Start a novelty store by following these 10 steps:
- Plan your Novelty Store
- Form your Novelty Store into a Legal Entity
- Register your Novelty Store for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Novelty Store
- Get the Necessary Permits & Licenses for your Novelty Store
- Get Novelty Store Insurance
- Define your Novelty Store Brand
- Create your Novelty Store Website
- Set up your Business Phone System
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 novelty 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 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 novelty store?
Entrepreneurs should factor in the following costs for their business:
- Employee salary
- Cost of inventory
- Advertising/marketing fees
- Administrative supplies
- Office equipment (e.g., payment system, etc.)
What are the ongoing expenses for a novelty store?
Novelty stores will need to account for the following expenses
- Office rental/mortgage
- Employee salaries
- Equipment maintenance/replacement
- Permit renewals
- New inventory
- Advertising costs
Who is the target market?
The target market can literally be anyone — novelty items are often given as gifts. So even if a person isn’t interested in cute memorabilia or silly gags, they probably know someone who is.
How does a novelty store make money?
Owners charge a mark-up on their products, based on the wholesale cost of the item and store expenses. The baseline mark-up is typically 50%, though this number will depend on both demand and total business expenses.
How much can you charge customers?
People will routinely pay up to 50% more than what an item sells at wholesale. Going to other novelty stores will give you an idea of what you can charge for each product you sell, but be responsive to customer feedback if they feel your prices are too high. An in-demand, exclusive item in your store may sell at 75 – 100% more than what it cost to make.
How much profit can a novelty store make?
Most retail stores operate at a profit margin of between 25 – 50%. So if you sell $100,000 worth of merchandise, your profits would be somewhere between $25,000 and $50,000 after all of the dust has settled. However, it should be noted that this number will vary significantly based on location and demand.
How can you make your business more profitable?
If you choose to make more personal items, consider catering to high-end customers who have very specific tastes. You could set up a side business that is strictly by-appointment only. Novelty stores may also choose to either franchise their business once it grows in popularity, or establish smaller kiosks in malls or other public areas. Holding frequent events and gatherings may be a good way to generate profits by charging a small entrance fee or a major mark-up on snacks or amenities.
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 Novelty Store 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 novelty store 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.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
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.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a novelty store 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
A novelty store business 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 novelty store 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 novelty store business will be in compliance and able to obtain a CO.
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.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a novelty store
If your products are novel, you’ll want your marketing campaign to be as well. Throw a wacky party or stage a fun scavenger hunt with desirable prizes. Make your social media be more about fun than about selling and work on charming everyone you come into contact with — whether it’s online, printed materials, or in-person.
How to keep customers coming back
People will come back if you’re offering a wide selection of merchandise that’s updated based on the consumer demand. They’ll begin to form an attachment if they have consistently pleasant (and memorable) experiences whenever they visit your store.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
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. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Nextiva
Nextiva is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start A Novelty Store 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?
People who are naturally goofy, charismatic, and fun-loving will thrive in a novelty store. An owner should be as appealing and one-of-a-kind as the objects they sell.
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 novelty store?
Novelty store owners may spend their days with the following agenda:
- Advertising their store online/in print
- Researching changes in public demand
- Providing customer service and a public face to customers
- Ordering inventory
- Preparing budgets
- Scheduling and managing employees
What are some skills and experiences that will help you build a successful novelty store?
Novelty store owners should have some idea of what it takes to manage inventory in a retail environment. They should be able to work with subordinates and customers alike to develop a consistent (and favorable) reputation. A formal business education may help you budget and develop strategic approaches to growing your business, but it's not an official requirement.
What is the growth potential for a novelty store?
Growth potential for a novelty store may be limited at first, especially considering how many choices are on the market both in stores or online. However, as shopping becomes more and more impersonal, there will be a growing niche of people who are looking for personable owners who can connect with them on a deeper level. This can help stimulate your growth and establish a brand across a wider audience.
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
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 novelty store?
A solid business plan should be developed before jumping in. Novelty stores vary greatly in terms of size, items sold, and marketing campaigns, so it is essential to strategize as many details as possible before you get started, such as which markets you’ll put your primary focus on. For example, you may want to focus only a small portion (or none at all) on gag gifts.
Owners need to stay flexible in terms of which novelties they sell. There will always be a need for novelty items, but the demand can change at the drop of the hat. Novelty stores may succeed by capitalizing off funny trends or odd quirks that only local shoppers would understand. For example, if the local high school is obsessed with Taco Tuesdays in the cafeteria, then owners could create funny items that declare a student's love for the day.
Novelty stores may also want to branch out to fulfilling personal orders as another way of appealing to a wider audience. For example, if a friend wants to give their mother a T-shirt with a specific saying and image, or if they want an unusual design on a license plate frame. There are plenty of ways to source one-of-a-kind gifts for individuals if the price is right.
Sellers without a lot of capital may want to get a sense of the market by starting an online presence before establishing a physical one. This can be especially helpful if you’re targeting a local audience as opposed to a regional one. It gives you an idea of what will be popular in a store location, and a chance to make a name prior to a Grand Opening. Finally, ensure you have a Certificate of Occupancy, Seller’s Permit, and all relevant federal or state licenses necessary to operate your physical location.
How and when to build a team
Novelty stores don’t necessarily need to keep long hours in order to make money, so you may be able to get away with either hiring one employee or managing the store on your own. Once you have an idea of when people are shopping (e.g., nights, weekends), you can structure the hours to fit the demand. If you do choose to hire a manager or employees, make sure you’re hiring people who are both personable and knowledgeable about the novelty products your store sells .