13 Easy Steps-Start a Retail Business in Malaysia with Xero

Retail Business Startup Guide Malaysia

Are you planning to set up a retail business in Malaysia? With Xero for Malaysian Retail, you can simplify your bookkeeping and focus on growing your store. This guide will walk you through 13 essential steps to get started in 2025, ensuring your business thrives with the support of cloud-powered solutions.

This guide will take you as the business owner, through some of the key actions in setting up your retail store. Among the most important things you’ll do are to plan your business effectively and conduct market research. Also, an online accounting software like Xero is important too, it can streamline many of your bookkeeping chores. Xero accounting software lets you get on with implementing your exciting business ideas, while making sure you stay compliant, supporting your growth. So let’s dive in!

Step-by-step guide:

Step 1: Market Research – your journey with Xero to start a retail business in Malaysia

It is very important before opening the retail business to get an idea about the market. Think of what products you would like to sell, whether clothes, cosmetics, baking products, or electronics.

After that, 

1. Consider the current trends in the market
2. Analyze your competitors
3. Observe demand for your selected products
4. Find out what distinguishes your product and check its sustainability by fulfilling continuous demand

Step 2: Define Your Target Market

It’s fundamental to build an idea of who your ideal customers are. You’d want to create a detailed customer profile, also referred to as a customer avatar, by considering age, gender, income, lifestyle, and preferences. This will be your guide as to how to design your branding, price, and market your services.

Step 4: Register Your Small Business

Choose your preferred type of business entities

Usually, there are a few types of business entities that are the common option. 

For local, sole Proprietorship/Partnership, Limited Liability Partnership (LLP), or Private Limited Company (Sdn Bhd). It will be another type of business entity – Foreign Company if it is owned by foreigners.

Company Name Reservation

Let your company name be registered with Suruhanjaya Syarikat Malaysia (SSM), letting it be acceptable per the naming norms of the country. 

Business Registration

The company has to apply for registration within 30 days after reserving the name. You have to submit identification documents, incorporation documents, and proof of address. 

If you are incorporating a Private Limited Company (A Sdn Bhd), please note that you may appoint a licensed company secretary to assist you in company name reservation and business registration. You also may reach out to us at connect@caltrix.asia if you need help with this.

Step 5: Get Licenses and Permits

The owner has to get one license for a retail business in Malaysia and some complementary licenses like:

Business Premise License – If you operate your business in a physical location, you have to apply for a business premise license from any local town council.

Signboard License – Apply for this license from your local town council if you intend to erect a signboard on your premises. Indeed, depending on the nature of your retail business, you may require an signboard license.

Industry or Sector Specific License – This license would be required if your retail business belongs to a specific industry.

Activity Specific License – If your business undertakes certain activities.

The application requirements for each license vary depending on the location, industry, and nature of the business. For instance, different local authorities may require different application needs for a Business Premise License and Signboard License. Depending on your activity and location, you can obtain a Business License from the relevant Pihak Berkuasa Melesen. Malaysiabiz Portal will also be able to assist you in searching for licenses, while SMEinfo Portal guides you on how to go about getting a business license.

Step 6: Opening of Business Bank Account

Opening a corporate current account is very important to keep your bookkeeping in order. Banks would normally require your Certificate of Incorporation, proof of business registration, and identification of the directors and signatories. 

The bank that integrates with Xero accounting software now is CIMB Bizchannel, and upcoming in 2025 will be Maybank.

With your bank account already running, integrate a cloud accounting software, such as Xero, to make your financial management easy. Xero will enable you to track sales, manage expenses, and allow you to access the latest financial reporting for making wise business decisions and maintaining a healthy financial outlook for your growing retail business.

Xero also can ensure each accounting transaction is supported by softcopy documents, high accuracy of data entry every week and set up proper standard operating procedures (SOP) for your business.

Step 7: Register for Taxes

Every company in Malaysia has to be registered with the relevant authority for corporate income tax within three months starting from the date of commencement of its business. You are supposed to send your application to the Inland Revenue Board of Malaysia, LHDN, for your tax identification number.

However, please also keep yourself updated and informed by your tax agent if your business needs to register for Sales and Service Tax (SST), and the most recent one – e-invoicing in Malaysia.

Step 8: Funding Options

Assess your need for funding and potential financing. Determine how much capital you need to start and maintain your retail business. This may be by your own savings, loans, or investments.

Other than funding, most importantly is to allocate appropriately in different areas of business like – renovation, advertising and marketing, operating funds. Do ensure after spending the initial investment to start your business, your cash balance must have at least 6 months of operating expenses that include your monthly purchases of stock, payroll, rental and other business expenses.

Step 9: Locate the Best Place – Right Location

Choose a strategic location that will give maximum publicity and physical touch to your retail outlet. These may include things like the nature of access to the location, the demography, and competition in the area.

Please remember to refer to Step 2 above which matches your target market.

Step 10: Identify Suppliers

Identify reliable suppliers of your products and build a rapport with them. It should be someone who can meet your demands in terms of quality and inventories.

Please discuss the payment terms and Minimum Order Quantity (MOQ) as well in order to allow your business to stay afloat in cash flow management which Xero is able to help you with.

Step 12: Branding and Marketing

Create a brand identity that speaks directly to your target audience. Follow a strategic marketing campaign for your store online and offline. Make use of social media, advertise in local papers, and participate in community affairs.

Step 13: Choosing the right technology for your business – Accounting Software, Inventory management Software

Cloud Point-of-Sales Software

As a retail business like brick and mortar stores, the basic technology you must have is – cloud Point-of-sales (POS) software as this allows you to run daily operations (like issuing e-invoice for your sale, generating sales data and analysis, track inventory by leveraging on inventory management feature to show the actual stock level over time, and issue and manage purchase orders, and many more.

Please check out our blog about Cloud POS software here.

Cloud Inventory System – Just In Time

In addition, investing money in inventory management technology is crucial for your new business to manage your inventory levels (whether under or excess inventory) for your finished products or raw materials. You need to evaluate the functionality of your inventory system as below to manage inventory efficiently:

1. Sales from multiple channels sync into inventory features (If you are running an e-commerce small business too, ensure website sales and e-commerce platform sales can be synced as well)
2. Manage inventory level – raw materials based on the production process towards finished goods
3. Manage inventory level – finished goods to manage economic order quantity and market demand
4. Multiple locations tracking (warehouse or in-store) for your finished products
5. Waste tracking to reduce waste
6. Establish Inventory Cost valuation method – The common methods are either First-In-First-Out (FIFO), Last-In-First-Out (LIFO), or Average Costing

Many small businesses and entrepreneurs might neglect this after growth; you need to practice a proper inventory management style to stay competitive. For example, implementing Just In Time (JIT) Inventory Management is a crucial process to ensure your business operations support the market demand from consumers. High customer satisfaction will bring you more revenue and finance essential business growth.

Cloud Accounting Software – Accrual Accounting Method

Next, you can start mapping your total cloud business solution starting from implementing Xero  – retail accounting software. Xero is a cloud accounting technology that you need to invest to record financial transactions like Revenue, Purchase Costs, Expenses, Employees Salary, Payroll taxes, inventory values in order to establish Financial Reports to make informed and wise business decisions.

The main reason is that the Xero app store allows you to access more than 1,000 apps integrated with your Xero account, making your business data sync seamlessly with Xero integration.

CALTRiX is a leading Xero expert and also the award winner of Medium Accounting Partner of Year 2024. We help new small businesses in Malaysia to implement Xero successfully, allowing you to access Xero features and fully utilize it. (Xero also offers you a Xero mobile app to access your numbers at figure tip.)

Most importantly, we help you to map the Cloud Integrated Solution within Xero. For example, Cloud POS software, Cloud Scheduling and Payroll Software, and many more.

Reminder: 3 Things to Note When Starting a Retail Business

1. Cash flow management

Good cash flow is the key to successful retail. Keep your business plan up to date regularly, reflecting actual trading compared with the forecast. Don’t use operating cash to purchase long-term assets; instead, consider other forms of finance, like a business loan, that match the length of the life of the asset. 

Poor cash flow will result in vendor payment being delayed, lost opportunity for expansion or growth, and employees have low morale. Identify cash flow issues early, with strategies for improvement put in place. Therefore, a cloud accounting software, like Xero, may be your assistant in having sound financial operations and payroll.

2. Competition

Competition at retail should be harnessed by paying attention to pricing and learning processes. Never set prices just based on your competitors; study the real costs of products and alter those costs as time goes on. 

Furthermore, take early mistakes and use them as building blocks to success, for it is from early failures that most successful entrepreneurs have learned their lesson. Understand different types of retail competition: intratype, intertype, and divertive. This will enable you to position your business more appropriately and attract customers in a very busy market.

Conclusion

Setting up a retail business is very exciting yet challenging at the same time. Proper market research and acquisition of licenses put one in good standing and give a very good head start toward success. 

Xero, a cloud accounting system filled with functionality, makes it much easier to handle your finances and bookkeeping, giving you more time to work on your business growth. Let us try to make your retail store successful in the Malaysian retail industry with the use of Xero, through which you can tackle the competition without any problem. Any questions about Xero, just get your FREE clarity call assessment with the certified Xero advisor to start turning your retail business from dream to reality!