The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 153,645 tax returns that were filed in the clothing and accessories store industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their boutique store.
We hope that this data will be helpful for you as a “reality check” for your financial projections and retail store business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How many boutique businesses in the US are sole proprietorships
There are roughly 150,000 boutiques in the US organized as sole proprietorships. We specifically analyzed 153,645 Clothing and Accessories Store financials based on the 2019 IRS tax return data.
Average annual revenue for a boutique
The average annual revenue for all sole proprietorship boutiques in the U.S. was just $64,928.
This number seemed low to me. However, this revenue number includes large and small stores which can have large differences in revenue streams, as well as location can have a major impact, especially for more boutique style stores.
We also need to remember that this tax return data includes all sole proprietors that categorize themselves in the “boutique stores industry” aka clothing and accessories store industry. Depending on location and region the potential revenue may vary.
This underscores the importance of actually creating your own Boutique Store projections based on your potential store size, customer traffic and product offering.
Average annual expenses for a Boutique Store
The average annual expenses for all sole proprietorship boutique store businesses in the U.S. was $63,654.
It should jump out to you immediately that average annual expenses for a boutique store was nearly as much as revenue, meaning there is very little room for profit. The expenses will be made up of the cost of goods, rent, wages and more, but can vary greatly depending on the type of products, so again let’s not focus too much on the specific dollar amounts here. What we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount.
Average net profit margin for a clothing and accessories store business
The average net profit margin for a clothing and accessories store business was 2%.
How much can I make by owning a Clothing and Accessories Store business?
In order to calculate the earnings potential of a clothing and accessories store you can take the following assumptions:
- # of visitors
- Average order value per visitor
These assumptions will allow you to come up with a revenue forecast for your boutique. From there you can apply the 2% profit margin.
Top 10 expenses for a clothing and accessories store business
Based on the tax returns of roughly 150,000 sole proprietors operating in the clothing and accessories store industry, the following were the 10 largest business expenses as a percentage of revenue.
Average material costs expense for a boutique
The average boutique spent 49% of annual revenue on material costs. This is the cost of the clothing, accessories and other products.
Given that a majority of the cost is spent on inventory to sell, this is not surprising. There is an importance of finding the right mix of inventory types that have higher profit margins with standard, in demand items.
Average rent for a boutique
The average sole proprietor boutique spent roughly 9% of annual revenue on rent.
Depending on the size and location of the property, this expense could vary widely. In higher traffic areas, it is likely that the expense would be higher.
Average salary and labor expense for a boutique store
The average sole proprietor clothing and accessories store business spent roughly 5% of annual revenue on Salaries and Wages. There is also another 2% in contract labor.
Next to inventory and rent, salary and labor is the second most common cost.
Average supplies for a Clothing and Accessories Store
The average clothing and accessories store spent roughly 4% of annual revenue on car and truck expenses.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 153,645 clothing and accessories store sole proprietorships in the U.S. in 2019.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!