This article is part of a larger series on Starting a Business.
A vape shop sells standard and customized e-cigarettes. It’s a regulated business, so it’s important to do research on your state and city’s regulatory rules before opening a vape shop. Depending on your location and build out, the cost to open a vape shop can be anywhere from $25,000 to $125,000.
Here’s how to start a vape shop in five steps:
1. Research The Different Types Of Vape Shops
There are several different types of vape stores you can open. Most vape businesses have a physical location, but it is not required. You can have an ecommerce only vape business that sells juices and other products online. If you’re opening a physical location, you may want to consider opening a vape shop franchise which provides you with an existing brand and system to operate your vape shop.
Online Vs Brick-and-mortar Vape Shop
Most vape shops have a physical location for customers to learn about e-cigarettes, vaping devices, and to try juices. However, you should consider an ecommerce platform if you are not opening a physical location or believe your current customers would rather reorder juices and vape products online instead of coming into the store.
Vape Shops With Physical Locations
If you decide to open a brick-and-mortar vape shop, it’s important to look up the municipal zoning restrictions before connecting with a commercial real estate agent. You may find that zoning restrictions keep you from opening your store in a specific location. For example, many cities place restrictions on how close a vape shop can be to a school or church. Use this municipal zoning restriction information to guide your commercial real estate search.
Ecommerce For A Vape Shop
If you’re going the ecommerce only route, it will be a challenge to get sales because of fierce competition for vape products in Google. If you want to get ecommerce customers it’s best to combine your website with another marketing tactics such as social media marketing or video marketing.
Additionally, many POS systems have ecommerce capabilities. It’s important to know that some payment processors view online vape sales as high risk and won’t process your online sales, which means you won’t get paid. If you’re interested in ecommerce, make sure whatever company is processing your payments accepts vape shop products.
Vape Shop Franchises
Typically, if you choose to purchase a vape shop franchise, the corporate office will help you with your business plan and financial projections. A franchise, like Premier Vapor, has already opened 14 different vape shops around the U.S. The downside of a franchise is the upfront cost and royalties. Premier Vapor requires an upfront investment from the owner between $85,000 and $120,000.
2. Write Your Vape Shop Business Plan
A business plan is what you’ll use to make the case as to why your vape shop is a great idea. A solid business plan outlines the opportunity to open a vape shop and how it will be profitable. Decide if you will create a traditional business plan—if you need funding —or modern business plan—which is more visual. The most challenging parts of a business plan are the financial projections, which breaks down how much money your vape shop will earn and spend every month.
Traditional Versus Modern Business Plan For Vape Shops
The traditional business plan is typically required to get capital from a bank or investor. This business plan has similar sections like the executive summary, management background, and target market. In more recent years, a modern business plan has emerged called a Business Model Canvas (BMC). The BMC is a visual business plan with updated sections like key channels, value propositions, and key activities for your vape shop. If you are not seeking funding, the BMC is recommended.
Market Research For A Vape Shop
The market research section of your business plan is where you determine if there is a demand for your vape products. Once you are clear on the demographics of your ideal vape shop customer, look at market data from a source like ReferenceUSA, which is available for free at thousands of local libraries.
During your market research, look into the vape shop regulations in your state and city. If you’re seeking funding, it’s wise to include all state and city regulatory information in your business plan. Operating a vape shop is considered a high risk business because many states and cities are implementing local regulations. For example, San Francisco has banned the sale of e-cigarettes. You can research the regulatory information on your state and city’s official website.
Competitive analysis is the process of reviewing your competitors to determine what makes your vape shop unique. A simple exercise is to find your top five vape shop competitors. and list their strengths and weaknesses. What is one advantage your competitors have that your business cannot do better—for example brand name recognition? What is something you know that your business will do better, for example, having the most comfortable lounge style shop?
Financial projections are the most difficult and time consuming section of a business plan. It’s where you outline how much money it takes to start your vape shop and how much money it will make and spend every month. If you’ve never opened a brick-and-mortar business before, you will have to research the costs associated with operating a vape store. Typically, you would use a financial projections work sheet to document your predictions.
Here is what you need to include in the financial projections for your vape shop:
- How much money to open your doors (also called startup expenses)
- Month-by-month breakdown of income and expenses for the first year in operation
- Month-by-month breakdown of income and expenses for the second year in operation
- Three year breakdown of income and expenses by year
It’s important to keep taxes in mind when creating financial projections for a vape shop. While there are no federal taxes on vape products, many states are charging a sales tax. For example, Minnesota charges an excise tax of 90%. If your state charges additional taxes, make sure to include them in your projections, because they could be the difference between earning a profit or operating at a loss.
Vape Shop Physical Location Costs
If you’ve never owned a retail store before, this step may be a challenge. Before creating financial projections it’s important to know how much it will cost to build-out your location and maintain it on a monthly basis.
Build out cost range wildly from a few thousand dollars to more than $50,000. The costs depend on the features your store will have like luxury furniture, custom lighting, and glass counters. To calculate the monthly costs you may need to call around and get estimates on expenses like rent, utilities, phone, insurance, and security.
Business Plan Software
Learning all of the information to include in a business plan may feel overwhelming. If you’re struggling with how to write a business plan with financial projections, you can use a business plan software. Live Plan is a software system that walks you step-by-step through the process of creating a business plan. It also provides examples—for instance, a business plan for a retail tobacco store, which is similar to a vape shop. The pricing to use Live Plan is $19.95 a month.
3. Obtain Necessary Capital For Your Vape Shop
Opening a vape shop will require a minimum investment of $25,000. You can obtain the capital needed to open a vape shop from a bank, investor, or crowdfunding. To keep your startup costs minimal, you need to start your business in an affordable area and keep build out costs low. Build-out cost is the cost to renovate your location. Other costs you might incur when opening a vape shop include purchasing inventory, licensing fees, and operational technology, like a POS system.
Get A Bank Loan
A common way to get funding for a business is by applying for a loan from a bank. What many new business owners fail to understand is that to get a bank loan, you need those funds in an accessible bank account. For example, if you want $75,000 to open your vape shop, you need $75,000 in a CD that the bank can access. The bank requires this, so that in the event that your business fails, it has the opportunity to get its money back. From the bank’s point of view, startups are generally risky.
Find An Investor For Your Vape Shop
Another funding option for your vape shop is to connect with an investor. Typically, an investor wants equity in your business in exchange for funds given. For example, an investor may lend you $75,000 for 50% ownership in the business. Even though you are giving up 50% of ownership and profits in the business, you find having half of a business is more appealing than no business at all.
Finding an investor is difficult, and if you do find one, the first thing they will look at is your financial projections. They want to know how quickly they can make their money back.
Start A Crowdfunding Campaign
A crowdfunding campaign for a vape shop is when potential customers pre-order vape shop products or services. When you open you will reward those customers with what they pre-order. Crowdfunding is a great way to get customers before you vape shop opens and gain credibility for a potential investor.
The success of your crowdfunding campaign will hinge on your network and your ability to persuade them to purchase vape products before your business opens. Typically, a crowdfunding platform will charge a 5% fee, plus a 3% payment processing fee. The platform fee is for you to use their website to host your campaign. Although it is rare, your campaign may also be picked up as an “Editor’s Choice” and get promoted on the platform for free.
Before you plan your campaign, make sure your crowdfunding platform allows vape and nicotine products. Kickstarter, a popular crowdfunding website, prohibits vape related-products. That being said, a vape shop campaign raised thousands of dollars in 2016 by finding loopholes in the system.
4. File Legal Paperwork For Your Vape Shop
When opening a new vape shop you need to do typical new business tasks like registering the business with the state and opening a business checking account. You also need to comply with all federal, state, and city laws and regulations. Vaping and e-cig regulation is changing rapidly and some cities such as San Francisco are banning the sale of all e-cigarettes.
Obtain Employment Identification Number
One of the first legal tasks to take as a future vape shop owner is obtain your Employment Identification Number (EIN). This is your federal business number that the IRS will use for income and payroll tax collection. You also need this number to open a bank account.
Register the Vape Shop Business
Every vape shop needs to register the business as a legal entity. Doing so protects your personal assets if a lawsuit were to occur in the business. The most common small business registration is an LLC. To register your business you can go directly to your state’s website or save time and frustration by using an online legal service.
“If someone is interested in opening a vape shop, or any small business for that matter, I recommend that they incorporate or form an LLC for their business. Incorporating a business designates the company as its own separate entity and provides liability protection, which ensures that your personal assets remain separate and untouched from those of the business. It also allows you to save on taxes and build credibility by establishing a professional identity for the company.”
—Deborah Sweeney, CEO, Mycorporation.com
Obtain State & Federal Licenses
As a vape shop owner you need to pay attention to the new and changing federal and state vaping requirements. The Food and Drug Administration (FDA) recently made an application requirement for all vape stores that mix liquids or assemble e-cigs. The deadline for the application was pushed back and is currently set for 2021. Unfortunately, the language is unclear as to what the implications for vape shops will be. Some say it will be the end of vape shops because most vape stores assemble products and the FDA application will cost up to seven figures.
Others think the FDA regulation may be helpful for vape stores. It appears that one way around this regulation is to require your shop to be 18 and up, similar to an adult store. If this happens, convenience stores won’t be able to sell vape products and customers may go to your store instead, which would increase your sales. Regardless, these laws and regulations are changing rapidly, so it’s important to follow a vape advocacy group like Consumer Advocates For Smoke Free Alternatives Association (CASAA) and consult an attorney to stay up to date.
Aside from the potential federal regulations, states and cities have their own vaping and e-cigarette business regulations. To learn more about each of these regulations and to obtain the proper licenses, visit the business section on your state and city’s official website.
Get Vape Shop Liability Insurance
All vape shop owners need to get liability insurance. This protects you from the liability of selling your vape products. For example, there have been reports of e-cigarette batteries reportedly exploding. If one were to injure one of your customers and they filed a lawsuit against your company, you’d want to be protected. The average cost of liability insurance for a vape shop is slightly higher than the industry average at $750 per year.
Open a Business Checking Account
Once you obtain your EIN number, you need to open a business checking account before you incur startup expenses for your vape shop. Don’t mix personal and business checking accounts, because maintaining separate accounts simplifies IRS audits. Chase Business Checking provides startups safe and secure checking with a minimum balance of $1,500.
5. Purchase Your Vape Products
Before opening your doors you need vape products. You can put a lot of research into this step, because there are hundreds of vape product wholesalers. You may also be considering selling vape products with your own label on it, also called white labeling. To sell your products in-store, you need a point-of-sale (POS) system to record and process.
“Our advice would be to open an herbal vaporizer shop. Focus exclusively on vaporizers designed for herbal blends, oils, and concentrates. Herbal use is on the rise, and vaporizers are, in our opinion, the most efficient delivery method. By putting your attention and focus on the herbal vaporizers and away from the alternative nicotine delivery systems, you will stand out from the rest and appeal to a growing market that is more interested in their well-being. Additionally, you won’t be restricted by nicotine cigarette laws, which are quickly increasing.”
—Damon Inlow, Owner, Vaporizers.ca
Connect With Vape Product Wholesalers
One of the first big decisions you make as a vape shop owner is from what company to buy your products. There are now hundreds of vape product wholesalers. A wholesaler is a company that sells you a product in bulk at a discount, so you can sell it at a mark-up and profit in your shop.
A few questions to consider when purchasing from wholesalers are:
- Will you purchase from China or the U.S.?
- What brands would you like to sell?
- What is the shipping cost?
“When you start a vape shop, you should carry the hardware and e-juice brands that you would personally use. Not only will you find these brands easier to promote because you’ll already think highly of them, but you’ll also deal with fewer returns due to the high quality of the products. And make sure you’re doing your due diligence on these products before you carry them. Regulations are changing rapidly for e-juice in particular, so familiarize yourself with the rules in your state or country. You don’t want to get stuck with a bunch of products you can’t sell.”
—Chris Innes, Owner, Elevated Vaping
White Labeling Vape Products
You might want to consider white labeling your products if you want to expand your brand into juices as well. White labeling is when you take someone else’s product and put your own brand on it. There are several white labeling juice companies that will work with you to create a custom label. The cost is about $21 to purchase the juice and $250 to purchase a hundred labels.
6. Open Your Vape Shop
Opening your vape shop starts with hiring staff and marketing early with a press release. You need to market your business to potential vaping customers and get them through the door. Physical marketing tips and online marketing strategies can help you get the word out about your business to potential customers. You may also want to have a grand opening and announce to the community you are open.
Hire Staff For Your Vape Shop
If you have a small vape shop, you may be the only staff member. However, most vape shops need more than one employee and you’ll have to hire staff. The average vape shop representative pay is $9 per hour. You may want to consider a commission structure as well to incentivize your staff to increase average customer spend per purchase. A website to make job posts is Indeed, which allows you to post jobs for free.
Manage & Pay Your Vape Shop Staff
When purchasing your POS software, it’s important to know if they offer a complimentary or low-cost add on for employee management. Many POS systems have built-in employee scheduling with the ability for staff to check in and out of their shifts. Additionally, you want to pay your staff. Gusto is a low cost payroll software that starts at $45 per month for one employee, plus $6 a month for each additional employee. It provides onboarding support and offers employee benefits administration.
Press Kit For Your Vape Shop
It’s important that journalists know about which local businesses are opening. Journalists prefer to learn about your vape shop in a press release, which is a short summary of your business. A press release is created in a specific format that is important to follow. Once you have yours written, you can email it to local newspapers or use a company like eReleases to distribute it to journalists nationwide for $199.
In a press release, it’s important to have a hook or story that a journalist may be interested in covering. For example, if you decided to open a vape shop because it helped you quit smoking tobacco products, you should share your experience. Be sure to include photos of the business with your press kit.
Vape Shop Grand Opening
A grand opening is an event where you celebrate your vape shop business. You don’t have to schedule it on your first day in business, and the event doesn’t have to last an entire day. A grand opening is a great way to simply create a buzz about your new shop.
Additionally, it’s a great hook in your press release. This gives local journalists a specific story to cover. There are various types of grand openings; consider a three hour event where you offer free food, discounted products, and giveaways.
Market Your Vape Shop
Consider traditional and online marketing for your vape shop. Traditional marketing includes physical materials and is important to have during networking and in your shop. Online marketing is everything digital, including a website, Google My Business listing, and social media pages.
Traditional Marketing For Your Vape Shop
Traditional marketing involves purchasing physical materials like business cards, flyers, mailers, paper advertising, or car wraps. As a new business owner, you want business cards to hand out at networking events. Additionally, you may want to sponsor and go to local events to hand out flyers. Before creating marketing materials it’s important to have your branding aligned, which includes logos, messaging, fonts, and colors.
Online Marketing For Your Vape Shop
Online marketing is a great opportunity for your vape shop. The challenge is learning the latest opportunities to get your shop in front of your ideal customers. A website is still a must have for vape shops, in addition to your free Google My Business listing. Email marketing is also great as it builds anticipation for your grand opening.
Basic online marketing opportunities for a vape shop are:
- Website: A website is the online billboard for your vape shop. Even if you choose to not sell products online, your website can persuade potential customers to come into the store with photos of your store, juice descriptions, and customer testimonials. Every website needs hosting to store online information, like photos. Hosting also keeps the website up and running. Dreamhost is a reliable and safe hosting platform for your shop.
- Google My Business: Every business that has a physical location and is looking for local customers gets a free business listing from Google called Google My Business (GMB). Claim this listing, fill it out, and update it frequently to get your business’s information in Google and in front of people looking for vape products.
- Social media: Social media marketing is not as effective as it was several years ago for vape shops. However, it is still a free opportunity to reach your loyal customers. In particular, if you have a visually appealing business, Instagram is a great tool to get in front of your customers for free.
- Email marketing: Before opening your shop, build anticipation with your family, friends, and local acquaintances through email marketing. With email updates you can take them through the journey of opening your vape shop. After opening your store, use email marketing to stay in touch with your most loyal customers with vaping tips, new products, and discounts.
Once you finish preparing the market for your vape shop’s debut, you’ll be ready to officially open your business. Doing all of the research and planning on the front-end will make operations much smoother when customers start coming.
How To Start A Vape Shop Frequently Asked Questions (FAQs)
This section includes the most frequently asked questions about how to start a vape shop.
How much money does a vape shop make?
The amount of money your vape shop earns depends on location, number of nearby customers, and the quality of your shop. Some vape shops are happy with a few hundred dollars a day in revenue. Others report making more than $4,000 a day. Remember, this is revenue. Profit for the business owner is the amount leftover after expenses, like rent and products, are subtracted.
Do you need a license to start a vape shop?
Yes, you will most likely need a license to operate a vape shop. Currently, you don’t need a federal license, but that may change in the next couple of years. Whether your state or city requires a license depends on their regulations. Some states classify vape shops under tobacco regulations.
Other states classify vape shops more specifically as e-cigarette stores. Additionally, some cities require an e-cigarette license. For example, San Marcos in California passed a city ordinance that requires any business that sells tobacco, including e-cigarettes, to obtain a retail tobacco license.
How can I open a vape shop with no money?
If you don’t have capital to open a vape shop, your best bet is crowdfunding. A successful crowdfunding campaign will rely on your own personal network and getting them to pre-purchase products before your shop is open. Another option is an investor, however, the typical investor will want a personal return as well. Remember, you want to create a thorough business plan with financial projections before approaching any local investors.
Are vape shops profitable in 2019?
Yes, vape shops can still be profitable in 2019. Some vape shops report daily revenue of $300 a day. This type of income is most likely for a one-employee shop. Other vape shops report daily revenue of $4,000+ a day. Your profit on this revenue depends on several factors like your vape shop location, how well you operate and market your business, and how well you control expenses.
How can I start an online vape shop?
The biggest expense for starting an online vape shop is gaining approval by a payment processor. Before receiving approval, you need to comply with your state’s legal age requirement for purchasing tobacco online. Then, you’ll need a legal letter confirming your website’s compliance from a lawyer, which costs between $500-$1000. You’ll present the legal opinion letter to the payment processor to gain approval. Additionally, you’ll need an ecommerce platform to sell your products, like Shopify.
Opening a vape shop is riskier than a standard retail business, but it can still be successful. Depending on your location and store popularity, your daily income could be anywhere from $300 to over $4,000 a day. To open a vape shop, you’ll begin by writing a business plan and putting your ideas on paper to marketing the business so you can get customers through the door.