How to Start a Vape Shop

Start a vape shop by following these 10 steps:

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

We have put together this simple guide to starting your vape shop. 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 Vape Shop 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 vape shop?

Unlike many start-ups, you can open a vape shop with a fairly low amount of capital. Industry leaders estimate a budget of $25,000 for a small shop and $50,000 for a large one.

The following items should be included in your budget:

• Lease - this will vary, depending upon your location
• e-cigarette kits and accessories - $7,500
• Accessories - $20,000
• iPad and point of sale software - $2,500
• Insurance
• Licensing

If you are considering franchising as an option, budget for an additional $10,000 to $20,000 in franchising fees.

What are the ongoing expenses for a vape shop?

Your estimated monthly costs are between $7,500 and $10,000 and include the following:

• Lease - $2,500 to $5,000 per month
• Insurance - $150 per month
• Payroll and taxes - $3,700 monthly
• Miscellaneous fees - $250 per month
• Marketing - $100/month

This estimate does not include replenishing of inventory. While this will be your largest expense, the numbers vary significantly, based on a number of factors.

Who is the target market?

Your preferred clients will be broken into three different groups. First, try to appeal to smokers who are considering breaking the habit. This will require more than educating them on the benefits of switching to e-cigarettes. Break it down and show them how they will save money in the long-run. Your second target audience is current e-cigarette smokers. To engage them as customers, carry a wide variety of quality products, at an attractive price point. Lastly, make sure your shop is easily located for vacationers. This could offer a steady flow of customers that many vape shop owners tend to ignore.

How does a vape shop make money?

Vape shops generate revenue from the sale of their products.

How much can you charge customers?

Prices will vary, depending upon the products sold. Accessories run as low as a $3, while some items sell for as high as $300.

How much profit can a vape shop make?

The average vape shop reports approximately $26,000 in monthly sales. If your monthly expenses are $10,000, your business would realize an annual profit of $120,000.

How can you make your business more profitable?

There are a number of opportunities for increasing your enterprise’s profits:

• Open kiosks in well-trafficked areas
• Host an e-Commerce site and sell your products online
• Manufacture your own e-liquids

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 vape shop 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.

Federal Business Licensing Requirements

Though vaping is a form of "smokeless tobacco", the FDA regulates e-cigarettes and vapes in the same way as other tobacco products. Manufacturers, retailers, and consumers must each follow their respective set of federal regulations. Here is a link to an overview of FDA tobacco retailer regulations.

State & Local Business Licensing Requirements

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

Certificate of Occupancy

A vape shop 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 vape shop 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 vape shop business will be in compliance and able to obtain a CO.

Tobacco Laws

FDA Tobacco Products Guidelines

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?

An increasing number of entrepreneurs are now opening vape shops, increasing industry competition. Successful shop owners are knowledgeable and passionate about educating their customers. They must enjoy researching an ever-evolving market and be dedicated to delivering strong customer service.

What happens during a typical day at a vape shop?

There are a number of duties you will be tasked with from day to day:

• Interact with customers - answer questions and educate them on their options
• Research industry trends
• Network with others in the industry, particularly representatives of the manufacturers
• Check inventory and place orders
• Ensure workspace is clean
• Administrative tasks
• Oversee staff and delegate
• Marketing

What are some skills and experiences that will help you build a successful vape shop?

This profession requires owners to be personable and able to connect with both customers and others, within the industry. For long-term success, focus on continuously researching industry trends, inventory, budgeting, and what makes your customer happy. The Smoke Free Alternative Trade Association is a great resource for keeping up with the latest in legislative changes. Additionally, there are a number of courses that offer guidance in putting it all together.   

What is the growth potential for a vape shop?

This is a fairly new industry that flourished from its inception. For business savvy owners who are dedicated to achieving their goals, there is significant room for expansion across the globe.