Start an energy drink 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 energy drink 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 an energy drink business?
The costs involved in opening an energy drink business can vary. A Bloomberg report from 2012 estimated that it may cost $100,000 or more to break into this business. A quarter of that money may go to a beverage development company in order to get your drink to a prototype stage. It may cost another $25,000 to get the raw ingredients and other materials necessary to begin production, including the labels and packaging. You must then pay for the labor, inventory, and distribution of your initial products: depending on how many units you are producing, this could cost up to $40,000. Finally, it is worth investing at least $10,000 or more into your initial advertising push: you are entering into a crowded market, and it's important to let customers know how and why your product stands out.
What are the ongoing expenses for an energy drink business?
If you are working with a beverage distribution company, your ongoing expenses are something of a double-edged sword: you will not have to separately manage aspects such as production, storage, and shipping on your own, and you won't have to personally pay for pricey business leases. However, all of these things factor into your production costs: if it costs $40,000 to produce, store, and ship a certain number of drinks in your first month, it will cost the same to ship that same amount next month. This cost will go up or down depending on the quantity of drinks produced.
Who is the target market?
The typical demographic for energy drinks is young men between the ages of 16 and 24. This is the legacy of the original marketing for companies such as Monster, although you can tweak your ingredients, branding, and marketing to target a less-served demographic and develop a better niche.
How does an energy drink business make money?
An energy drink company makes money through the distribution and sale of its own brand of energy drinks.
How much can you charge customers?
As a product, energy drinks have a wide range of price points. For a 16-ounce drink, prices typically range from $1.99 for something like Full Throttle to $4.00 for something like Red Bull. Your own price will likely fall in-between these, though you want to be competitive within your region.
How much profit can an energy drink business make?
The exact profit you can make is hard to determine, but things look pretty good: the energy drink industry has seen a five percent boost since 2013 and is overtaking soda as the drink of choice for many consumers. Sales of Red Bull amount to over $3.4 million each year and Monster Energy Drink sells over $3 million. While it will take your own drink longer to establish itself, there is great potential for profit.
How can you make your business more profitable?
Be sure to price your drinks competitively, but don't be afraid to increases the price as need be: even a small bump can lead to a big shift in profits. Use your social media to advertise the other potential uses of your energy drink: a good model is Red Bull, who helped make Red Bull and vodka a preferred drink for many club goers. Finally, make sure your advertisements always highlight your community roots. This helps establish you within your region but also positively distinguishes you from bigger companies, making your drink look more artisinal and, therefore, more appealing.
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 Energy Drink 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 energy drink 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
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an energy drink 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.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
An energy drink business is generally run out of a factory. 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 an energy drink business.
- 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 energy drink business will be in compliance and able to obtain a CO.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
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 an energy drink business
Within your budget, it is wise to embrace multiple channels of communication. Regional advertising through radio and newspapers can help to initially establish your product in the eyes of different distributors as well as local consumers. Social media provides a very cheap way of engaging with your customers and further establishing your particular niche, and it remains the single best way to highlight the part you play within your community. Partnering with local businesses can also allow you to sell your drinks to your particular demographic via selected restaurants and bars.
How to keep customers coming back
You may consider handing out free samples of your product at concerts or other events in order to literally give consumers a taste of what you have to offer. If possible, offering different flavors or formulas of your energy drink can give you a more diverse appeal to wider audiences. Retaining those customers is primarily a function of your drink delivering on its promise and enhancing energy and awareness in consumers.
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 An Energy Drink 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?
If you have a background (or outright skill) in fields such as chemistry or health, it may help you to develop an energy drink that is tasty, safe, and helpful for consumers needing extra energy. Any past sales experience may also help you sell your new product to the various distributors in your region and, eventually, at an international level.
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 an energy drink business?
Your exact daily activities will vary depending on how you start your business. If you work with a beverage development company, you will spend much of your days raising funds and collaborating with various professionals on everything from the exact ingredients of your drink to its logo, brand name, and marketing. You will also help facilitate practical details such as the inventory and shipment of your products. If you want to maintain more direct control over your product, you may decide to work with a co-packer that emphasizes research and development rather than a larger consulting company.
What are some skills and experiences that will help you build a successful energy drink business?
A formal education in fields such as health or chemistry can aid you in creating the energy drink itself. Prior sales experience can help you set up the various distribution deals needed for your energy drink to thrive. While less likely, any direct experience you may have working with an energy drink manufacturer will be invaluable.
What is the growth potential for an energy drink business?
The growth potential for this business is modest. The Monster Energy Drink company recently experienced a lower sales bump than expected (8.9% rather than double digits) even after being bought out by marketing juggernaut Coca-Cola. However, it should be noted that the sales bump they received is still a good indicator of market health and, as mentioned earlier, the market certainly has room for more energy drinks catering to different demographics than Monster.
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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 an energy drink business?
Stand out from the competition by developing a specific niche. For instance, marketing towards those thirty and up can instantly distinguish you from the Monster demographic. Some form of community branding and community-based advertising can also help your drink take root in a specific region, with positive word of mouth allowing you to later expand. Finally, be very selective about the development of a logo: this will be the first thing customers see when they view your drink in a vending machine, and it must be vivid and distinctive.
How and when to build a team
Unlike some jobs, this will require a team very early on. Whether you are working with a beverage consulting company or a co-packing company, it will take a large team to bring your energy drink from concept to market.