Starting a warehouse 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 warehouse business.
Importantly, a critical step in starting a warehouse business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
15 Steps To Start a Warehouse Business:
- Choose the Name for Your Warehouse Business
- Determine the Type of Warehouse Business You Will Launch
- Develop Your Warehouse Business Plan
- Choose the Legal Structure for Your Warehouse Business
- Secure Startup Funding for Your Warehouse Business (If Needed)
- Secure a Location for Your Business
- Register Your Warehouse 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 Warehouse Business
- Buy or Lease the Right Warehouse Business Equipment
- Develop Your Warehouse Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Warehouse Business
- Open for Business
1. Choose the Name for Your Warehouse Business
The first step to starting a warehouse 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 warehouse 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 warehouse business.
2. Determine the Type of Warehouse Business You Will Launch
The next step is to determine the type of warehouse business you will launch. The four main types of warehouse businesses are:
- Traditional Warehouses – These are large facilities that mainly store products for retailers and manufacturers. They are typically staffed around the clock and offer a wide variety of services including inventory management, order fulfillment, packaging and shipping.
- Temporary Warehouse – This type of warehouse business rents out space to other businesses who need temporary storage solutions. They may also provide additional services such as loading and unloading, packaging, labeling and shipping.
- Public Warehouses – These warehouses offer space for commercial storage of products that do not require any special handling or care. They are typically less expensive to rent than traditional warehouses.
- Specialty Warehouses – These types of warehouses specialize in providing customized storage solutions for businesses and consumers that need specialized storage and handling.
3. Develop Your Warehouse Business Plan
One of the most important steps in starting a warehouse 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 warehouse business.
- Company Overview – this section tells the reader about the history of your warehouse business and what type of warehouse business you operate. For example, are you a traditional warehouse, a temporary warehouse or a specialized warehouse ?
- Industry Analysis – here you will document key information about the warehouse 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 or services 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 warehouse 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 warehouse 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?
4. Choose the Legal Structure for Your Warehouse Business
Next you need to choose a legal structure for your warehouse 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 owner of the warehouse business 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 warehouse 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 warehouse 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 warehouse 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 warehouse 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.
5. Secure Startup Funding for Your Warehouse Business (If Needed)
In developing your warehouse 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 warehouse 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 warehouse business that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your warehouse business. You will need to consider how much space you need and how much it will cost. You should also consider the location of your warehouse, how accessible it is to vendors, customers, and other businesses.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Warehouse 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.
8. Open a Business Bank Account
It is important to establish a bank account in your warehouse business’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
9. Get a Business Credit Card
You should get a business credit card for your warehouse 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.
10. Get the Required Business Licenses and Permits
A warehouse business will likely need the following licenses and permits:
- Business License
- Tax ID Number
- Sales Tax License
Nearly all states, counties and/or cities will also require:
- 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.
Depending on the type of warehouse business you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Warehouse Business
Business insurance is important for any business, and a warehouse business is no exception. There are a variety of types of business insurance, and the type of insurance you need will vary depending on your business.
Some of the most common types of business insurance include:
- General Liability Insurance: This type of insurance protects your business from financial losses in the event that someone is injured or their property is damaged as a result of your business operations.
- Product Liability Insurance: If you sell products, you need product liability insurance to protect you in the event that a product you sell causes injury to someone or their property.
- Business Owner’s Policy: A business owner’s policy (BOP) is a package policy that combines general liability and property damage insurance into one policy. This can be a cost-effective option for small businesses.
- Commercial Vehicle Insurance: If you use a vehicle for business purposes, you need commercial vehicle insurance to protect you in the event that an accident occurs. This includes vehicles such as cars, trucks, and vans.
- Workers’ Compensation Insurance: If you have employees, you are required to have workers’ compensation insurance to protect them in the event that they are injured on the job.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Warehouse Business Equipment
When starting a warehouse business, you will need to purchase or lease the following equipment:
- Warehouse space
- Storage racks
- Tape guns and boxes
- Box cutters
You may also need additional equipment such as an office, a restroom, and climate control systems depending on the type of warehouse business you are starting. Once you have identified what equipment you need, do research to find out how much it will cost and how you can acquire the equipment.
13. Develop Your Warehouse Business Marketing Materials
Marketing materials will be required to attract and retain customers to your warehouse business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your warehouse 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 warehouse business website provides potential customers with information about the products and/or services 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 warehouse business.
14. Purchase and Setup the Software Needed to Run Your Warehouse Business
In order to run your warehouse business, you will need to purchase and install the following software:
- Warehouse management software
- Inventory management software
- Sales tracking software
- Accounting software
- Customer relationship management (CRM) software
Each of these software programs has a specific function in helping you manage your warehouse business. For example, warehouse management software will help you keep track of the inventory in your warehouse, while accounting software will help you track your expenses and sales revenue.
CRM software will help you keep track of customer information and interactions. It is important to research each of these software programs and find one that meets the specific needs of your warehouse business.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your warehouse business. 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 Warehouse Business FAQs
No, it's not hard to start a warehouse business.
If you follow the steps above, you should be able to start your warehouse business without too much difficulty.
If you have the desire and ambition to start a warehouse business but don't have any experience, don't worry - you can still do it! There are a few things you can do to give yourself a head start:
- Read books or articles about how to start a warehouse business.
- Take online courses or workshops that teach how to start a warehouse business.
- Join online forums or groups where people share tips and advice on how to start a warehouse business.
- Attend tradeshows and industry events where you can learn from experienced warehouse business owners.
- Talk to friends and family members who have experience in running a warehouse business.
By doing some research and gaining as much knowledge as possible, you'll be well on your way to starting a successful warehouse business.
Traditional warehouses that store goods for a fee are typically the most profitable type of warehouse business. However, there are also other types of warehouse businesses that can be quite lucrative. These include:
- Warehouses that specialize in storing and managing inventory for e-commerce retailers or wholesalers.
- Third-party logistics (3PL) warehouses that provide shipping, warehousing, and other logistics services.
- Cold storage warehouses that specialize in storing food, pharmaceuticals, and other temperature-sensitive items.
- Distribution centers or fulfillment centers that specialize in receiving orders, packaging them, and shipping them out to customers.
No matter what type of warehouse business you decide to start, you should always do your research and find the option that best suits your needs and resources. With the right planning, you can make any type profitable.
The cost to start a warehouse business will vary depending on the size and scope of your business. The startup costs for a warehouse business range between $10,000 and $50,000, depending on the equipment and software you need.
The ongoing expenses for a warehouse business include things like rent, utilities, insurance, and maintenance costs. You'll also need to budget for things like employee wages, marketing expenses, and professional development.
The average ongoing expenses for a warehouse business range between $5,000 and $15,000 per month. However, this cost will vary depending on how large your business is and how much you're spending on supplies, staff, and other expenses.
In order to keep your warehouse business running smoothly, it's important to have a solid budget in place for ongoing expenses. This will help you stay on top of your finances and avoid any unnecessary surprises down the road.
There are a few different ways that a warehouse business can make money. The most common methods include charging a fee for storage, providing logistics or shipping services, and selling goods or products.
Warehouses that store goods for a fee are typically the most profitable type of warehouse business. In addition to storage fees, these businesses may also charge for handling and packaging services. Warehouses that specialize in storing and managing inventory for e-commerce retailers or wholesalers can be especially profitable, as the demand for these services is constantly growing.
Third-party logistics (3PL) warehouses are another popular option for warehouse businesses. These warehouses provide shipping, warehousing, and other logistics services to clients. This can be a very profitable business model, as there is always a demand for reliable logistics services.
Yes, owning a warehouse business can be very profitable.
Yes, owning a warehouse business can be very profitable. In order to be successful, it's important to invest in the right equipment and supplies, as well as to budget for ongoing expenses. Additionally, warehouse businesses that offer specialty services such as 3PL logistics may be able to earn even more.
Some of the key things you can do to make your warehouse business more profitable include:
- Setting up an efficient and organized system for storing goods
- Investing in the right equipment to make operations more efficient
- Offering additional services such as 3PL logistics or packaging
- Developing a strong marketing strategy to attract new customers
- Establishing partnerships with other businesses in the industry
- Monitoring costs
- Offering add-on services that complement your main offering
- Optimizing your website for SEO to increase online visibility
- Providing outstanding client service
A warehouse business can fail for a variety of reasons, such as poor planning, lack of experience, and not understanding the market.
One of the main reasons that warehouse businesses fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
The warehouse market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- C.H. Robinson
- UPS Supply Chain Solutions
- FedEx Logistics
- J.B. Hunt Transport Services
- XPO Logistics
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
Warehouse fees can vary depending on the type of warehouse services being offered, as well as the size and scope of the project.
However, some common warehouse fees include:
- Storage fees – $0.45 – $1.50 per cubic foot
- Packing and unpacking fees – $25 – $75 per hour
- Receiving fees – $0.20 – $0.60 per item
- Delivery charges -$2.00–$4.00 per mile
The best way to determine the right fee for your warehouse services is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.