialises will also affect your customer base. For example, if you become known as a supplier of high quality or unusual rugs you may attract customers from further afield.

When deciding what to sell it is worth bearing in mind that cheaper carpets are popular with first time house buyers for whom price is important. More expensive carpets are likely to bought by older, more affluent people. Try to match the image of your shop to the type of people who live in your area. Of course, there is nothing to prevent you selling a wide range of carpets to suit all budgets. However, your market research may have helped you to identify any gaps in the market and the type of customer you can target.

Trade customers

As well as private individuals, you may also have some trade customers. These may be businesses of any type who are looking to renew their flooring as well as house building firms, property developers and landlords. You may have a separate trade price list and you're likely to offer account terms to your trade customers.

Promoting your shop

The right image

It is important that your shop projects the right image. Providing a helpful service is a vital part of creating a good image. Aim to offer a high quality, friendly and knowledgeable service, which can help to differentiate your shop from some of your competitors. Make sure that you and any sales staff are knowledgeable about the carpets and floor coverings that you can supply. Offering advice about carpet finishes, quality of underlay, durability, stain resistance and any protective coatings that are available will help your customers to make the right choice and reassure them that you are knowledgeable about your product range. It can also be important to make sure that:

• the outside appearance of the shop is smart
• window displays are changed regularly to attract passing trade
• samples are attractively displayed
• signs are used to draw attention to new ranges or special offers
• staff are neatly dressed and behave in a friendly and helpful manner
• you and your staff can give some level of design advice as well as technical guidance

Extra services

As well as offering measuring, delivery and fitting services, any extra services that are not available elsewhere may help to bring in customers and additional income. Your competitors might not be able to offer interior design, planning and advice, for example. Maybe you could offer out of hours measuring, sample viewing and fitting. Follow up telephone calls to check that everything is fine will show that you are serious about providing a good service. Guarantees on products and workmanship, and membership of a trade association should help to give potential customers confidence in your business. Offering credit facilities might also enable some people to replace a carpet that they could not otherwise afford to.

Advertising your shop

Make sure that your potential customers know about you and the products and services you offer.

The window display and external signs can inform and attract passing trade but it may be beneficial to advertise to a wider audience. You could advertise your shop in the local press or directories. You might consider becoming a recognised local supplier for the National Landlords Association - landlords will often re-carpet throughout at the end of a tenancy. Having your business vehicles sign-written is another good way of advertising. Your advertisements should emphasise any special services offered, brands stocked or other features that distinguish your shop from the competition.

It is worth advertising on the internet to reach a wider market, especially if you intend to supply high quality or unusual carpets which are not widely available elsewhere. The Carpet Information Centre website offers consumers general information about carpets and other floor coverings and gives retailers the chance to display their contact details and website address in a searchable directory of local carpet retailers directory. Having your own website and social networking on Facebook and Twitter can be effective ways of advertising your service.

Decide which flooring services to offer

As well as supplying a wide range of carpets and floor coverings you will probably offer various services, for example:

• a measuring-up service at the customer's home
• estimates and quotations (possibly including work covered by the customer's home insurance)
• a delivery service
• removal and disposal of old carpets - you'll need to be registered as a lower tier waste collector (professional collector or transporter of waste in Scotland) if you offer this service
• a new carpet fitting service - you might do this yourself, employ someone to do this for you, or sub-contract the work out to a local carpet fitter
• applying protective spray to newly laid carpets
• laying laminate and wooden flooring
• laying other types of floor covering, such as tiles, vinyl, linoleum and so on
• interior design, advice and planning. Some carpet retailers use digital cameras and interior design software to give customers an impression of how new carpets and colours schemes will look

You may decide to offer some of these services free of charge when a customer purchases a floor covering from you.

Much of this work is likely to be carried out in people's homes, but you might also decide to supply carpets or floor coverings to offices, shops, pubs, hotels, nursing homes, schools and public buildings.

You could also offer wholesale carpet supplies to shopfitters, interior designers, decorators and local building contractors.

Price your flooring products

Getting the price right is very important. You need to make sure that the difference between the cost price and the selling price is enough to cover all of your operating costs, including your own drawings.

Generally carpet prices reflect the type, quality and grade of material and are normally quoted per square metre. You will probably aim to supply a range of different carpets to suit a range of applications and to fall within different people's budgets. Decide what your prices will include. For example, will you charge an all-inclusive price per square metre to include measuring, underlay, ancillaries and fitting, or will you make separate charges for these.

Mainstream carpet at the cheaper end of the market is usually very competitively priced. Customers often shop around for the best prices, so you may have to price in line with your competitors.

Consider the following points when setting your prices:

• what do your competitors charge for similar carpets
• will you aim to compete on price. It will be very difficult to undercut the multiple chain stores that enjoy bulk discounts from their suppliers. If you are able to match their prices, you may achieve extra sales but your business may not be able to survive on slender profit margins
• do you need to discount. Discounting is a major feature of the carpet industry. Will you set your prices to allow for occasional special offers and discounts. If your shop aims for the upper end of the market, you may decide that you don't need to discount. People expect to pay high prices for quality goods and you may be the only shop in the area supplying a particular range of carpets or rugs

If you supply business customers, they are likely to expect you to offer them a 'trade rate'. If you tender for contracts to supply large organisations such as housing associations, they too will expect your rates to be very competitive.

Special offers

Sales are traditionally held in January, although they may be held at other times of the year too, particularly when the economy is struggling. However, bear in mind that if your periods of discounting are too frequent, you may find that customers simply wait for these rather than buying carpets at full price.

In addition to a January sale, you might decide to try occasional special offers. For example, you might give your customers a discount if they buy several carpets at once. If you supply any business customers like hotels and nursing homes you might offer them a discount on extra large orders. Many shops also give discounts to staff, family and friends. Check out the local opposition for ideas and keep a close eye on any special offers you do make to be sure that they are working for you. After all, these kinds of promotions might encourage extra sales, but they will also affect the amount of profit you make on each sale.

Offering finance

Laying floor coverings in a house, or even in just one room, can be an expensive purchase. Some customers may be unwilling or unable to pay for it all in one go and would prefer to pay a deposit and spread the balancing payment over several months or years.

You may decide to offer credit to these customers through a specialist finance company. Several such companies exist and, between them, they offer a range of different finance packages. Some of the finance packages available which you might use to attract customers include:

• standard interest bearing credit
• subsidised interest rate credit
• interest free credit
• deferred payment (buy now pay later) credit
• high risk credit (for customers who might normally be turned down by a finance company)

When you sell goods on finance you will have to fill in a credit application with the customer. Your finance company will then give a decision on whether to accept the application. All being well, the transaction will be completed quite quickly and you will receive payment from the finance company within a few days. You will usually also be paid commission. This is normally based on a percentage of the value of the sale and paid to you separately at the end of the month.

Most finance companies will expect you to meet certain requirements and standards before agreeing to do business with you. Some only deal with businesses that have been trading for a minimum length of time, often two years.

Shop around when choosing which finance company you will deal with. Their terms and working practices vary. When choosing which one is best suited to your business, bear in mind the following:

• what types of finance packages are most likely to appeal to your customers
• how promptly will you receive payment from the finance company
• how much commission are you offered
• how quickly will your customers' credit applications be turned around
• what level of back-up and support is available to you

You will need consumer credit authorisation if you want to offer finance to your customers. This is obtained from the Financial Conduct Authority (FCA). For more details visit the FCA website.

Buy an existing carpet and flooring business

You might decide to buy an existing carpet shop rather than start your own venture from scratch. Buying a going concern can mean that:

• the premises, business equipment and shop fittings are already in place
• the business is already known to existing and potential customers
• the business can generate income immediately
• suppliers have been identified and relationships established with them
• the business has a track record, which can help if you are looking for finance
• staff are already in place
• the business website and social media accounts have already been set up

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.

Other matters to consider include:

• the state of the premises, fittings, equipment and so on. Will you have to spend money refurbishing or replacing assets
• the condition and value of any stock you are buying. Check this over carefully before agreeing a price. Make sure you're not paying over the odds for stock that is out of fashion
• is the existing owner prepared to give you some training after you take over
• existing staff rights
• how to retain key personnel once you've taken over
• does the business owe money that you will be responsible for
• if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.