Starting a record 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 record store.
Importantly, a critical step in starting a record 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 Record Store:
- Choose the Name for Your Record Store
- Develop Your Record Store Business Plan
- Choose the Legal Structure for Your Record Store
- Secure Startup Funding for Your Record Store (If Needed)
- Secure a Location for Your Business
- Register Your Record 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 Record Store
- Buy or Lease the Right Record Store Equipment
- Develop Your Record Store Marketing Materials
- Purchase and Setup the Software Needed to Run Your Record Store
- Open for Business
1. Choose the Name for Your Record Store
The first step to starting a record 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 record 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 record store.
2. Develop Your Record Store Business Plan
One of the most important steps in starting a record shop 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 record store.
- Company Overview – this section tells the reader about the history of your record store and what type of record store you operate. For example, are you an independent record store, chain record store, used record store, or a vinyl record store?
- Industry Analysis – here you will document key information about the record 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 customers 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 record 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 record 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 Record Store
Next you need to choose a legal structure for your record 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 record 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 start a record 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 record 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 record 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 record 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 Record Store (If Needed)
In developing your record 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 record 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 record store that they believe has high potential for growth.
5. Secure a Location for Your Business
To find a location for your record store, you should consider areas with a high population density and a high concentration of music lovers. You may also want to consider areas with a diverse music scene, as this can attract customers from a variety of backgrounds.
Additionally, try to find a location that is close to other businesses, as this will make it easier for customers to find your store. Finally, make sure the area is large enough to accommodate your inventory and store layout.
6. Register Your Record 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 record 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 record 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
To start a record store, you’ll need to obtain a business license and a seller’s permit. You may also need to obtain a zoning permit if your store is in a restricted area.
10. Get Business Insurance for Your Record Store
The type of insurance you need to operate a record store will depend on the scope of your operation.
Some business insurance policies you should consider for your record 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.
- 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 Record Store Equipment
To run a record store, you will need some basic equipment, including shelves to display your records, a cash register, and a computer to manage your inventory. You may also want to invest in a turntable so that customers can listen to records before making a purchase.
12. Develop Your Record Store Marketing Materials
Marketing materials will be required to attract and retain customers to your record store.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your record 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 record 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 record store.
13. Purchase and Setup the Software Needed to Run Your Record Store
To run a record store or open an online record store, you need software to manage your inventory and sales. You’ll also need a point-of-sale (POS) system to take payments. Some record stores also use software to create playlists or to manage their social media accounts.
14. Open for Business
You are now ready to open your record store. If you followed the steps above, you should be in a great position to build a successful business and know everything you need about how to open a record store. Below are answers to frequently asked questions that might further help you with opening a record store.
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How to Start a Record Store FAQs
Is it hard to start a record store?
No, a record store is an easy business to start because it doesn't require a lot of capital. However, it is important to do some research before you open your store to determine what kinds of records your target customers will be looking for.
How can I start a record store with no experience?
There are a few things you can do to start a record store with no experience. First, you can research the industry and learn about the different aspects of running a business. You can also network with other record store owners and get advice and support. Finally, you can create a business plan and track your progress.
What type of record store is most profitable?
There is no definitive answer to this question because profitability will vary by location, type of records, and competition. However, a record store that sells new and used records, hard-to-find items, and other music memorabilia tends to be more profitable than one that only sells new records. In addition, independent stores typically have a more personal connection with their customers, which helps to build customer loyalty.
How much does it cost to start a record store?
The cost to open a record store can vary depending on the size and location of the store. However, on average, it costs around $10,000-$50,000 to start a record store. This includes the cost of inventory, rent, and other overhead costs.
What are the ongoing expenses for a record store?
A record store's ongoing expenses typically include rent, employee salaries, and inventory costs. Other common expenses include advertising, marketing, and promotional costs. To keep the doors open and customers coming back, a record store must carefully manage all of its expenses.
How does a record store make money?
Record shops make money by selling records. Record stores may also sell other items, such as CDs, DVDs, and cassettes in addition to vinyl records. Other record stores partner with online music retailers to reach more people.
Is owning a record store profitable?
Yes, record stores can be profitable if they provide quality customer service that is not easily replicated. They can offer a physical location for customers to browse and purchase music and personalized service to help customers find the music that fits their tastes. This combination of factors makes record stores an attractive option for music lovers. Thus, owning a record store is a profitable endeavor.
Why do record stores fail?
Record stores fail for a variety of reasons. One reason is that they do not understand their target market or have the inventory their target customer is looking for. Another reason records stores may fail is if they have a poor marketing strategy and do not attract enough customers to their store. Finally, record stores may fail if they charge prices that are too high for their customers.