How to Start an Educational Toy Store

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Our guide on starting an educational toy store covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of an educational toy store owner, the typical target market, growth potential, startup costs, legal considerations, and more!

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Start an educational toy store by following these 9 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 step guide to starting your educational toy store. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

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 initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Luckily we have done a lot of this research for you. Skip on ahead to the Business Overview for more detailed answers to all your questions.

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your educational toy store is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4: Open a business bank account

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.

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.

STEP 7: Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

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.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Business Overview

An educational toy store (or instructive toy store) sells toys and games that are meant to stimulate and challenge the player’s creativity and intelligence. The market for educational toys is huge. Every age level can benefit from educational or instructive toys, stores typically have different sections for infants/toddlers, children, and adults. These toys have been known to decrease stress, increase happiness, and even potentially fight debilitating diseases like dementia and Alzheimer’s.

Who is this business right for?

This business is great for someone who understands and is passionate about educational toys. Every potential customer has a different skill set they want to exercise when buying these toys. For example, a more verbal person will gravitate towards certain games over others. You will also need people skills to work with customers and employees on a regular basis.

What happens during a typical day at an educational toy store?

A typical owner’s agenda may look include the following:

  • Researching available educational toys
  • Developing a line of toys to sell
  • Selling to customers
  • Managing employees
  • Preparing sales reports
  • Maintaining a physical store
  • Marketing to different types of people

What is the target market?

The best client will be one who wants a fun way to challenge themselves, or who wants to promote learning to their child in a stress-free way.

How does an educational toy store make money?

Money is made by charging a premium on all toys purchased. Regardless of whether or not an owner makes their own toys or sells the toys of others, the profit margin will need to be determined for each item based on supply and demand.

What is the growth potential for an educational toy store?

Growth is partially determined by the amount of people in any given city. In some places across the country, there may be little use for educational toys. People may think they’re too expensive, or not interesting enough to play. In other parts of the country though, the market may be oversaturated in certain major cities. Owners may want to sell online to reduce overhead and to reach a wider audience.

What are some skills and experiences that will help you build a successful educational toy store?

An owner should have a good idea of how the brain works, so they can market their toys to the people who need them the most. Also, an owner should have a good understanding of what holds people’s interests. A 12-year-old who is struggling with numbers may not want to play anything that even resembles a math problem, so a toy maker or distributor will need to look for toys that address the deficiency without upsetting the recipient.

What are the costs involved in opening an educational toy store?

What you spend depends on where you are, and how you choose to sell your toys. If you choose to start a franchise, such as Learning Express Toys, then your investment will be considerable. The high-end estimate of the initial costs you’ll need is $384,000. The low end estimate is $194,500. If you choose to develop your own toys and sell them online, then you will only spend the cost of the materials to build them, plus any advertising costs you may have.

Where can I 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.

What are some insider tips for jump starting an educational toy store?

The best thing you can do is be passionate about what you do by working to bring value into the lives of those who play the games and use the toys. Sell toys online, in a store, or both. There are so many fun ways for people to pass the time that also make them smarter!

Find out what websites your ideal customers are on (e.g., educational or news sites), and consider marketing your business on those pages. Choosing to franchise instead may also be a good idea if you’re looking for a tested business model that works. You also get the benefit of a trusted, recognizable name from the first day you open. If you don’t have very much experience as an entrepreneur, this will may be a good option for you.  

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Growing Your Business

How to promote & market an educational toy store

Most educational toy stores don’t need large billboards or television ads. The best way to market will likely be optimizing your search engine visibility. You’ll need to have a great website that is easy to navigate, and easy to find when people search for educational toy in their area. In addition, because so many people already shop online, you may not necessarily need a store location. Store locations are best for people who want to capitalize on heavy traffic, such as an extremely busy mall or shopping plaza.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

The best way to attract customers is to show them just how fun it can be to play these games! People aren’t looking for a toy that they’ll only play for a few days and then put away. Owners need to find games that stay fresh year after year. The games will need to be difficult enough to be challenging in a variety of ways, but not so difficult as to frustrate the user. This is a hard combination to hit, but one that will keep customers coming back again and again.

How and when to build a team

Unless you have a large store with a constant stream of customers, you likely only need a few employees (or none at all.) This is not necessarily the most demanding job, so you can likely hire college students or even high school students to assist you. However, employees should have the people and sales skills to show and tell customers the best games for them.

Legal Considerations

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an educational toy store. 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.

Toy stores may also wish to look into applying for a resale certificate, as a resale certificate allows retailers to purchase goods intended for resale without paying sales tax.

In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

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.

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.
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To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

Certificate of Occupancy

An educational toy store is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a educational toy store.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your educational toy store will be in compliance and able to obtain a CO.

Earning Potential

How much can you charge customers?

People are willing to pay money to strengthen their mind — up to $1,200 depending on the toy. However, the market does face somewhat stiff competition from educational apps for smartphones, so it’s important to set your margin at a reasonable rate based on market demand. If you develop a particularly popular game though that no one else has a version of, you can potentially set your own profit margin at whatever you want it to be.

What are the ongoing expenses for an educational toy store?

Toy stores may face the following expenses over the years:

  • Cost of materials to develop toys
  • Wholesale costs of other toy makers
  • Market research to determine where toys are headed
  • Employee wages
  • Office supplies (including computers, etc.)
  • Mortgage/rent in a physical store
  • Shipping costs for an online business

How much profit can an educational toy store make?

Profits may be slim for the first year or so. If you franchise a toy store at the low end of the business model, you would need to make around $16,000 a month in sales simply to break even. Anything after this can be used as profit or reinvested into the company. Depending on the demand in your area, you could stand to make between $15,000 to $30,000 in profit a month.

How can you make your business more profitable?

If you develop your own popular toys, you can profit by offering your toys to other toy shops. You may also be hired by a large toy maker to design and create additional products for their line.

Next Steps

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