Due to the growth and success of digital and streaming music services, such as Spotify and iTunes, record stores no longer appeal to most mainstream consumers of music. Today’s successful record store businesses serve as a resource for individuals with a deep interest in a particular musical style or styles. In a record store, one can find rare albums and collectibles that are not found elsewhere easily. The customers may be collectors or just ordinary music lovers. Vintage record players are usually on display for sale. The record store owner(s) and staff are like walking encyclopedias about favorite music styles and their enthusiastic love for music is contagious.
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Learn how to start your own Record Store and whether it is the right fit for you.
Start a record store by following these 10 steps:
- Plan your Record Store
- Form your Record Store into a Legal Entity
- Register your Record Store for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Record Store
- Get the Necessary Permits & Licenses for your Record Store
- Get Record Store Insurance
- Define your Record Store Brand
- Create your Record Store Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your record store. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
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 record store?
By far the largest expense when getting started is investment in inventory. In order to have a nice selection, the investment in inventory is around $100,000. Some store owners use their own personal collection of items acquired over decades and open a record store in order to liquidate their personal collection.
Equipment needed is a cash register(s), bins to hold items for sale, appropriate lighting, and decorations to make the store attractive. The other thing needed is exterior signage. These add up to an additional $10,000 to the startup costs.
Finally, a deposit is often required to sign a long-term lease. The deposit amount depends on the monthly rent and the size of the retail location.
What are the ongoing expenses for a record store?
The main expenses are rent, electricity, and staff costs. To succeed, these need to be as low as possible. For example, renting a high-traffic location in a high-priced shopping mall is completely the wrong idea. The rent needs to be very low and the location can be in a very odd place or even out of the way. The attraction is the inventory and store-owner knowledge, not necessarily the location of the store.
Who is the target market?
People who love listening to music and collecting it are the ones attracted to this business. Another customer type is a DJ looking for extended play or dance mix albums to use in clubs.
How does a record store make money?
Records sell at retail prices with sales tax. For online sales, shipping and handling charges are additional.
How much can you charge customers?
Retail sales average around $24 per buying customer. Extremely rare collectibles can sell for many thousands of dollars.
How much profit can a record store make?
There may be low sales during any particular week. Then, a regular collector may come in and buy a significant amount of items. A small record store might make $800 to $1,000 per week in average sales or $41,600 to $52,000 in sales per year. Approximately 25% of the sales are profits, which equals $8,350 to $10,500 per year.
How can you make your business more profitable?
Great strategies to improve profitability of a record store business include:
- Acquire entire collections at bargain prices from estate sales.
- Find valuable old records in second-hand stores and at garage sales at low prices.
- Take rare items in on consignment.
- Sell both from the shop and online.
- Sell CDs and DVDs in addition to records.
- Feature in-store performances.
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 Record 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 record 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:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
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
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report 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 best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
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 open a record 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.
In addition, certain local licensing or regulatory requirements may apply. For more information:
- Check with your town, city or county clerk’s office for information about local permits and licenses
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
In order to play music in a business setting, permission must be acquired from the composer or license holder. Typically, it is possible to obtain “blanket” license allowing a businesses to play music owned by a large catalog of artists and recording studios. Such licenses can be obtained from Performance Rights Organizations, such as ASCAP and BMI.
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 record store
Establishing your store as an expert resource for a particular music genre(s) is critical. Some record stores cater to DJs looking for the newest released long-play vinyl records. Owning physical records is necessary to DJs for the type of mixing they do in a live club scene by hand. Other clients that come to these specialty record stores are looking for rare items, hard to find elsewhere.
The good news is that vinyl record sales are increasing dramatically. A report from Forbes says that the sales of vinyl records are up 30% in 2015, with a total of around $12 million in sales of records in the USA during 2015.
How to keep customers coming back
To take advantage of renewed consumer interest in vinyl records, a record store will do well by having many in-store record signing events to promote sales of signed items in the record store. Members of bands who appear for record signings, famous DJs, or others who are well-known for their musical importance are all potential candidates for such in-store events.
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: Phone.com
Phone.com 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 Record Store in your State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
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Is this Business Right For You?
Do you like listening to music? People attracted to this business love listening to music. They enjoy understanding the detailed history of music (“musicology”). They know how the creation of a music style happened, who performed it, and how popular a style became. They enjoy serving as an authority/guide for others as a curator for specific styles. Independent record stores are not particularly lucrative and are best suited for music lovers, who are content with marginal profits.
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 record store?
The daily activities for the staff or owner of a record store include:
- Marketing efforts to find customers - A combination of selling online with a physical retail presence is most effective. The physical retail store may be very modest. In fact, it should be. However, profits do exist from managing vast catalogs of acquired materials and selling them both online and offline. The marketing budget is usually limited to free postings online such as offerings on Craigslist or eBay. Posting flyers around town and at music events or collector conventions is also helpful.
- Closing out the accounting for daily sales and updating inventory records – Every day, enter the sales from the day before in the accounting system and update inventory records to reflect the sales.
- Order fulfillment – Process any sales that need shipment and prepare the packages for pickup by the shipping company.
- Cash management – Count cash in the register(s) to verify the correct amount exists according to the transactions made. Note any discrepancies. Make change from the register proceeds for large cash bills to make sure the change is available for cash-paying customers. Deposit any excess over the baseline cash requirements into the business banking account.
- Clean the store – This includes making sure to clean all areas of the store according to a posted daily schedule. Additionally, check the bins for vinyl records for proper alphabetization and artist/genre categories to make sure the correct product, offered for sale, is in the correct place.
- Promotional materials – Put up and keep current the display of promotional materials.
What are some skills and experiences that will help you build a successful record store?
You have to love listening to music. The best ones in this business love learning the detailed trivia about the music, including information about its creation, who performed it, and why a particular record is significant.
What is the growth potential for a record store?
There are no significant franchise opportunities. The trend with record stores is that they are largely independent. This is a very niche area where there are no longer many retail chains. There is less possibility for expansion when starting with one store. Some of the best independent record stores closed down, so this industry sector is reducing not expanding.
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.
How and when to build a team
Usually, the store owners do most of the work. If any staff is hired, the pay rate is typically close to minimum wage as revenues in this business seldom support large payrolls. It is important to hire staff that have a love for music, know a lot about it, and are enthusiastic about sharing their knowledge with customers.
- Information on Record Store Day, an opportunity for independent record store owners to capitalize on special vinyl releases
- Alliance of independent music stores