How to Open a Toy Store

Start a toy store by following these 10 steps:

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

We have put together this simple guide to starting your toy 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 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 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 Toy Store Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

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.

What are the costs involved in opening a toy store?

The exact costs of opening your toy store business will depend on location, amongst other factors. For instance, certain locations are more expensive to rent, as is more space, but it is important to open close enough to residential areas and other shopping centers in order to naturally attract your primary demographic. One toy store owner had to spend almost $5,000 on rent and utilities for the first month of business, and this included the monthly rent ($1,877), a security deposit (also $1,877), separate security deposit for utilities ($300), and her share of the operating expenses and property tax of the shopping center she opened in ($835).

The space itself needed work, and she spent nearly $8,000 to customize the space to her needs, acquire necessary fixtures, and hire a local handyman. Perhaps the biggest cost, though, is also the biggest question mark: the cost to purchase the products themselves. For instance, this same toy store owner had enough product she had accumulated over the years and began by selling that, which meant she initially spent nothing. Most people, though, must buy hundreds of toys to initially stock their shelves, and even at wholesale prices, the cost of this is significant. Because of this, some owners have taken to importing toys from places where it is cheaper, such as China, though you must be mindful of the possibility of being sold “knock-off” toys. Other owners become part of toy buying groups—which allow smaller retailers to pool together to buy toys at wholesale price and split the product—in order to buy toys in the kind of bulk that smaller stores normally cannot, which helps drive the purchasing prices lower.

What are the ongoing expenses for a toy store?

There are a variety of ongoing toy store expenses. Monthly rent is a factor (likely to be $1,500 or greater), telephone and other utilities (which also may be around $1,500), and business insurance ($600 or more). Don’t forget advertisement costs (around $1,000), and any additional decoration/new signage costs (under $1,000). Finally, you must budget for how much to pay employees, which will depend on how many employees you have and what you want their wage to be.

Who is the target market?

Some of the best clients for toy stores are the parents of younger children. Such children are at an age where they are very susceptible to advertising and marketing, and their constantly-changing tastes mean they often want new toys. Depending on the business, though, your ideal customers may change: a niche store focusing on collector’s items or retro toys will likely focus on customers in their 30’s, while a store that heavily sells games and gaming supplies (such as Magic: The Gathering) will likely focus on customers in their late teens and early 20s.

How does a toy store make money?

The most basic way that a toy store makes money is, of course, by selling toys and receiving some profit from every toy that is sold. One hurdle that small toy store owners must face is that it is completely impossible for them to compete with the mass market brick-and-mortar stores like Wal-Mart or Toys-R-Us or online juggernauts like Amazon.com and because of this, it’s important to focus on personalized service and attention for customers. Some toy store owners have taken to personally delivering toys to homes or offering free storage or layaway plans that many bigger stores are unwilling to offer.

How much can you charge customers?

Unlike other businesses, the amount for how much you can charge customers is relatively fixed by the manufacturer's suggested retail price (MSRP) of the products you sell. While you can sell products for more than this amount, remember that you are in constant competition with major stores both online and offline, so driving prices beyond MSRP may drive people away. You can supplement your in-store toys by possibly selling certain things on eBay, where an in-demand toys may sell for far more than its standard MSRP.

How much profit can a toy store make?

The overall profit of the toy industry has been variable in recent years. It seemed to peak in 2015 at 4.5 percent, but 2016 is looking exactly like 2012 did at 2.8 percent. With that being said, much of this is determined by the different big box stores competing with one another as well as competing with the online world, and opening a local retail store with ties to the community can help you build a steady stable of regular customers.

How can you make your business more profitable?

Some of the ways to make your business more profitable have been discussed, including holding gaming tournaments and selling online. If you sell games like Magic: The Gathering, you may also branch into selling single cards to eager customers, some of which are worth a great deal. You can also work on mastering exactly how much product to order each month so that you do not have an excess of product that doesn’t sell. Handling as much of the business yourself (from stocking and selling to cleaning) can also cut down on costs, thus increasing your profits.

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 toy store 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.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a toy store. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Certificate of Occupancy

A toy store 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 toy store.
• 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 toy store 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.

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?

First and foremost, this job is for those who love toys. Someone who already collects and sometimes re-sells toys will have an edge over someone completely unfamiliar with this market. Similarly, the ability to research the toy market and network with others that do so allows you to get the inside track on what will be the latest upcoming toys. Having ties to the community can also help you advertise your business, especially if you plan on having any special events in order to help your business stand out from larger retailers. Finally, this is a job for the consummate “people person,” as it involves both understanding what children want and what their parents want and figuring out how to accommodate both demographics.

What happens during a typical day at a toy store?

The day starts early for toy store owners. While most such businesses operate during normal business hours, you must show up early to ensure that the store looks clean, organized, and otherwise presentable. Much of each day is spent balancing accounts and managing your money, including being ready for boom seasons such as Christmas. Ideally, much of your time will be spent helping your customers find the perfect toy they are looking for (and sometimes the perfect toy they didn’t know they needed). Along with busy days, you will likely be patrolling the aisles and cleaning them throughout the day, as kids often take things down and don’t put them back up. Finally, most days will be spent ordering stock for your store and keeping abreast of industry trends so that you know what to order (and how much).

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

There are a variety of skills that may help you open a toy store business. As mentioned above, having personal experience as a toy collector and enthusiast can help you gain a competitive edge in figuring out what to order and how to market and sell it. Having previous experience working in a toy store, especially in a management capacity, will help you understand the daily activities of the business quite well. A professional degree in something like Business or even Hospitality Management can help you master required skills such as accounting and customer service.

What is the growth potential for a toy store?

The growth potential for a toy store business is respectable. Research published in 2016 found that domestic toy sales had increased by seven percent since 2014. The same report found that the overall toy industry has become a $25 billion dollar industry in America, making it a healthy market to enter into (albeit one that may become more competitive over time).