Starting a sneaker business 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 sneaker business.
Importantly, a critical step in starting a sneaker business 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 Sneaker Business:
- Choose the Name for Your Sneaker Business
- Develop Your Sneaker Business Plan
- Choose the Legal Structure for Your Sneaker Business
- Secure Startup Funding for Your Sneaker Business (If Needed)
- Secure a Location for Your Business
- Register Your Sneaker Business 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 Sneaker Business
- Buy or Lease the Right Sneaker Business Equipment
- Develop Your Sneaker Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Sneaker Business
- Open for Business
1. Choose the Name for Your Sneaker Business
The first step to starting a sneaker business 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 sneaker 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 sneaker business.
2. Develop Your Sneaker Business Plan
One of the most important steps in starting a sneaker business 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 sneaker business.
- Company Overview – this section tells the reader about the history of your sneaker business and what type of shoe store business you operate. For example, are you a retail sneaker store, manufacturer, online store, or a sneaker boutique?
- Industry Analysis – here you will document key information about the sneaker industry. Conduct market research and document how big the industry is and what industry 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 sneaker business? 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 sneaker business 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 Sneaker Business
Next you need to choose a legal structure for your sneaker business 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 shoe 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 sneaker business 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 sneaker business 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 sneaker business 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 sneaker business, 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 Sneaker Business (If Needed)
In developing your sneaker 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 sneaker business 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 sneaker business that they believe has high potential for growth.
5. Secure a Location for Your Business
You will need to find a location for your sneaker business. Your choice of location will depend on whether you will be 1) manufacturing your sneakers at this location, 2) selling sneakers at retail and/or wholesale at your location and/or 3) distributing sneakers from your location.
If you will be manufacturing and/or distributing sneakers, you will want to look for a low cost space that is conveniently located for your staff. Conversely, if you will be selling sneakers at retail from your location, you will need to conduct market research to find the best location based on where your target customers live and/or shop. For example, you might choose a retail space in a busy shopping center to draw lots of foot traffic.
6. Register Your Sneaker Business 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 sneaker business’ 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 sneaker business 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
You will need a business license, a seller’s permit, and a resale license. You may also need a zoning permit if your business is located in a commercial area. Contact your local government office for more information.
10. Get Business Insurance for Your Sneaker Business
The type of insurance you need to operate a sneaker business will depend on the scope of your operation.
Some business insurance policies you should consider for your sneaker business 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 Sneaker Business Equipment
To start a sneaker business, you will need some basic equipment. This includes a computer, phone, and printer to market your products, as well as a shipping scale, boxes, and packing materials to ship your sneakers.
12. Develop Your Sneaker Business Marketing Materials
Marketing materials will be required to attract and retain customers to your sneaker store.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your sneaker business. 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 sneaker business 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 platforms will help customers and others find and interact with your sneaker business.
13. Purchase and Setup the Software Needed to Run Your Sneaker Business
To run a sneaker business, you will need business software such as accounting software, customer relationship management (CRM) software, and inventory management software. You may also need software to design and create your sneakers, such as computer-aided design (CAD) software. In addition, you will need to have a website to sell your sneakers online.
14. Open for Business
You are now ready to open your sneaker business. 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 sneaker store. If you want to know how to start a shoe reselling business or how to start sneaker reselling, follow the same steps above to ensure your success. Below are answers to frequently asked questions that might further help you.
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How to Start a Sneaker Business FAQs
Is it hard to start a sneaker business?
No, it is not too hard to start a sneaker business because there are few barriers to entry. You need a good idea, some capital, and a manufacturing partner. The market for sneakers is extremely competitive, so you need to have a business plan and be able to execute well.
How can I start a sneaker business with no experience?
The best way to start a sneaker business with no experience is to do some research and learn as much as you can about the industry. You should also reach out to other entrepreneurs in the space for advice and mentorship. Finally, be prepared to put in a lot of hard work to make your business successful.
What type of sneaker business is most profitable?
The most profitable type of sneaker business is the retail business. They tend to have more control over their prices, which allows them to charge more for their products. Additionally, retailers typically have a large selection of sneakers available, which increases the chances that customers will find what they are looking for.
How much does it cost to start a sneaker business?
It costs around $10,000-$50,000 to start a sneaker business. You will need to purchase a good amount of inventory, as well as pay for some business licenses and fees. You will also need to set up a website and invest in marketing in order to get your business off the ground.
What are the ongoing expenses for a sneaker business?
There are a few ongoing expenses associated with a sneaker business. One of the main expenses is the cost of inventory. This includes the cost of the sneakers, the cost of shipping, and the cost of storage. Another major expense is the cost of marketing, advertising, and promoting the business. Finally, there is the cost of employee salaries and benefits.
How does a sneaker business make money?
A sneaker business makes money by selling sneakers to customers in a brick and mortar store, clothing stores, or in online stores. They may also make money by licensing their brand to online retailers or other companies that are selling shoes. Some businesses also earn from flipping sneakers and sneaker reselling.
Is owning a sneaker business profitable?
Yes, owning a sneaker business can be profitable. With the sneaker culture, sneakers are popular with people of all ages, and they often have a high resale value. In addition, the popularity of sneakers has led to a rise in demand for customized sneakers, which can be very profitable. Finally, the sneaker industry is growing rapidly, so there is potential for significant profits in the future.
Why do sneaker businesses fail?
One main reason shoe stores fail could be that the sneakers are not of good quality, and as a result, people do not want to buy them. Another reason could be that the company is not able to produce enough sneakers to meet demand, which results in shortages and lost sales. Additionally, if the company is not able to keep up with the latest trends, their sneakers may quickly become outdated.