The vaping industry is expected to be worth $61.4 billion. It stands to reason that entrepreneurs, both new and established, would want a piece of this lucrative industry and be interested in learning how to open a vape shop.
When an industry reaches this level of popularity, the business world takes notice. According to Quartz’s 2016 research, there are approximately 2.7 vape shops for every bowling alley in the United States, and they remain one of the fastest-growing business trends today. If learning how to open a vape shop appeals to you, the following are some of the first steps you should take to get your new business off to a good start.
Steps To Open A Vape Shop
Make a business plan.
Normally, the first order of business in starting a vape shop would be to choose the type of business you want to start, a name, and a business structure. While these are all important steps in determining how to open a vape shop, you should first do some planning and research that goes along with writing a business plan.
Starting a vape shop is a one-of-a-kind endeavor because it is a highly popular industry that is also subject to changing regulations and, more recently, bans in some states.
Do some research first if you’ve decided to open a vape shop in your state. Super-high excise taxes on vaping products, depending on where you live, can make your brick-and-mortar location unviable. Although there is currently no federal excise tax on vape products, certain states and municipalities do levy taxes on them, either as a percentage of the product’s wholesale value either per unit or milliliter of liquid.
The tax values vary across these states and municipalities, but the highest rates can make opening a vape shop prohibitively expensive, as vape shop owners must raise their prices accordingly—and potentially lose business to lower-priced online sellers.
After you’ve completed this research, you can come up with a business name and choose a business entity for your company, which you can then include in your business plan. You can check the Secretary of State’s website for your state to see if the name you want is available. They should have an online database with a quick and simple search function to check the names that are already in use.
Choosing a business entity for your vape shop business may be simple, in part because the structure you choose will be influenced by whether or not you have business partners.
Register your company and obtain any proper licenses or permits
If you’ve determined that you can avoid your state or city’s vape tax and developed a business plan, the next step in opening a vape shop is to register the business at the federal, state, and local levels and obtain any licenses required to comply with the laws of each. This is most likely one of the most difficult aspects of learning how to open a vape shop.
Because the FDA considers e-cigarettes to be tobacco as of 2016, you must follow the government’s specific regulations regarding the sale of vape products
Account for essential startup costs
Every soon-to-be small business owner, regardless of industry, must take a few steps before opening their brick-and-mortar locations. Opening a business bank account, scouting and securing a location, deciding on a supplier, purchasing point-of-sale and accounting software, launching a marketing campaign, and hiring and training employees are just a few of the critical first steps. Throughout the process, you must account for your startup costs.
Get business insurance
When considering how to start a vape shop, you must consider what type of business insurance policy you will require—and factor high insurance fees into your startup budget.
According to internal data, vape shops pay significantly more for insurance than other retail stores. Whereas the average annual cost for small business owners holding the company’s general liability insurance policy was $591.13, coverage for vape shops on the same policy cost an average of $711.11 per year. The precise cost of your insurance policy, however, will be determined by risk factors such as your projected revenue, the value of your property and equipment, and the value, type, and quantity of products you stock.
Get funding
Aside from preparing for high start-up costs, vape shop owners should also be aware that financing in this industry is difficult to come by. Despite its high profitability, banks classify your industry as risky, so you’ll have a difficult time obtaining approval from the largest financial institutions in your area.
Aside from the industry risk, banks generally will not fund startups at all. New businesses lack the credentials—such as time in business, strong revenue, and profitability—to demonstrate to these institutions that they can repay what they owe.
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