Starting a thrift 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 thrift store.
Importantly, a critical step in starting a thrift 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 Thrift Store:
- Choose the Name for Your Thrift Store
- Develop Your Thrift Store Business Plan
- Choose the Legal Structure for Your Thrift Store
- Secure Startup Funding for Your Thrift Store (If Needed)
- Secure a Lease for Your Location
- Register Your Thrift 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 Thrift Store
- Buy or Lease the Right Thrift Store Equipment
- Develop Your Thrift Store Marketing Materials
- Purchase and Setup the Software Needed to Run Your Thrift Store
- Open for Business
1. Choose the Name for Your Thrift Store
The first step to starting your own thrift 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 thrift 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 thrift store.
2. Develop Your Thrift Store Business Plan
One of the most important steps in starting a thrift 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 thrift store.
- Company Overview – this section tells the reader about the history of your thrift store and what type of thrift store you operate. For example, there are different types of thrift stores, but the most common are donation-based and secondhand stores. Donation-based thrift stores accept donations from the community in order to stock their shelves, while second hand stores typically buy and sell used items.
- Industry Analysis – here you will document key information about the thrift 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 thrift 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 thrift 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 Thrift Store
Next you need to choose a legal structure for your thrift 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 thrift 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 their own thrift 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 thrift 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 thrift 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 thrift 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 Thrift Store (If Needed)
In developing your thrift 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 thrift 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 thrift shop that they believe has high potential for growth.
5. Secure a Lease for Your Location
When looking for a location for your thrift store, it’s important to find a space that is accessible and visible to potential customers. You’ll also want to make sure the space is big enough to accommodate your inventory.
Another important consideration is the cost of rent. Be sure to budget for rent and other associated costs, such as utilities and security. You’ll also need to factor in the cost of marketing and advertising your store.
Finally, be sure to check with your local zoning board to make sure your chosen location is allowed to operate as a thrift store.
6. Register Your Thrift 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 thrift 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 thrift 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
In order to open a thrift store, you will need to obtain the necessary licenses and permits. The requirements for each state vary, so it is important to contact your local government to find out what you need. Generally, you will need a business license and a zoning permit. You may also need a special permit to sell used clothing.
10. Get Business Insurance for Your Thrift Store
Below are the main types of insurance to consider for your business:
- 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 Thrift Store Equipment
To start a thrift store, you’ll need some basic equipment: a cash register, tables and racks to display clothing and hangers for clothes. You may also want to invest in a security system to protect your store’s inventory.
12. Develop Your Thrift Store Marketing Materials
Marketing materials will be required to attract and retain customers to your thrift store.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your thrift 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 thrift shop 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 thrift shop.
13. Purchase and Setup the Software Needed to Run Your Thrift Store
There are a few different software programs that are necessary to run a thrift store. The first is a Point of Sale (POS) system, which is used to track sales and inventory. The second is a donation management system, which is used to track donations and keep track of what items are in stock. The third is a consignment management system, which is used to manage consignment items.
14. Open for Business
You are now ready to open your thrift 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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Thrift Store FAQs
No, it's not hard. In fact, it's a relatively easy business to get into. You just need to find a space for your store, and then stock it with items that people will want to buy. You'll also need to market your store and attract customers.
There are a few things that you can do in order to launch a thrift store with no experience. First, you can research the industry and learn about the different aspects of running a thrift store. You can also reach out to people who have experience in the thrift store industry and ask for advice. Finally, you can attend workshops and training sessions that are specifically designed for those who want to start a thrift store.
Yes, a thrift store is a good investment. They typically have low overhead costs, meaning they can be profitable with relatively small sales volumes. Additionally, thrift shops can be a great way to recycle unwanted items and help keep them out of landfills.
There is no definitive answer to this question, as the profitability of a thrift store can vary depending on a number of factors, such as the location of the store, the type of merchandise it carries, and the amount of competition in the area.
One profitable type of thrift store is a vintage store. These stores typically carry a wide variety of unique items that are not found in most other thrift shops. Another profitable type of thrift store is a consignment shop. Consignment shops accept used clothing and other items from people and then sell them for a profit. This type of store typically does not carry as much merchandise as a traditional thrift store, but it makes up for this by selling the merchandise at a higher price.
The cost to start a thrift store varies depending on the size and scope of your business. Here are a number of initial costs you'll need to cover:
- Renting or purchasing a storefront
- Outfitting the store with shelves and displays
- Purchasing inventory
- Hiring employees
If you're looking to start a thrift store on a shoestring budget, you may want to consider starting an online store instead. This can be a less expensive option, and you can still offer a wide variety of items for sale.
The ongoing expenses for a thrift store can vary, but typically include rent, utilities, and staff salaries. It's important to factor these costs into your business plan when starting a thrift store so you can be sure to make a profit.
Thrift stores make money by selling many different items, including clothes, furniture, toys and other items at a discounted price. They typically buy these items from people who no longer want them, or from companies that are going out of business. The thrift store then sells the items at a discounted price, but for more than what they bought them for. The price is typically lower than that of a retail store.
Yes, the thrift store business is profitable, as long as you do it right.
The profitability of a thrift store depends on the location of the store, the merchandise that is offered for sale, and the prices that are charged.
There are a few things that you can do to increase the chances of your thrift store being profitable:
- Research the area you plan to open up your thrift store. You want to make sure that there is a need for another store of your kind in the area.
- Look for a space to house your thrift store. Find a rental space that will give you enough room to display and store your items.
- Learn how to price the items in your thrift store.
- Make sure that everything in your thrift store is clean and properly organized, because the best way to attract customers is to have a neatly organized space.
- Hire employees if necessary, but make sure they fit the culture of your business and know what you expect from them before you hire them.
- Decide how to advertise your thrift store, whether through social media or in-person announcements.
- Start selling. Make sure that you're committed to selling all of the items in your store, and adjusting prices, if need be so that you do not end up with unsold inventory.
- Grow your business by promoting it to local charities that might want to donate items to be sold, or by getting permission from businesses in the area that are closing down to sell their stuff alongside you.
There are a number of reasons why thrift stores can fail. One reason is that it can be difficult to compete with big box stores and online retailers. Additionally, thrift stores often have high overhead costs, and it can be difficult to make a profit.