The costume rental business is part of a continuously flourishing industry that presents many opportunities for growth. The reason for this is simple: Why would anyone want to buy an expensive costume that they’ll wear only once?
There will always be a need to rent out outfits since people don’t want to purchase costumes that they will only wear once. So if you’re looking to venture into something lucrative, a costume rental business is perfect for you. Not only is it an amazing startup idea, but it’s also fun!
The thought of starting a business can be overwhelming, let alone dealing with all the nitty-gritty details of launching it. Worry not!. We’ve put together some quick tips to help you launch a costume rental business and make it a surefire success. Here’s how you start!
1. Find your target market
Running your business without adequate market research is a fool’s game. You must hunt and target people who are looking for exactly what you offer. If you come to think of your own target market, your first intuitive guess is “Halloween costume renters”. However, such customers only bring in seasonal demand. They can’t be making up your entire target market!
Think of the bigger picture here. There could be production houses, theatre groups, music bands, education institutes and churches looking to rent costumes on a short-term basis. Cash in on those!
To choose which particular niche you wish to serve, you must study the market first. It’ll give you insights on which costumes are in the highest demand and how you can leverage those to your benefit.
The easiest way to find the right audience is to talk to people. Some helpful questions to ask them are:
- What age group do they fall in?
- Why are they looking for costumes (for school plays, comic festivals or as props for theatrical performances, etc.)?
- How much are they willing to pay per costume?
- What do they expect from a costume rental business?
- Do they prefer an online store or an in-store experience?
- How will they respond to promotional coupons and seasonal discounts?
Finding a relevant target market helps you start on the right foot and develop your strategy around it.
2. Figure out your costs
When it comes to launching a business, several things require an outlay of money apart from inventory acquisition. So it’s important to figure out the initial investment that your business needs. You can start off by listing down some basic costs. These will normally include:
- Fee for creating a Limited Liability Company (LLC)
- Cost of buying or renting a store space
- Purchase cost of your costume repository
- Repair and cleaning expenses of costumes
- Employee salaries
- Website development and hosting costs
- Advertising expenses
- Property insurance
- Tax expenses
- Additional expenditures (discounts and promotions)
On average, all of this will cost you anywhere between $10,000 – $50,000, depending on how much funding you have. Remember to save a portion of your budget for rainy days.
3. Secure funding for your startup
Don’t let money stop you from chasing after your dreams. If you’re passionate about opening up a costume rental business, then you will find many startup incubators willing to fund your venture.
However, there’s a trick to getting incubators on board. Start off by creating a well-researched business plan. This shows that you know what you’re talking about.
You score plus points if you have some statistics in your plan to back up your argument. Other things a good business plan includes are market analysis, organizational structure, and financial projections for the next 5 years.
If you can’t present your business in front of any incubator, then another good bet is to visit any bank. You can present your case and file a small business loan application. And if that doesn’t work out either, then worry not. You will always have your family and friends there to help you out.
4. Create an LLC
This doesn’t sound like such an exciting step, but your business can’t exist if you don’t go through this. You must register your business as a Limited Liability Company (LLC).
An LLC is the most suitable legal structure for rental startups. It limits your liability in case of a personal lawsuit. So if things ever go south, you won’t lose its assets if it’s an LLC.
To create an LLC, you need to file the Articles of Organization. You can file these articles at your State’s commercial-services department.
5. Register for taxes
Startups have to register for a number of State and Federal taxes. However, these taxes vary across different states and counties. So depending on where your business is, the tax rates will change accordingly.
An important thing to note is that rental items are mostly taxed like sales – something that most people don’t know of!
Also, keep in mind that not every rental transaction is taxed. Most LLCs have a “pass-through” taxation structure. This means your business earnings pass along to your personal earnings, and so you’re taxed only on your personal income.
Before you file for your taxes, it is key to get your business an Employer Identification Number (EIN). It is basically your company’s tax ID. You can apply for it online at the Internal Revenue Service site.
It is important for many reasons, some of which include:
- All banks and commercial lenders require an EIN to open a bank account for your company.
- An EIN means you don’t have to use your social security number anymore for business transactions. This limits the possibilities for identity theft.
- You need this tax ID to file taxes.
6. Open a business bank account
Once you have your EIN, you can now open your business bank account. You might have thought of just using your personal bank account to cut all the hassle.
However, using your personal account for business transactions can be a grave mistake. Here’s why:
- It creates a complex network of your personal and business transactions, which is difficult to detangle later on.
- Muddling of the two transaction types also leads to inaccurate bookkeeping.
- It also reflects your flippant attitude about the business and how you pursue it only as a hobby. This makes it harder to obtain loans or funding later on to grow the business.
- Your business tax filing process gets more complicated
7. Pick a store location
Once you’re done taking care of all the legal matters, next comes purchasing a store for your costume rental business. When choosing a location for your rental startup, there are many aspects to consider.
It’s always wise to look for places that are near your chosen target market. For example, if you want to rent out costumes to schools, then you might want to look for stores that are closest to them.
Next, of course, you have to check your budget and pick what you can afford. Ideally, you should look for places that don’t require a considerable level of renovation.
Some other plus points to look for include an easy-to-navigate floor plan, ample storage capacity, and availability of display cases. Changing rooms are always a must for a costume rental business. If the store you choose doesn’t have any, then it’s best to consult a contractor to add one.
Read More: 25 Key Rental Business Lessons for Owners
8. Build your costume rental inventory
Now that you have a store, it’s time to stock up! A common mistake most business owners make is buying the most expensive inventory because they think the more it costs, the better it is. However, what if customers don’t want expensive costumes? All that investment in high-end items goes down the drain.
So it’s important that you keep your market research in mind here. If your target market is looking for cheap solutions, then don’t go wasting your money on high-quality goods. Another factor in building your inventory is knowing what kind to stock up on.
Depending on the niche you choose, you will have to stock up on different types of inventory. Here, we take a look at how your inventory may differ based on your target market.
9. Invest in an inventory management setup
Once your business kicks off, you will have a large inventory of costumes and other trackable articles like masks, and related props, etc. This is where your business calls for dedicated rental management software to manage your inventory levels
Such software gathers information on how much a particular item is selling and how often it needs to be stocked. This helps you easily understand the demand for various items. It will also provide information on which items are no longer profitable so you can down-size accordingly. These are important factors to consider so that you can discard idle costumes and better utilize profitable sources.
You can also benefit from the automation of daily business processes. For example, automating invoice management allows you to create and send out invoices without any delay, helping you save vital time.
Moreover, automated notifications and alerts are also available to help remind customers of the due date. This helps increase timely returns and decrease item unavailability.
10. Set your pricing
It’s time to figure out your pricing. This includes not only your rental rates but also any discounts and promotions, late fee charges, damages fees, etc. Costume businesses typically charge customers on a daily basis.
a) Rental rates
Rental rates can lie anywhere between $35 to $250. To calculate where your rental rate falls in this range, a good technique is to subtract the residual value from the current value.
The residual value is an estimate of how much a costume will be worth once a customer returns it. After you calculate the difference, divide that amount by the number of days the costume is rented out for. Voila! The resultant amount is your daily rental rate.
b) Special pricing and discounts
Production houses usually rent costumes for longer rental periods. To cater to them, you should consider offering special pricing and discounts. For example, instead of charging them on a daily basis, you can charge them on a weekly or monthly basis as per their convenience.
Moreover, since production houses are valuable customers renting in bulk, you can also offer them good discount deals as you deem appropriate.
c) Late return and damages fee
If you don’t charge customers a late return fee, they may start taking the return policies lightly. This will eventually impact your business, as enough costumes won’t be available for others to rent out.
You can prevent this by charging customers a late return fee. Unlike rental rates, you don’t necessarily have to charge a late return fee on a daily basis. You can either charge the fees at a varying rate (per minute, per hour, per day and so on) or set a flat rate.
You may also want to charge your customers for any damages the costumes might incur when in the possession of your customers. This is a crucial aspect as it saves you from wasting your own money over damages your customers inflict.
11. Create an online costume rental store
According to Statista, 224.1 million people shop online in America. This is reason enough to show why having a prominent online presence is vital for your startup. An online store helps magnify your target market and significantly lower costs.
Almost every successful business has an e-commerce website, including most of your competitors. This makes it all the more critical to have an online presence to have a top-of-the-mind awareness.
You must make sure that the website shows all the necessary information. This may include details such as business hours, contact information, pricing, product details, and shipping terms.
Above all, your website should have catchy illustrations and be user-friendly. This entire process can be made easy if you have a reliable costume rental software to store all critical information.
12. Effectively manage your costume vendors
Managing vendors plays an important role in any rental business. This is especially true for costume rentals, where you can’t stay in business without reliable vendors. This is where vendor sourcing comes in, where you constantly have to manage your vendors. To do this, keep evaluating the benefit your vendors provide your business.
Vendor sourcing also dictates identifying and building valuable relationships with vendors. This is important so you can obtain the best quality products, all the while managing costs as well. If at any point the costs outweigh the benefits, you will know it’s time to look for a new vendor.
13. Ready yourself for impromptu customer requests
There will be moments when you may not have the costume that your customer desperately wants. When this happens, you have two options to choose from.
The first option is to let the order slip through your hands and lose a potential client. The second option is to implement a simple solution: sub-rent from third parties to rent it forward to your customers.
This solution helps costume rental businesses deal with impromptu customer requests and deliver exceptional service to their customers.
The sub-renting feature is especially of utmost importance during peak seasons. It helps avoid overbooking of costumes and missing out on potential orders. You need to create and manage amicable relationships with relevant third parties for successful sub-renting operations.
14. Hire your first employees
Hiring is a tricky business – you can never know if you hired the right person or not. However, there are certain things you can do to ensure that you find the best fit for your business.
Make sure you carry out background checks into each prospective hire. Most people include false facts on their resumes. So don’t go believing everything they tell you.
Ask them questions about why they want to work at your business and what they will bring to the table. Scenario questions are also another great way to gauge if someone can perform effectively at your company or not.
Have an onboarding process in place so you can train your new hires from the get-go. The extra hands on deck will help things run much smoother!
Important aspects of Costume Rental Businesses
Apart from focusing your efforts on how to launch a costume rental business, there are several other aspects that you need to keep in mind as well. Let’s take a look at some of these aspects that your rental business needs to flourish.
1. Accessing data from anywhere
Who’s going to keep track of all the order details, rental returns, and whatnots when you’re not in town? For this reason, it is important that you utilize the right tool for your rental business to store information on a cloud database. This allows you and your team to easily access all the information from any device, at any place.
You will no longer have to rush to the office to deal with an urgent rental crisis. Having snapshots of important data available online allows you to stay in touch with work even when away from the office.
2. Availability-based ordering
For a rental business to work, there should be enough stock available when the customer wants to place an order. If the costume isn’t available, then the customer shouldn’t be able to view it online at all.
To make this happen, availability-based ordering is ideal. This system of ordering aligns order scheduling with item availability so that an order is only scheduled when the costume becomes available, and not before that.
3. Bookings and reservations
Customers might want to book costumes beforehand to ensure that your business doesn’t run out of them before they need it. To make this happen, you might need to reserve items so that they are available when the customer wants them.
However, all such bookings and reservations present complications for your business. One possible solution to help you manage all bookings effectively is a rental management platform. The system automatically updates costume availability. As a result of this, customers can only order items that haven’t been booked already. This helps avoid all sorts of booking conflicts.
Time to start running your business smoothly
A costume rental business is one of the most creative and exciting businesses you can venture into. However, that doesn’t mean you take it lightly and let it sink to the ground. Keep in mind all the important aspects discussed above because those will surely help.
Start off with the most important aspect of your costume rental business – the costumes themselves. Costumes need proper maintenance and must be returned on time. Moreover, you also need a substantial stock of costumes, otherwise, your business will cease to exist. To make sure nothing of that sort happens, stick to the guide above and you’re good to go!
Your costume rental business has the capacity to break-even in the first few years if you manage it properly. Remember to use our tips to ensure steady running and inflow of profits!
We are a cloud based costume rental system that offers costume rental businesses seamless rental management. It also comes with a host of other features like asset tracking, maintenance management, a customized webstore, and much more. Try us out today!