How to Start a Thrift Store Business

Start a thrift store business by following these 10 steps:

1. Plan your Thrift Store Business
2. Form your Thrift Store Business into a Legal Entity
3. Register your Thrift Store Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Thrift Store Business
6. Get the Necessary Permits & Licenses for your Thrift Store Business
7. Get Thrift Store Business Insurance
8. Define your Thrift Store Business Brand
9. Create your Thrift Store Business Website
10. Set up your Business Phone System

We have put together this simple guide to starting your thrift store business. 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 will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is very important. Read our detailed guide on how to name your business. 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.

What are the costs involved in opening a thrift store business?

According to one previous thrift store owner in Nevada, opening a store costs between $20,000 and $30,000. That is if you do it right and have enough capital to stay open long enough to build a business. Among other things, you’ll need to rent space, purchase shelving and display cases, obtain merchandise, and implement a marketing plan. 

What are the ongoing expenses for a thrift store business?

The ongoing expenses for a thrift store include rent for the commercial space, utilities, internet, and phone. Storage is often an expense as well unless you have enough space to store plenty of merchandise. Probably the most significant ongoing expense is merchandise purchases. These businesses have to keep purchasing merchandise to keep the shelves filled. 

Who is the target market?

The target market for thrift stores is typically bargain hunters. Many of these are elderly and on fixed incomes, but not all. Some are just excited to find the best bargain or the hidden gem like they see others do on TV. There are also certain types of thrift stores, such as vintage clothing shops, that target a more specific market like fashion-conscious customers. 

How does a thrift store business make money?

A thrift store makes money by selling merchandise. This process begins by finding merchandise for sale that the businesses can buy at the right price. These businesses need to acquire merchandise for a low enough price to turn a profit when they resell it. 

How much can you charge customers?

As a general rule, thrift stores should price their merchandise at a quarter of the value of retail. So, if a good costs $100 in a store, you should charge $25 for it in your thrift store. There are exceptions to this rule, such as if you find a desirable product in great condition. However, you want to avoid overpricing your products because you want repeat customers. 

How much profit can a thrift store business make?

Thrift stores are not the most profitable businesses. Many are lucky to make $100 to $200 a day – just enough to keep the lights on. If you are trying to start a business with serious profit potential, a thrift store is not it. 

Most of these businesses are labors of love and/or charity organizations. 

There are exceptions. Large national chains like Goodwill are quite successful.

How can you make your business more profitable?

The biggest key to profitability in the thrift store business is learning how to buy the right merchandise at the right price. Far too many thrift stores fail to be profitable because they don’t buy the right merchandise or spend too much on merchandise. For example, they may pay $1,000 for a storage unit sale but only make $500 from the merchandise they find in the storage unit. If you want to increase your profitability, pinpoint where you can get the most bang for your buck in merchandise purchases. 

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your thrift store business is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

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!

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.

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.

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.

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.

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.

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.

Is this Business Right For You?

A thrift store is right for people who love a good deal and are willing to work hard to get one. If you love shopping at thrift stores, have a passion for guessing the value of merchandise, and are motivated – either to pay your bills or to contribute to a good cause – you may be the perfect fit for a thrift store business. 

What happens during a typical day at a thrift store business?

Thrift store owners spend their days on two primary tasks – obtaining merchandise and running their store. They obtain some merchandise through donations, but they also seek out storage unit sales and estate sales. A typical day may include scanning publications for potential merchandise purchases, organizing current merchandise, selling goods to customers, and designing displays. 

What are some skills and experiences that will help you build a successful thrift store business?

Running a successful thrift store requires good instincts for estimating merchandise value. If you spend $500 on merchandise that you can only sell for $400, you are going to struggle to get by. But if you are skilled at identifying a great deal – merchandise that you can buy low and sell high – then you are more likely to be successful as a thrift store owner. 

Other skills and experience that can prove useful are sales experience, negotiation skills, organizational skills, and retail display design experience.

What is the growth potential for a thrift store business?

The growth potential for a thrift store is usually not that great. Depending on where you live, you may have seen multiple thrift stores open and close in your area. That’s because it is difficult to turn a significant profit in the thrift store business – unless you are one of the big players. However, that does not mean growth is not possible. With the right model and some luck, you could hit upon a system that leads to growth for your business.