Starting a dollar store can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful dollar store.
Importantly, a critical step in starting a dollar store is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Dollar Store:
- Choose the Name for Your Dollar Store
- Develop Your Dollar Store Business Plan
- Choose the Legal Structure for Your Dollar Store
- Secure Startup Funding for Your Dollar Store (If Needed)
- Secure a Location for Your Business
- Register Your Dollar Store with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Dollar Store
- Buy or Lease the Right Dollar Store Equipment
- Develop Your Dollar Store Marketing Materials
- Purchase and Setup the Software Needed to Run Your Dollar Store
- Open for Business
1. Choose the Name for Your Dollar Store
The first step to starting a dollar store is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your dollar store.
2. Develop Your Dollar Store Business Plan
One of the most important steps in starting a dollar store is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your dollar discount store.
- Company Overview – this section tells the reader about the history of your dollar store and what type of dollar store you operate. For example, are you a general merchandise dollar store, variety dollar store, or a discount grocery store?
- Industry Analysis – here you will document key information about the dollar store industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target market are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your dollar store? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your dollar store make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Dollar Store
Next you need to choose a legal structure for your dollar store and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the dollar store owner and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to open a dollar store together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the store’s profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a dollar store include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a dollar store is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your dollar store, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Dollar Store (If Needed)
In developing your dollar store business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a dollar retail store to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a dollar store that they believe has high potential for growth.
5. Secure a Location for Your Business
To find a store location, you’ll first need to consider the demographics of the area. You’ll want to target an area with a high population density and a strong buying power. You’ll also want to make sure that the area is accessible by foot, car, and public transportation.
Ideally, your store should be close to large shopping malls, grocery stores, schools, and other such establishments. This way you’ll benefit from the foot traffic these places generate. You can also tap into their customer base by selling similar products or items that complement the items they sell.
You’ll also want to check the zoning of the area for commercial use. If it’s not zoned for commercial use you can apply for rezoning, but this process will take time and money.
6. Register Your Dollar Store with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your dollar store’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your dollar store to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
Depending on the location and type of dollar store you launch, you will have to obtain the necessary state, county and/or city licenses.
Common license requirements may include:
- General Business License: getting your Articles of Incorporation as discussed above
- Sales Tax License or Seller’s Permit: for selling products
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
10. Get Business Insurance for Your Dollar Store
There are various types of insurance that are necessary to operate a dollar store.
Some business insurance policies you should consider for your dollar store include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Dollar Store Equipment
You will need the following equipment to start your dollar store: cash register, storage racks, shelves, signage, and a security system.
12. Develop Your Dollar Store Marketing Materials
Marketing materials will be required to attract and retain customers to your dollar store.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your dollar store. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional dollar store website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your dollar store.
13. Purchase and Setup the Software Needed to Run Your Dollar Store
You’ll need a Point of Sale (POS) system to track your sales and inventory. You’ll also need accounting software to manage your finances, and a customer relations management (CRM) system to keep track of your customers’ contact information and purchase history.
14. Open for Business
You are now ready to open your dollar store. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Dollar Store FAQs
Is it hard to start a dollar store?
It can be hard to start a dollar store. There are some things you’ll need to do to set your store up for success. You'll need to create a business plan, find a location for your store, and stock your shelves with new dollar store merchandise. You'll also need to market your store and keep track of your finances. However, if you're willing to put in the work, a dollar store can be a profitable business venture.
How can I start a dollar store with no experience?
There are a few things you can do to start a dollar store with no experience. First, you can research the industry and learn about the different types of products that are typically sold in dollar stores. You can also reach out to other dollar store owners for advice and tips on how to run a successful business. Finally, you can create a detailed business plan and track your progress along the way. By taking these steps, you'll be on your way to starting a successful dollar store.
What type of dollar store is most profitable?
The most profitable type of dollar store is the variety store. A variety store is a store that sells a variety of products, including both dry goods and packaged foods, as well as small appliances, seasonal items, and toys. A variety store nearly always has a limited amount of space, meaning the products must be arranged carefully. A well-organized display can help increase the store's profitability.
How much does it cost to start a dollar store?
The cost to start a dollar store can vary depending on the size and location of the store. Typically, the initial investment can range from $10,000 to $50,000. This includes buying or renting the building, the rent/mortgage expenses for a few months, hiring staff, and buying inventory.
What are the ongoing expenses for a dollar store?
A dollar store may have a variety of ongoing expenses, such as the cost of inventory, employee salaries, and rent. This would also include the cost of insurance, such as employee health and liability. The dollar store may also have to deal with miscellaneous expenses such as vehicle maintenance and utilities.
How does a dollar store make money?
A dollar store makes money by purchasing items in bulk and selling them to consumers. Another way to make money is by selling items that are close to their expiration date at a steep discount. Finally, most dollar stores make money by stocking items that people need, but may not want to purchase at the higher price points set by other types of stores. For example, many dollar store businesses sell food, personal care items, and cleaning supplies. By stocking these necessary items, the store is able to compete with big box retailers and grocery stores.
Is owning a dollar store profitable?
There is no definitive answer, as profitability depends on a number of factors specific to each store. However, in general, dollar stores tend to be quite profitable, as they offer an affordable alternative to traditional retail stores.
One reason owning a dollar store can be profitable is because people are always looking for ways to save money. By offering a variety of products at low prices, a dollar store can attract customers who are looking for a good deal. Additionally, because a dollar store is not challenging to operate, it can be a relatively low-maintenance business venture.
Why do dollar stores fail?
Dollar stores fail for a variety of reasons, but often it boils down to the store not being able to generate enough traffic or sales to cover costs. Other reasons can include underperforming locations, competition from big-box stores, and a failure to keep up with changing trends.