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 24, 2022 Updated on November 23, 2023
$83,550 - $119,100
$547,000 - $1.37 million p.a.
Time to build
1 – 3 months
$55,000 - $137,000 p.a.
With the growing interest in DIY projects, particularly among millennials, hardware stores have been thriving, expanding nearly 46% in the last decade. If you have a passion for tools, you could start your own hardware store, provide an invaluable local service and eventually grow into the next Ace Hardware or Home Depot.
But first you’ll need to know the nuts and bolts of starting a business and being an entrepreneur. Luckily, that information is all packed into this handy step-by-step guide, which will prepare you to launch and operate a successful hardware store.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
The DIY home improvement market is growing, led by millennials, with many hardware stores branding themselves as DIY stores and offering classes.
Hardware delivery is on the rise, presenting an additional revenue opportunity for hardware stores.
Challenges in the hardware store industry include:
The proliferation of online hardware stores is creating new competition for traditional hardware stores.
The rise of stores like Home Depot and Lowe’s has driven many small hardware stores out of business.
How much does it cost to start a hardware store business?
Startup costs for a hardware store range from $85,000 to $120,000. The largest cost by far is the inventory. Other costs include the space rental and preparation.
Alternatively, you could sharply reduce the initial costs by starting out with an online hardware store before opening a physical location.
Setting up a business name and corporation
$150 - $200
Business licenses and permits
$100 - $300
Business cards and brochures
$200 - $300
$1,000 - $3,000
$2,000 - $5,000
$5,000 - $10,000
$75,000 - $100,000
$83,550 - $119,100
How much can you earn from a hardware store business?
Prices for items sold will obviously vary. These calculations will assume that your average customer will spend $50 Your profit margin after cost of goods sold, rent, labor, and overhead, should be about 10%.
In your first year or two, you might have 30 customers a day, bringing in $547,000 in annual revenue. This would mean $55,000 in profit, assuming that 10% margin. As your brand gains recognition and your store becomes more well known, you might get 75 customers a day. With annual revenue of $1,370,000, you’d make an outstanding profit of $137,000.
What barriers to entry are there?
There are a few barriers to entry for a hardware store. Your biggest challenges will be:
The high startup costs of inventory
Facing a large number of competitors
Related Business Ideas
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.
Now that you know what’s involved in starting a hardware store, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research hardware stores in your area to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a small hardware store that offers DIY classes, or a hardware store that offers same-day delivery.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as plumbing supplies or power tools.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
Your products will be any number of hardware items, from nails to power tools. You can earn additional revenue by offering deliveries or holding DIY classes.
How much should you charge for hardware?
Prices will vary by hardware item. Typically, you should mark up your prices from wholesale prices to have a gross profit margin of 40%. After the costs of rent, labor, and overhead, your net profit should be about 10%.
Once you know your costs, you can 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 will be mainly homeowners and contractors. You should spread out your social media marketing to include TikTok, Instagram, Facebook, and LinkedIn.
Where? Choose a hardware store location
To choose the ideal hardware store location, start by researching the local market to pinpoint areas with strong demand for your products.
Opt for a location with good visibility, easy access by car and public transportation, and ample parking.
Ensure the chosen site has sufficient space for product display, storage, and customer flow.
Lastly, consider the competition, safety, and neighborhood quality, as these factors contribute to attracting and retaining customers.
You’ll most likely need to rent out a storefront. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
Step 3: Brainstorm a Hardware 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 “hardware” or “hardware store”, boosts SEO
Name should allow for expansion, for ex: “Ace Hardware Co.” over “Plumbing Parts Palace”
Avoid location-based names that 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 with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Hardware 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: A brief summary outlining the core elements of the hardware store business plan, including its mission, goals, and key financial projections.
Business Overview: An overview of the hardware store business, including its mission statement, location, legal structure, and a brief history or background.
Product and Services: A detailed description of the hardware products and services the store will offer, emphasizing the unique selling points and value proposition.
Market Analysis: An examination of the target market for the hardware store, including demographics, market size, trends, and potential opportunities and challenges.
Competitive Analysis: An assessment of the hardware store’s competitors, identifying strengths, weaknesses, opportunities, and threats in the market.
Sales and Marketing: A plan outlining how the hardware store will attract and retain customers, including marketing strategies, sales tactics, and promotional activities.
Management Team: Profiles of key individuals responsible for managing and operating the hardware store, highlighting their qualifications and roles.
Operations Plan: Details on how the hardware store will operate on a day-to-day basis, covering inventory management, suppliers, facilities, and other operational aspects.
Financial Plan: A comprehensive financial projection for the hardware store, including startup costs, revenue forecasts, profit and loss statements, and cash flow projections.
Appendix: Supplementary materials that provide additional information, such as resumes of key team members, detailed market research data, and any other supporting documents.
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’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to hardware 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 hardware 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.
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.
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.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re 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 hardware store business.
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.
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 hardware 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.
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 LS Retail, Vend, or Retail Pro, to manage purchasing, inventory, and invoicing.
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.
Develop your 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 website builders. 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.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
For your hardware store, the marketing strategy should focus on showcasing the variety and quality of your products, your expertise in home improvement and DIY projects, and your commitment to customer service. Emphasize any unique offerings like specialized tools, local products, or services such as tool rental or repair.
Professional Branding: Your branding should convey reliability, quality, and expertise. This includes your store’s signage, logo, staff uniforms, and overall store layout and design.
Direct Outreach: Network with local contractors, tradespeople, and DIY enthusiasts. Offer workshops or training sessions at your store to draw in these customers.
Digital Presence and Online Marketing
Professional Website and SEO: Develop a website that lists your products, services, and store information. Use SEO best practices to rank for local searches related to hardware stores, home improvement, and DIY projects.
Social Media Engagement: Utilize platforms like Facebook, Instagram, and YouTube to showcase your products, share DIY tips, and highlight customer projects.
Content Marketing and Engagement
DIY Blog or Video Series: Share informative content about home improvement projects, tool usage tips, and DIY ideas. Video content can be particularly engaging and useful for demonstrating how to use certain tools or complete specific projects.
Email Newsletters: Regular newsletters can inform your customers about new products, upcoming workshops, and special promotions.
Expert Advice and FAQs: Offer expert advice sections or FAQs on your website to help customers with their DIY queries and position your store as a knowledgeable resource.
Experiential and In-Person Engagements
In-Store Workshops and Demonstrations: Host regular workshops or live demonstrations on various home improvement topics to attract customers to your store and engage with them directly.
Community Events: Participate in or sponsor local community events to increase brand visibility and connect with potential customers.
Collaborations and Community
Partnerships with Local Businesses: Collaborate with local contractors and home service businesses for mutual referrals. Partnering with local craftspeople or manufacturers can also diversify your product offerings.
Local School and Community Projects: Engage in local school projects or community building projects, providing materials or expertise.
Customer Relationship and Loyalty Programs
Loyalty Rewards Program: Implement a program offering discounts, points, or special perks to regular customers.
Contractor and Tradesperson Discounts: Offer special discounts or accounts for professional contractors and tradespeople to encourage repeat business.
Promotions and Advertising
Targeted Local Advertising: Use local newspapers, radio, community boards, and online platforms to advertise your store and any special promotions or events.
Seasonal Promotions and Sales: Take advantage of seasonal cycles in home improvement and gardening to offer relevant promotions and sales.
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 hardware 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 hardware store business could be:
Your hometown hardware store has you covered!
All the hand and power tools at great prices
Your #1 resource for DIY projects
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 hardware store, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in hardware 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 hardware. You’ll probably generate new customers or find companies with which you could establish a partnership.
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a hardware store business include:
Store Clerks – make sales, customer service
General Manager – scheduling, ordering, inventory management, accounting
Marketing Lead – SEO strategies, social media
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 Hardware Store – Start Making Money!
Good old-fashioned hardware stores are an important part of any community. Many people prefer the small local shop, rather than going into a store that looks like a giant warehouse and getting lost. If you have a passion for tools and DIY, you could create a community hardware store, provide value to customers, and start building your hardware empire!
You’ve got business knowledge in your toolbelt now, so it’s time to hit the ground running and start your successful hardware store.
Hardware Store Business FAQs
Are hardware stores profitable?
Yes, hardware stores can be very profitable. The key is to offer a variety of hardware items and provide great customer service that will keep people coming back.
What is the biggest hardware store company?
The biggest hardware store company is The Home Depot, followed by Lowe’s and Menards.
What makes a successful hardware store?
A successful hardware store typically offers a wide range of products, excellent customer service, knowledgeable staff, fair pricing, and a convenient location. Additionally, successful hardware stores may provide additional services such as equipment rental, repair or installation services, or educational workshops and events.
How do I differentiate my hardware store from competitors?
To differentiate your hardware store from competitors, you could focus on providing a personalized and consultative approach to customer service, offering unique or specialized products, using eco-friendly and sustainable practices, or providing additional services such as delivery or installation. You could also consider partnering with local businesses or community organizations, hosting events or workshops, or using targeted advertising to attract new customers and encourage loyalty.
What kind of marketing and advertising strategies can I use to promote my hardware store?
Effective marketing and advertising strategies for promoting your hardware store could include creating a strong online presence through social media and a user-friendly website, offering promotions or discounts to attract new customers and encourage loyalty, hosting events such as DIY workshops or tool demonstrations, using visual merchandising and signage to create an inviting and attractive shopping environment, and offering exceptional customer service to encourage positive word-of-mouth referrals.
How to Start a Hardware Store
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Hardware Store Name
Create a Hardware Store Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Hardware Store Business Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run a Hardware Store - Start Making Money!
Hardware Store Business FAQs
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