Charity shop business plan — open your first store
Originally published: July 2017
There are at least 11,000 charity shops around the U.K., according to the Charity Retail Association (CRA), generating over £270 million in profit every year and involving more than 221,000 volunteers. With a tradition that dates from the 19th century, such shops still feature large in British society: research carried out by Charities Aid Foundation in 2016 showed that more than eight in 10 people had bought something from a charity shop the previous year.
Stores can be an important revenue stream. But that’s not all. A high street presence can be great for raising awareness of a cause and an organization—for many charities they are the most visible aspect of their work. Reusing goods instead of sending them to landfill or recycling them means less waste. And for consumers, such shops are a great source of low-cost, quality products (the average transaction price in a charity store is less than £4).
But charity retail is also complex, involving many legal and practical considerations. Organizations shouldn’t assume it’s easy to get right, Jayne Cartwright, founder of the Charity Retail Consultancy told The Guardian. "Do lots of research so you are confident that your idea for a shop will work," she advises. "Plan everything carefully: location, volunteers, products, and identify what will make your charity shop stand out from the rest."
Before you start
It’s essential to check if your charity is allowed to trade, and if you are, how this will affect your tax status.
You also need to have (or bring in) the entrepreneurial skills to make the business a success. And you’ll need to deal with the challenges any small business faces—such as security or health and safety, as well as the issues specific to a charity shop, such as ensuring a regular supply of stock and available volunteers.
The Charity Retail Association suggests the following steps (note these are general principles, but specific requirements may vary between England and Wales, Scotland and Northern Ireland):
- Register as a charity with the Charity Commission, if not done yet—only registered charities can set up charity shops.
- Familiarize yourself with the statutory obligations for a retailer, charity, employer and occupier of property—seek legal advice where needed.
- Familiarize yourself with the tax side of running a charity shop. Charity shops are exempt from corporation tax, pay zero VAT on the sale of donated goods (but not necessarily on other goods), and benefit from 80% mandatory non-domestic business rates relief. Check with HMRC for guidance.
- Contact your local council to arrange rates relief.
- Create a budget with expected income and expenditure; assume that 60% to 80% of income will go to operating costs, such as rent and wages. Note that all profits must go to the parent charity for it to be classified a charity shop.
- Raise start-up capital: you will need at least £5,000 to pay the rental deposit, shop-fit, essential building repairs and staff recruitment.
Setting up a charity shop
- Choose where to open your shop—it should be in a mixed income area with good footfall and nearby car parking.
- Find a property. The shop will need to have a decent-size backroom for storage and stock preparation, as well as a nice public area. To comply with health and safety legislation, and with disability discrimination laws, the shop will need to be safe, well lit and accessible to those with disabilities.
- Fit the shop. The public area will need shelves, railings and a counter with a till, while the backroom needs storage and sorting facilities. Security equipment is highly recommended.
- Hire a manager with retail experience. They will be responsible for all activities, including stock, volunteers and cash handling, as well as reporting on sales figures.
- Find volunteers. You will need a minimum of two people working in the shop at all times, for safety, security and stock processing. The average charity shop has 19 volunteers on its roster.
- Train your workforce so they understand your charity’s aims, retail law, product safety and stock preparation and are able to identify valuable goods. Give training on workplace health and safety, and security.
Running a charity shop
- Encourage donations, whether through chatting to customers, running a post-Christmas or spring-cleaning campaign or doing house-to-house collections using donation sacks. Note there are legal obligations involved in house-to-house collections—this is mostly regulated at a local level, so it’s best to find out more from your local authority.
- Sort, clean and price your stock. Textiles that are too old or damaged may be sold to a textile recycler.
- Make sure the shop is safe and secure, and complete the necessary paperwork—such as risk assessments—to prove this. Display the required posters and notices such as employer’s liability insurance certificate, a health and safety law poster and emergency evacuation instructions.
- Make sure the shop is accessible and welcoming to disabled customers and volunteers. This involves physical things, like having a ramp to put on steps, as well as training staff.
- Make sure the shop complies with consumer law, and sells safe goods of satisfactory quality. Visit Trading Standards for further guidance.
- Get your systems set up for Gift Aid.
- Apply for a music licence if you want to play copyrighted music in your shop.
You might have done the training and got the systems in place, but it’s important to maintain quality and ensure rules and procedures are being followed. Arlene Clapham, risk and assurance manager at Sayer Vincent, advises regular visits and using an audit checklist to ensure managers, staff and volunteers are up to date and consistently implementing good practice.
And to be a successful enterprise, the usual principles of business apply.
"Retail is constantly changing and charity shops need to do the same," says Charity Retail Consultancy's Cartwright. "We should always be looking at what is happening in retail and what we need to do to compete."
This article was produced in partnership with the Charity Retail Association, the only body in the U.K. that represents the interests of charity retailers. CRA members run over 8,500 shops between them. CRA members benefit from legal advice, training, learning and networking opportunities.
Charity Retail Association: Starting a charity shop
Charities Aid Foundation: Charity Street II: The value of charity to British households (2016)
UK Fundraising: Charity shops: Getting the balance right by Arlene Clapham (2017)
The Guardian: Charity shops: What’s in store? by Charlotte Seager (2014)