Start a costume rental business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your costume rental business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a costume rental business?
Before making any business purchases, a location must be chosen. Setting up shop near a theater, school, or church is a great way to start building a loyal customer base. Once you’ve settled on a location, start designing and filling your space. Ample storage and display cases will help with maintaining organization. These can often be purchased used, which will allow you to reallocate a portion of your budget. If your work space’s current floor plan doesn’t already have changing rooms, consult with a reputable contractor to discuss renovations. Building specifics, local code, and scope of the project will define contractor costs, ranging anywhere from $3,000 to more than $20,000. Before signing a lease, have a general contractor inspect the building and discuss your needs. This will safeguard against unexpected issues and ensure you budget properly.
Whether you offer rentals only, or plan to sell as well, your business will need to be set up like a retail space. Business tools such as a cash register, credit card machine, computer system, and business software will lay the foundation for a successful shop. Set aside $3,000 - $4,500 of your budget to purchase or lease these items.
Additional items you’ll need are:
- Name and logo design that will draw people in
- Business cards
- Website - Cost for a simple site build ranges between $1,500 - $3,500. If you plan to sell inventory online, invest in an Ecommerce site. This has the potential to double your initial website cost, but is a great way to increase profits.
- Inventory - Costumes, wigs, makeup, and jewelry. Pieces vary in price from just a few dollars, to several hundred.
Total start-up costs, assuming your storefront doesn’t require major renovations, average from $5,000 to $27,000.
What are the ongoing expenses for a costume rental business?
Aside from the standard operational expenses, your biggest overhead expense will be payroll and inventory. Each new trend signals the need to purchase new costumes and accessories. That, coupled with the need to replace pieces that were lost or damaged, means you’ll need to consistently expand your collection. Specific costs vary, depending upon the type and quality of costumes and how many are purchased.
Who is the target market?
Most consumers have the need to shop for a costume at least once a year. The bulk of your business, however, will come from specific niches, such as: theater groups, schools, churches, and musicians. These are often very tight knit communities, so establishing a positive reputation with these groups will help your business achieve success.
How does a costume rental business make money?
Shops generate revenue through the sale and rental of costume items. Shop owners set rental prices, which vary from item to item. In addition to the rental fee, customers put down a deposit in case the item is lost or damaged. For sale item profits vary depending upon wholesale cost; shop around and build relationships with wholesalers to minimize inventory costs.
How much can you charge customers?
Costume rentals range in price from $35 to $250. Customers pay a flat fee per day. To accommodate longer rentals, consider offering special pricing and discounts.
How much profit can a costume rental business make?
Smaller businesses report an annual profit of $35,000 - $50,000. Shops located in urban areas are generally larger, allowing for a higher profit margin, generating a profit of up to $250,000. One entrepreneur started her business out of her home. With an emphasis on princess parties, she was able to work part-time and realized a profit of $27,000 in her first year.
How can you make your business more profitable?
Successful entrepreneurs continuously seek out innovative opportunities to generate more profit for their business. The following are a few strategies other costume shop owners have implemented to ensure a more profitable business:
- If you enjoy the process, consider manufacturing your own costumes and accessories that could be sold or rented to individuals. While your start-up and ongoing expenses will increase, as you’ll need to invest in reliable equipment and quality fabric. The profit margin on your own creations, however, is much higher than on items purchased wholesale.
- Host community workshops or courses, where you teach students how to make their own costumes.
- Expand your business to include the sale and/or rental of decorations and props for theaters and parties.
- If your business strategy includes catering to the acting community, offer delivery service. Just make sure you track transportation and maintenance expenses and charge a fair delivery fee.
- Sell costumes and accessories online.
- Consider offering franchising opportunities.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Costume Rental Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your costume rental business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
If creating your own costumes, make sure to comply with the Federal Trade Commission’s regulations for labelling clothing products.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a costume rental business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Resale certificates allow retailers to purchase goods wholesale and sell them individually. This method helps reduce the amount of tax paid by the retailer.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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How to promote & market a costume rental business
Because the costume business ebbs and flows, your marketing strategy should be focused and analyzed for improvement regularly. An online presence, particularly on social media, is a great way to reach potential customers.
Target previously mentioned niche groups. Direct mailers and advertising in school yearbooks and play programs are effective strategies for getting your name remembered throughout the community. Many of these niche communities are very tightly knit. Take the time to get involved and get to know them on a personal and professional level. Participate in parades and set up booths at local special events - networking could prove to be your strongest marketing tool.
How to keep customers coming back
September and October are big months for the costume industry, with merchandise flying off the shelves as fast as employees can stock them. To build a solid customer base that generates revenue year round, you’ll need to get creative. Research other costume shops in your area. What are they lacking? What do they have too much stock of? What target opportunities are they not catering to? By offering items the community is lacking, you have a leg up on the competition. Above all else, consistently delivering quality products and services will help ensure customer retention.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Costume Rental Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is best suited for individuals who are creative and passionate about the entertainment industry. Due to the nature of this business, owners should enjoy working with people. Many customers will enter your store feeling self-conscious; your passion for putting together costumes should be infectious, helping ease their apprehension.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a costume rental business?
Many consider the costume industry a seasonal business. If you build a proper marketing strategy, however, there are a number of ways to minimize downtime and ensure a profitable business year round. A typical day will look something like this:
- Check and answer emails and phone messages
- Set up and attend meetings with clients who need assistance putting outfits together for a special event
- Checking in and inspecting returned costumes
- Cleaning returned costumes before re-stocking on shelf
- Placing orders to replenish inventory
- Researching the latest trends
Additionally, there are a number of administrative duties you’ll be tasked with. As revenue increases, consider hiring a trusted team member to handle the day-to-day office tasks.
What are some skills and experiences that will help you build a successful costume rental business?
Owning a costume rental shop is exciting, as it appeals to one’s artistic side. Many artists find it easy to get caught up in their passion, forgetting there is a business to run. It takes a disciplined individual with strong business and marketing acumen to ensure the business is set up for success. Strong interpersonal skills are a must, as you’ll spend much of your day catering to the needs of customers.
Your client base will consist of individuals from every demographic. Many will have an idea in their head of what they’re looking for, yet unable to express it clearly. The ability to listen, ask the right questions, and draw answers out of customers will help you consistently deliver excellent service. As mentioned, a creative mind will serve you well in this industry. Perhaps even more important, however, is having an eye for detail and a passion for research. If a theater group needs you to furnish the costumes for their newest play, set in Ireland in 1926, you don’t want to deliver items modeled after 1926 London.
As part of your research, make sure you stay abreast of the latest trends. Organizational skills are also beneficial in this industry. Starting out, you might only have twenty or thirty costumes. As your business grows, however, you’ll find yourself with hundreds of costumes. Implementing a strategy for keeping things organized from the onset will ensure inventory is properly managed and easy to find.
What is the growth potential for a costume rental business?
Just the Halloween retail and rental industry alone is worth over $7 billion annually, and is still rising. Stocking inventory that caters to niches previously mentioned will help achieve your business goals. Some costume shop owners prefer to remain small, limiting their service to members of their community, while others strive for a multi-million dollar business. With commitment and a strong business plan, your shop has the potential to grow on a national level.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a costume rental business?
The following are some tips from successful costume rental shop owners:
- Before committing, research and visit the local competition. Identify their strengths and weaknesses Their weaknesses offer an opportunity to bring something unique to the community.
- As part of your initial and ongoing investment, start a library of period and present-day costume books. This will serve as a great reference when a question pops up.
- Include a section for fancy dresses. Themed parties have gained popularity in recent years and will increase your profits year round.
- If possible, choose a location in an area where people are well off.
- Don’t try to do everything at once. When building your collection, focus on purchasing costumes that represent the latest trends, as well as the staples every costume shop should have. Stock up on the most popular sizes first; you can always add more sizes later.
- If your initial budget is slim, invest in a little lower quality costumes, at least until you have the essentials. Once you’ve built up a collection and more capital, you can start replacing them with better quality pieces.
- Those with a larger budget should invest in high quality costumes from the start. The pieces will last longer and you’ll build a reputation for quality goods and services.
- Remember to carry an ample supply of plus size pieces.
How and when to build a team
To save on overhead expenses, running the business yourself is a viable option. Once business starts to pick up, or the busy season starts, you can start building a team. Many costume shops hire temporary employees to get them through the busy season. High school and college students are a great option, as they understand the latest trends and often attract friends and family who might otherwise not have visited your establishment.
Once you’ve built a trusted team, you’ll have more opportunities to focus on the aspects of the business you’re most passionate about. Just be sure you have a knowledgeable and well-rounded team, so all your clients needs are met.