How to Start a Dollar Store: Cost and Profit Potential

Important elements to think about when starting your dollar store:

1. Choose a strategic location — Select a location with high foot traffic, such as busy shopping centers, residential areas, or near public transportation. Ensure the area has a demand for affordable products.
2. Find reliable suppliers — Establish relationships with reliable suppliers to stock a wide range of essential and high-demand products. Look for wholesalers who offer competitive prices and consistent quality.
3. Stock a wide range of essential and high-demand products — Offer a diverse inventory that includes household items, personal care products, snacks, and seasonal goods. Ensure your stock meets the needs of your target market.
4. Hire and train staff — Recruit friendly and efficient staff to manage the store, assist customers, and handle inventory. Provide training to ensure excellent customer service and efficient store operations.
5. Implement security measures — Ensure the safety of your store, staff, and inventory by installing surveillance cameras, alarm systems, and secure cash registers. Regularly review and update your security protocols.
6. Register your business — A limited liability company (LLC) is a good legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
7. Legal business aspects — Register for taxes, open a business bank account, and get an EIN. Obtain all necessary licenses and permits to operate your dollar store legally.
8. Online presence — Develop an online store to reach a broader audience. Ensure your website is user-friendly, with detailed product descriptions, high-quality images, and an easy-to-navigate layout.
9. Logistics and inventory management — Plan the logistics of sourcing, storing, and restocking inventory. Implement an efficient inventory management system to keep track of stock levels and reorder products as needed.
10. Marketing and promotion — Use a mix of online marketing, local advertising, and community engagement to promote your dollar store. Highlight your wide range of affordable products and convenient location to attract customers.

Step 1: Decide if the Business Is Right for You

Pros and cons

Dollar store industry trends

Industry size and growth

• Industry size and past growth – The U.S. dollar and variety stores industry is worth $114.2 billion in 2023 after growing 3.9% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/dollar-variety-stores-industry/))
• Growth forecast – The U.S. dollar and variety stores industry is projected to grow 1.7% in 2023.
• Number of businesses – In 2023, 73,422 dollar and variety store businesses are operating in the U.S.
• Number of people employed – In 2023, the U.S. dollar and variety store industry employs 590,606 people. 

Trends and challenges

Trends

• Dollar stores are the fastest growing retail channel for food products due to inflation.
• Dollar store shoppers are seeking more frozen food options, presenting a new dollar store owner with the opportunity to differentiate their store with a large frozen food section.

Challenges

• According to the New York Times, some communities have rejected having dollar stores in their area because they undercut the prices of locally owned businesses.
• Dollar stores are often easy targets for robberies and theft due to few staff members, no security, and the large amount of cash they have from frequent cash transactions.

How much does it cost to start a dollar store business?

Startup costs for a dollar store range from $30,000 to $60,000. Costs include the space rental and preparation, inventory, an operating budget, and marketing budget. 

Alternatively, you could purchase a franchise, such as a Dollar General franchise, but that would cost far more. However, it would be much easier to source your products and market your store.

You’ll need a handful of items to successfully launch your dollar store business, including: 

• Aisle dividers and shelves
• Checkout counters
• 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
Space rental and preparation	$5,000 - $10,000	$7,500
Inventory	$10,000 - $20,000	$15,000
Operating budget	$10,000 - $20,000	$15,000
Sales and marketing budget	$5,000 - $10,000	$7,500
Total	$30,800 - $62,300	$46.550

How much can you earn from a dollar store business?

These calculations will assume that you’ll have an average sale per customer of $10. Your profit margin after all costs should be about 10%. 

In your first year or two, you might have 100 customers a day, 360 days a year, bringing in $360,000 in revenue. This would mean $36,000 in profit, assuming that 10% margin. 

As you gain traction and your store becomes more well-known, you might have 250 customers a day. With annual revenue of $900,000, you’d make a tidy profit of $90,000.

What barriers to entry are there?

There are a few barriers to entry for a dollar store. Your biggest challenges will be:

• Funding the startup costs
• Sourcing products at good wholesale prices
• Competing with chain dollar stores

Step 2: Hone Your Idea

Now that you know what’s involved in starting a dollar store, 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 dollar stores in your area to examine their products, price points, and customer reviews.

• Make a list of dollar stores that offer similar products. 
• 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 dollar store with a frozen food section or that sells greeting cards. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products

Dollar stores offer a variety of items, from food, to health and beauty products, to cleaning products, and much more. At first, you might need to base your product offerings on what you can source at discount prices.

How much should you charge for dollar store products?

Obviously, you’ll sell most products for $1 although some dollar stores have increased their prices to $1.25. Some dollar store items are priced higher, but you’ll have to be careful with that, as it may cause customers to become disgruntled. 

Your prices should also depend on your costs to acquire the items.

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

Your target market is bargain shoppers, who could be of any age. You should spread out your marketing to include TikTok, Instagram, and Facebook. 

Where? Choose a dollar store location

You’ll need to rent out a store 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 Dollar Store Name

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 “dollar store” or “discount store”, boosts SEO
• Name should allow for expansion, for ex: “Bargain Basket Universe” over “Crafters’ Dollar Haven”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

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 Dollar Store Business Plan

Here are the key components of a business plan:

• Executive Summary: Provide a concise summary of your business plan, highlighting your business goals, target market, and expected financial performance.
• Business Overview: Describe your dollar store, including its location, size, and the range of products you plan to sell (e.g., household items, snacks, party supplies).
• Product and Services: Detail the variety of products and services your dollar store will offer, their pricing, and any additional services like special promotions or loyalty programs.
• Market Analysis: Analyze the local market for discount stores, including potential customers, demand for various product categories, and economic factors affecting consumer spending.
• Competitive Analysis: Identify and assess competitors in the discount store industry in your area, including other dollar stores, big-box retailers, and online sellers.
• Sales and Marketing: Explain your strategies for attracting customers, including advertising, in-store promotions, and partnerships with local organizations.
• Management Team: Introduce yourself and any key team members involved in running the dollar store, highlighting their relevant experience and roles.
• Operations Plan: Describe the daily operations of your store, including inventory management, staffing, store layout, and operating hours.
• Financial Plan: Present financial projections, including startup costs, sales forecasts, pricing strategies, and operating expenses, to demonstrate the financial viability of your business.
• Appendix: Include supplementary materials such as vendor agreements, product catalogs, and lease agreements to support 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

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 dollar stores. 

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 dollar store 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. 

Step 6: Register for Taxes

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.

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 dollar store business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Dollar Store Business Licenses and Permits

Starting a dollar store business requires obtaining a number of licenses and permits from local, state, and federal governments.

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.

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.

Step 9: Open a Business Bank Account

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 dollar store 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.

Step 11: Prepare to Launch

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 NRS, Brilliant, or Bepoz, to manage your vendors, purchases, inventory, and sales. 

Accounting

• 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:

• Strategic Product Placement: Arrange high-demand and impulse-buy items near the entrance to attract customer attention and encourage additional purchases.
• Local SEO — Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Frequent Sales and Promotions: Implement regular promotions, such as “Buy One, Get One Free” or discounts on specific items, to create a sense of urgency and drive foot traffic.
• Loyalty Programs: Introduce a simple loyalty program, offering discounts or free items for repeat customers, incentivizing them to choose your store over competitors.
• Seasonal and Holiday Themes: Decorate your store and create themed displays for holidays and seasons, making shopping a more engaging and festive experience.
• Local Partnerships: Collaborate with nearby businesses for cross-promotions, distributing flyers or coupons at local events to increase community awareness.
• Social Media Engagement: Leverage social media platforms to showcase new arrivals, highlight promotions, and engage with your audience by responding to comments and messages.
• In-Store Events: Host in-store events, such as product demonstrations or contests, to attract new customers and provide a unique shopping experience.
• Effective Signage: Utilize clear and attractive signage both inside and outside the store to communicate promotions, discounts, and key product categories.
• Bulk Buying Discounts: Encourage larger purchases by offering discounts for bulk buying, appealing to customers looking for even greater value.

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 dollar store 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 dollar store business could be:

• Biggest selection in town
• The best food prices you can find
• Shop conveniently, save big

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 dollar store business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in dollar stores 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 dollar stores. 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 dollar store business include:

• Store Clerks – customer service, make sales
• Stockers – stock shelves
• 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. 

Step 13: Run a Dollar Store – Start Making Money!

Dollar stores serve an important role in any community, providing affordable products to consumers. By starting your own dollar store, you’d be providing value and making a living at the same time. If you’re successful, you could even franchise your business and become the next Dollar Tree.

You understand the business now, so you’re ready to get to work and start your dollar store venture! 

FAQs

Is a dollar store profitable?

A dollar store can be profitable, but it depends on various factors such as location, pricing strategy, product selection, and operational efficiency. Successful dollar stores often maintain low overhead costs and focus on high-volume sales with tight profit margins.

What is the growth potential of a dollar store?

The growth potential of a dollar store can be significant. As consumers look for affordable options and value-focused shopping experiences, dollar stores have the opportunity to expand their customer base and open new locations. However, the growth potential may vary based on market saturation and competition in a specific area.

What type of business is a dollar store?

A dollar store is a retail business that offers a wide range of products at low price points. The concept revolves around providing inexpensive everyday items, household goods, party supplies, snacks, and more. Dollar stores typically aim to attract budget-conscious shoppers seeking affordable options and convenience.

Can you start a dollar store on the side?

Starting a dollar store on the side can be challenging due to the level of commitment and effort required to run a retail business. Dollar stores often require consistent management, inventory control, and customer service.