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Many consumers are now using electronic cigarettes in place of traditional cigarettes. This offers a unique opportunity for entrepreneurs interested in entering the industry. In addition to selling vaping devices, some vape shops also offer a lounge where customers can enjoy their recently purchased products.
Who is this business right for?
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
What 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.
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.
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 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
If you are considering franchising as an option, budget for an additional $10,000 to $20,000 in franchising fees.
What are the steps to start a vape shop?
Once you're ready to start your vape shop, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your vape shop is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your vape shop keeps your finances organized and makes your business appear more professional to your customers.
- 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.
- 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.
- 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.
- 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.
- Establish a 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. Save 15% when you create a business website with Weebly.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I 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.
What are some insider tips for jump starting a vape shop?
Industry leaders offer the following advice:
- Spend time developing a brand that your target audience can relate to. Remain consistent with that brand image.
- When initially stocking your inventory, use the following formula, adjusting as you get to know your market better: 50% starter kits, 40% mid-level kits, and 10% high end hardware. Additionally, stock an assortment of replacement parts.
- In this industry, brand loyalty is paramount to your success. Find the manufacturers you believe in and stick with them. If you take care of them, they will take care of you.
- Ultimately, price is what will turn prospective customers into loyal clients. Carry quality products at competitive prices.
- Offering your clients the option to customize their e-cigs will cut down on your need to carry kits. This will help reduce ongoing expenses.
How to promote & market a vape shop
The vape community is tight knit, yet rapidly growing. Reach out to others in the community. Research the marketing staff of the brands you carry and find ways to connect to them. Regularly attend trade shows and vape conventions to further strengthen those relationships, as well as your position within the community.
Search engines like Google and Yahoo will not allow e-cig companies to advertise. This means you will need to get creative. Maintain an online presence by having a simple, yet informative website. Create social media pages, such as Twitter and Facebook. Reddit is another effective way of advertising your vape shop. Some online advertising services, such as eCigMedia, specialize in the e-cigarette industry.
To target the out-of-town customers we mentioned earlier, make sure your business is listed on Google Maps, Apple Maps, and Yelp. While you cannot advertise on search engines, you can make sure the shop is listed. Google, Bing, and DuckDuckGo listings are a great way to increase your online visibility.
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How to keep customers coming back
Provide exceptional customer service at all times. Carry quality, affordable products. Encourage satisfied clients to spread the word and always ask for feedback, both negative and positive.
How and when to build a team
Veteran vape shop owners recommend you be present as much as possible, to ensure your business strategy is adhered to. To avoid burnout, however, your shop will require a team of one to two people. Each employee should be personable and knowledgeable about the shop’s products. If they do not have the answer, they should make it their mission to find out. Once you have gotten a better feel for the demands of the store, you can adjust the number of team members you employ.
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.
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.
For 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.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
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.
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.
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.
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.
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