Starting a hardware 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 hardware store.
Importantly, a critical step in starting a hardware 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 Hardware Store:
- Choose the Name for Your Hardware Store
- Develop Your Hardware Store Business Plan
- Choose the Legal Structure for Your Hardware Store
- Secure Startup Funding for Your Hardware Store (If Needed)
- Secure a Location for Your Business
- Register Your Hardware 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 Hardware Store
- Buy or Lease the Right Hardware Store Equipment
- Develop Your Hardware Store Marketing Materials
- Purchase and Setup the Software Needed to Run Your Hardware Store
- Open for Business
1. Choose the Name for Your Hardware Store
The first step to starting a hardware 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 hardware store:
- 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 hardware store.
2. Develop Your Hardware Store Business Plan
One of the most important steps in starting a hardware 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 hardware store.
- Company Overview – this section tells the reader about the history of your hardware store and what type of hardware store you operate. For example, are you a home improvement store, a specialty hardware store, or a big-box store?
- Industry Analysis – here you will document key information about the hardware 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 a loyal customer base to your hardware 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 hardware 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 Hardware Store
Next you need to choose a legal structure for your hardware 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 hardware 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 business owners. It is an agreement between two or more people who want to open a hardware 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 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 hardware 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 hardware 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 hardware 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 Hardware Store (If Needed)
In developing your hardware 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 hardware 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 hardware store that they believe has high potential for growth.
5. Secure a Location for Your Business
There are a few things to consider when looking for a location for your hardware store.
First, you’ll want to think about the population of the area. You’ll want to be sure there are enough people in the area who will be potential hardware shoppers.
Additionally, you’ll want to think about the competition. If there are already several independent hardware stores in the area, you’ll need to find a location that offers something different or better than what is already available.
You’ll also need to find a space that is big enough to fit all of your inventory. Finally, you’ll want to think about your budget and find a location that is affordable.
6. Register Your Hardware 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 store personnel, 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 hardware store’ 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 hardware 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 a small business loan and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
To launch a hardware store, you will need a business license and a tax ID number. You will also need to contact your local zoning commission to find out what restrictions are placed on hardware stores in your area. Depending on the size of your store and how it will be laid out, you may need a building permit.
10. Get Business Insurance for Your Hardware Store
The insurance you need to operate a hardware store may vary depending on your state’s laws and regulations.
Some common business insurance policies you should consider for your own shop 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 Hardware Store Equipment
To run a hardware store, you will need the following equipment: cash register, computer, phone, security cameras, and shelves.
12. Develop Your Hardware Store Marketing Materials
Marketing materials will be required to attract and retain customers to your hardware store.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your hardware 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 hardware 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 hardware store.
13. Purchase and Setup the Software Needed to Run Your Hardware Store
To run a hardware store, you will need accounting software and customer relationship management (CRM) software. You will also need software that will help you manage your inventory, track your sales, and create purchase orders. Additionally, you will need a point of sale (POS) system to handle purchases made by customers.
14. Open for Business
You are now ready to open your hardware 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 Hardware Store FAQs
No, it is fairly easy to launch a hardware store. All you need is an idea of the type of product you want to sell and where you want to sell it. You should also define your business model and plan how you're going to market, promote, maintain, and manage it.
There are a few ways to go about starting a hardware store with no retail and hardware experience. One way would be to research the industry and learn as much as possible about the business. Another option would be to team up with someone who has experience in the industry. Finally, you could take on a consultant to help you get started. Whichever path you choose, make sure you have a clear plan and are prepared to put in the hard work necessary to make your own hardware store a success.
Generally speaking, stores that sell higher-priced items such as appliances or tools tend to be more profitable than stores that sell lower-priced items such as plumbing supplies or light bulbs. Additionally, stores that are located in high-traffic areas tend to be more profitable than stores that are located in low-traffic areas.
It can cost a lot of money to open a hardware store. You'll need to invest in inventory, and you'll also need to pay for rent, utilities, and employee salaries.
Some startup costs involved in starting a hardware store include:
- Security system
- Computer system
- Purchasing inventory
- Credit card machines
- Building a retail space
- Fixtures and display cases
- Licenses and permits
Ongoing expenses for a hardware store generally include utilities, rent, and inventory. Additional expenses to keep in mind include insurance and wages.
Hardware store owners make money by selling products to repair or improve a home. These products can include tools, building supplies, appliances, and more. The store makes money by selling products and by charging customers for the labor to install hardware or appliances.
Owning a hardware store can be a profitable business venture. This is because hardware shops typically have high margins. This means that the store can sell products at a higher price than it paid for them, and thus make a profit.
Most hardware stores lose a large portion of their clientele due to the internet and the fast-paced shopping experience that comes with it. A lot of people now choose to order online because they can do so from the convenience of their own homes with the click of a mouse. Most often these transactions will be cheaper as well.
Another common reason hardware stores fail is from being in business for too long without changing their offerings with evolving customer preferences. Sometimes they fail because consumers simply need different goods than what the old-fashioned store offers. For instance, key cutting, lawn care booklets, or landscaping materials may not be as in demand as they once were.
Finally, some chain retail hardware stores fail because they are in the wrong location. If the store is in a location that is not easily accessible or visible to passersby, it may not get enough customers to sustain its operations.