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 tea shop. 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 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.
What are the costs involved in opening a tea shop?
The costs involved in opening a tea shop business can vary a lot. A small kiosk might be opened for just a few thousand dollars, while a free-standing shop can cost more than $100,000 to build.
The list of startup costs include both fixed expenses, such as rent, taxes and equipment costs, and variable expenses, like employees’ wages, tea, dishes and to-go cups.
Tea itself can vary a lot in cost, depending on its quality. Upton Tea Importers, for example, lists a Darjeeling tea from on estate (Balasun Estate) for $44.80 per 800 grams and a first-flush Darjeeling from another estate (Singbulli Estate) for $58.90 per 100 grams. That’s a difference of over $50 per 100 grams of tea. (Darjeeling is just one kind of tea.)
What are the ongoing expenses for a tea shop?
The ongoing expenses for a tea shop business include labor costs, rent, utilities and the cost of goods sold (COGs). The biggest component of COGs is tea, but to-go cups also fall into this category.
Who is the target market?
Tea shops’ customers are usually people who like tea and have discretionary income. While some teas are extremely inexpensive, tea shops usually offer higher-priced specialty teas. Consumers with less discretionary income aren’t able to spend as much on these more expensive teas.
How does a tea shop make money?
Tea shops make money by selling brewed tea, food and packaged tea to customers.
How much can you charge customers?
The price of a cup of tea at a tea shop varies depending on the quality of the tea and the shop’s location, along with other factors. One tea shop business in New York City sold green tea for $2.85 per cup. Many fancy teas, however, can be priced higher than this.
How much profit can a tea shop make?
The profit potential of a tea shop business depends a lot on its location and what it offers. A tea shop on a busy intersection in a major city that offers lunch might have an annual profit of hundreds of thousands of dollars, while a shop in a small town that only sells tea might have a profit of tens of thousands of dollars after wages (including the owner’s wages) and other expenses are accounted for.
How can you make your business more profitable?
There are a number of ways a tea shop can increase its revenue. Offering food and packaged tea can increase a shop’s average ticket. A shop that has light fare can host afternoon tea and private parties, which can provide additional revenue streams. Carrying bubble tea, which is tea with tapioca-like “bubbles,” milk and sugar, can attract customers who wouldn’t normally come in for a traditional cup of tea.
What will you name your business?
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.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your tea shop is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
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?.
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.
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.
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.
Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
In addition, local licensing or regulatory requirements apply. As a tea shop, you will need licensing from a local health department; all establishments serving food or beverage are required to pass a health inspection.
For more 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 tea shop business is generally run out of a retail store. 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 tea shop
- 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 tea shop.
- 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 music instrument store
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your tea shop business will be in compliance and able to obtain a CO.
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.
How to promote & market a tea shop
Tea shop businesses generally serve a local area, so their marketing should be targeted towards the people near them. Signage can help draw attention to a shop. Going into a community and offering free samples of teas and coupons for complimentary beverages is one of the most effective ways to initially get people to visit a new shop.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Although tea is the second-most popular beverage in the world, there are still many people in the United States who don’t drink tea on a regular basis. Offering classes on tea can help introduce these people to tea and get them in the habit of regularly enjoying it.
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.
Start A Tea Shop In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who loves tea and socializing with others may be well-suited for running a tea shop. The business involves lots of hands-on work, namely brewing tea, as well as regular interaction with employees and customers.
Tea shops are often open during the morning and afternoon, and shop owners should be prepared to work when their shop is open (unless they have employees).
What happens during a typical day at a tea shop?
In a tea shop, day-to-day activities revolve around serving tea to customers. When not brewing or packaging tea for customers, downtime is often spent washing dishes, cleaning the shop, and placing orders for tea and supplies.
What are some skills and experiences that will help you build a successful tea shop?
Tea shop business owners must be experts on tea, and they also need to be familiar with inventory management and managing employees. The World Tea Academy and Specialty Tea Institute offer courses on tea, and IAP Career College offers a Tea Room Owner Certificate course.
What is the growth potential for a tea shop?
A tea shop business can be as small as a single location or as big as an international chain. Some of the largest chains have hundreds of locations.
TRUiC's YouTube Channel
For fun informative videos about starting a busines visit the TRUiC YouTube Channel or subscribe below to view later.
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.
How and when to build a team
A small tea shop business can be run by a single person. Hiring at least one employee, however, lets the owner take an occasional day off. For this reason, many tea shop owners hire an employee as soon as the business can support an employee.
Tea shops that also offer food or are in particularly busy locations may need several employees working at peak times in order to ensure customers are promptly served.