Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on May 17, 2023 Updated on March 13, 2024
Fast Facts
Investment range
$25,300 - $51,300
Revenue potential
$104,000 - $312,000 p.a.
Time to build
3-6 months
Profit potential
$31,200 - $93,600 p.a.
Industry trend
Declining
Commitment
Full-time
Electronic cigarettes have emerged as an alternative to traditional tobacco cigarettes, with some saying that e-cigarettes are safer. E-cigarettes and vape shops have thus emerged as their own industry, which is worth nearly $8 billion in the U.S. alone.
If you’re a vaping fan, you could open your own vape shop to tap into that market and make some money.
But before you get started, you’ll need to understand the business. Luckily, this step-by-step guide details all you need to know to launch a successful vape shop.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Number of people employed – In 2022, the electronic cigarettes and vape shops industry employed 40,866 people.
Trends and challenges
Trends
Diverse flavors are being sought by vape shop customers.
Vaping devices are becoming smaller and more convenient to carry.
Challenges
Regulations on e-cigarettes are likely to continue to tighten, which may negatively impact vape shops.
Online sales for vape products are increasing, making it harder for vape shops to get customers.
How much does it cost to start a vape shop business?
Startup costs for a vape shop range from $25,000 to $50,000. Costs in include the shop space rental and preparation, inventory, and an operating budget.
You’ll need a handful of items to successfully launch your vape shop business, including:
Shelving
Checkout counter
Vape shop POS system
Start-up Costs
Ballpark Range
Average
Setting up a business name and corporation
$100 - $500
$300
Business licenses and permits
$100 - $300
$200
Insurance
$100-$500
$300
Website
$500 - $1,000
$750
Store space rental and preparation
$4,000 - $8,000
$6.000
Inventory
$10,000 - $20,000
$15,000
Operating budget
$10,000 - $20,000
$15,000
Sales and marketing budget
$500 - $1,000
$750
Total
$25,300 - $51,300
$38,300
How much can you earn from a vape shop business?
Prices for the items you sell will vary, but these calculations will assume an average sale of $20 per customer. Your profit margin after operating costs should be about 30%.
In your first year or two, you could have 100 customer per week bringing in $104,000 in revenue. This would mean $31,200 in profit, assuming that 30% margin.
As you gain traction, you might have 300 customers a week. With annual revenue of $312,000, you’d make a tidy profit of $93,600.
What barriers to entry are there?
There are a few barriers to entry for a vape shop. Your biggest challenges will be:
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Step by Step Business values real-life experience above all. Through our Entrepreneur Spotlight Series, we interview business leaders from diverse industries, providing readers with firsthand insights.
Join us in our interview with Tyler Browne to uncover the strategies behind To the Cloud Vapor Store’s success and gain valuable e-commerce insights.
Step 2: Hone Your Idea
Now that you know what’s involved in starting a vape shop, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.
Analyze your competitors
Research vape shops in your area to examine their products, price points, and customer reviews.
Make a list of vape shops that offer similar product.
Review your competitors’ products – their features, pricing, and quality – and marketing strategies
Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
Identify your competitors’ strengths and weaknesses.
This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.
Why? Identify an opportunity
You’re looking for a market gap to fill. For instance, maybe the local market is missing a vape shop that’s also a smoke shop, or a vape shop that sells a full line of vape products.
You might consider targeting a niche, such as vape pens and vape juices that people could enjoy in a vape lounge that you set up in your shop.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Curating a diverse range of vaping products for your shop
Here’s a list of potential products you could offer:
Bags of tobacco and cigarette tubes
Vape juices
Vape pens
Traditional cigarettes
Other vape products
How much should you charge for vape products?
Your products should depend on market prices in your area, but also on your costs of the products.
Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Most vapers are millennials, ages 35 to 44, so your best bet is to market to them on Instagram or Facebook.
Where? Choose a vape store location
You’ll need to rent out a shop space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Vape Store Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “vape shop” or “vaping store”, boosts SEO
Name should allow for expansion, for ex: “VaporVerse Emporium” and “Inhale Innovations” over “CloudChaser’s Den” and “FlavorFog Boutique”
Avoid location-based names that might hinder future expansion
Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation.
Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward.
Step 4: Create a Vape Store Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
Executive Summary: Provide a brief summary of your business plan, highlighting your business goals, target market, and anticipated financial outcomes.
Business Overview: Describe the nature of your vape store, including its location, size, and the range of vaping products and accessories you plan to offer.
Product and Services: Detail the various vaping products, e-liquids, and accessories you will stock, emphasizing quality, brand selection, and any additional services like vape customization.
Market Analysis: Analyze the demand for vaping products in your area, identify your target customer demographics, and consider market trends, including regulations on vaping.
Competitive Analysis: Identify and evaluate competitors in the vaping industry, both local and online, highlighting what sets your store apart and your competitive advantages.
Sales and Marketing: Explain your strategies for marketing and promoting your vape store, including branding, online presence, in-store displays, and partnerships with vape manufacturers.
Management Team: Introduce yourself and any key team members involved in running the Vape Store, highlighting their relevant experience and roles.
Operations Plan: Describe the day-to-day operations of your store, including inventory management, relationships with suppliers, store layout, and operating hours.
Financial Plan: Present financial projections, including startup costs, sales forecasts, pricing strategies, and operating expenses, to demonstrate the profitability of your business.
Appendix: Include supporting documents such as supplier agreements, product catalogs, and lease agreements to provide additional context for your business plan.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to vape shops.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your vape shop will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding a vape shop business. You might also try crowdfunding if you have an innovative concept.
You’ll likely need specific tobacco and paraphernalia licenses at the state and local levels.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your vape shop business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Korona, Lightspeed, or Vend, to manage your sales, inventory, and purchases.
Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Create a website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales.
Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now” or “Order”. This can sharply increase purchases.
Marketing
Here are some powerful marketing strategies for your future business:
Influencer Collaborations: Partner with local influencers or vape enthusiasts to showcase your products on social media platforms, leveraging their followers and credibility to increase brand visibility.
Product Bundling and Discounts: Encourage larger purchases by offering bundled deals or discounts on e-liquids and accessories, enticing customers to buy more in a single transaction.
Educational Workshops: Host workshops on vaping basics, safety, and latest trends to position your shop as a knowledge hub, fostering trust and loyalty among customers.
Loyalty Programs: Implement a tiered loyalty program with rewards for repeat customers, encouraging them to return and make additional purchases to unlock exclusive benefits.
Local Event Sponsorship: Sponsor or participate in local events, such as concerts or community fairs, to enhance your shop’s visibility and connect with potential customers in person.
Social Media Contests: Run engaging contests on social media platforms, encouraging users to share content related to your shop, creating a buzz and expanding your online reach.
Customized Loyalty: Use customer data to personalize loyalty rewards and promotions, tailoring offers based on individual preferences and purchase history.
Collaborate with Local Businesses: Partner with complementary local businesses, such as coffee shops or fitness centers, for cross-promotions, expanding your customer base through shared audiences.
Interactive In-Store Experience: Create an inviting and interactive in-store experience with product samplings, allowing customers to try new flavors and devices before making a purchase.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your vape shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your vape shop business could be:
Unleash your vaping experience with our extensive selection of premium e-liquids and devices
Experience the ultimate satisfaction with our high-quality vaping products and accessories
Elevate your vaping game with our expert guidance and top-notch customer service
Networking
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a vape shop business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in vape shops for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in vape shops. You’ll probably generate new customers or find companies with which you could establish a partnership.
Step 12: Build Your Team
You will likely need workers to fill various roles. Potential positions for a vape shop business include:
Store Clerks – make sales, customer service
Marketing Lead – create and implement marketing strategies
General Manager – accounting, scheduling, inventory management
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Vape shops have taken off, growing into a nearly $8 billion industry. If you’re into vaping, now could be a great time to start your own vape shop. If you’re successful, you could even expand to new locations or franchise your business.
You understand the business now, so you’re ready to get your successful vape shop up and running!
Vape Shop Business FAQs
Is a vape shop profitable?
The profitability of a vape shop can vary depending on factors such as location, competition, product offerings, pricing strategy, and customer demand. A well-managed vape shop that offers high-quality products, excellent customer service, and stays up-to-date with industry trends can be profitable.
What happens during a typical day at a vape shop?
During a typical day at a vape shop, various activities take place to serve customers and manage the business. This includes tasks such as assisting customers with product selection and inquiries, restocking inventory, managing sales transactions, providing guidance on vaping devices and e-liquids, conducting product demonstrations, handling customer service requests, and staying informed about the latest vaping products and regulations.
What is the growth potential of a vape shop?
The growth potential of a vape shop depends on factors such as market demand, industry trends, and the ability to adapt to changing regulations. While the vaping industry has experienced growth in recent years, it also faces evolving regulations and public perceptions. Vape shops that can navigate these challenges, offer a wide range of products, stay updated with market trends, and provide a positive customer experience have the potential for growth.
What type of business is a vape shop?
A vape shop is a retail business that specializes in selling vaping devices, e-cigarettes, e-liquids, and related accessories. It falls under the category of the retail tobacco industry, but it is important to note that regulations surrounding vaping products can vary by jurisdiction. Vape shops cater to customers who are interested in vaping as an alternative to traditional tobacco products or as a recreational activity.
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