How to Start a Record Store: Cost & Profit Potential

Here are the most important factors to consider when you want to start a record store:

1. Location — Choose a location that is easily accessible and has high foot traffic, such as near universities, cultural districts, or busy commercial areas. The right location will attract more customers and ensure your business thrives.
2. Security — Implement security measures to protect your inventory and ensure the safety of your customers and staff. This can include surveillance cameras, alarm systems, and secure payment processing methods.
3. Suppliers — Establish relationships with reliable suppliers who can provide a diverse selection of vinyl records, including popular and rare titles. Consistent quality and availability are crucial to maintaining customer satisfaction and trust.
4. Online store — Set up an online store to reach a wider audience and increase sales. Ensure your online store is user-friendly, showcases your inventory effectively, and provides a seamless shopping experience.
5. Niche — Identify a niche market for your record store, such as specializing in a particular genre, rare vinyl, or local artists. Focusing on a niche can help you target specific customer segments and differentiate your store from competitors.
6. Stock a diverse selection — Ensure your store stocks a wide range of vinyl records to cater to different musical tastes and preferences. This can include new releases, classic albums, and exclusive items that are not easily available elsewhere.
7. Special events — Host special events such as live performances, record release parties, and vinyl listening sessions to attract customers and build a community around your store. These events can create a unique and engaging shopping experience.
8. Register your business — A limited liability company (LLC) is the best 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 incorporation services on the market.
9. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.

Step 1: Decide if the Business Is Right for You

Pros and cons

Record store industry trends

Industry size and growth

• Industry size and past growth – The U.S. record store industry is worth $1.4 billion in 2023 after declining 2.9% annually the last five years.((https://www.ibisworld.com/industry-statistics/market-size/record-stores-united-states/))
• Growth forecast – The U.S. record store industry is projected to decline 7.9% in 2023. However, in the coming years, the decline is expected to slow as record stores adapt to the market.
• Number of businesses – In 2022, 2,911 record store businesses were operating in the U.S.((https://www.ibisworld.com/united-states/market-research-reports/record-stores-industry/))
• Number of people employed – In 2022, the U.S. record store industry employed 10,640 people.

Trends and challenges

Trends

• Top artists are now releasing their albums on vinyl, creating more buzz, which is giving a boost to record stores who offer new releases. 
• “Record Store Day” is a new global event featuring the latest vinyl releases, which is an opportunity for record stores to boost sales and gain new customers.

Challenges

• Supply chain issues are driving up the prices of vinyl records, which is negatively impacting record store profit margins. 
• Demand for vinyl is so great that manufacturers can’t keep up with demand, making it difficult for record stores to maintain their inventory levels. 

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

Startup costs for a record store range from $35,000 to $70,000. Costs include the space rental and preparation and a starting inventory. 

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

• Shelving
• Record display boxes and dividers
• POS system

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$200 - $300	$250
Insurance	$100-$500	$300
Website	$200 - $1,000	$600
Initial Marketing Budget	$300 - $500	$400
Space rental and preparation	$10,000 - $20,000	$15,000
Inventory	$25,000 - $50,000	$37,500
Total	$35,900 - $72,800	$54,350

How much can you earn from a record store business?

Your records should sell at an average of $20 each, although some new records and vintage records may sell for more. Your profit margin should be about 25%. 

In your first year or two, you might sell 20 records a day, bringing in $146,000 in revenue. This would mean more than $36,000 in profit, assuming that 25% margin. 

As you gain traction, sales could climb to 40 records a day. With annual revenue of $292,000, you’d make a tidy profit of $73,000.

What barriers to entry are there?

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

• Funding the startup costs
• Building awareness of your store

Step 2: Hone Your Idea

Now that you know what’s involved in starting a record 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 record stores in your area and online to examine their products, price points, and what sells best.

• Make a list of record stores that offer similar products. 
• Review your competitors’ products – their genres, pricing, and marketing strategies. This can help you to determine their target market. 
• 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. You want to try to capitalize on their weaknesses. For example, maybe they often run out of stock of new releases. If you can avoid that issue in your store, you can gain an advantage.

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 shop that has listening stations or specializes in vintage albums.

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

What? Determine your products

You might consider specializing in a specific kind of music, such as classical or rock, or offering the widest possible variety along with new releases. You could also sell vinyls, turntables, CDs, posters, and other music merchandise.

How much should you charge for records?

The average record sells for $20, but your prices should be based on market prices as well as your cost to purchase the records and your other costs.

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 will depend on the types of records you offer. If you offer new pop records, your target market will be a younger demographic who you can find on TikTok or Instagram. If you sell vintage records, Facebook might be your best bet. 

Where? Choose a record store location

Choosing a record store location requires careful consideration of several factors.

First, research the demographics of potential areas to ensure a sufficient number of target customers.

Second, ensure the location is easily accessible with good visibility to attract both foot and vehicular traffic.

Third, evaluate the competition in the area; proximity to similar businesses can either boost or hinder sales.

Fourth, consider the rent or lease costs to ensure they align with your budget.

Lastly, assess the space for its layout and size, ensuring it can comfortably house your inventory and provide a pleasant shopping experience.

You’ll need to rent out a space for your store, preferably in an area where you’ll find your target market. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

Step 3: Brainstorm a Record 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 “records” or “vinyl”, boosts SEO
• Name should allow for expansion, for ex: “Infinite Grooves” or “Sonic Spectrum” over “Jazz Junction” or “Soulful Spins”
• 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 below. 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 Record Store Business Plan

Here are the key components of a business plan:

• Executive Summary: Provide a concise overview of your record store business plan, highlighting key points such as your store’s concept, target audience, and financial goals.
• Business Overview: Describe your record store, its location, the types of music (vinyl, CDs, etc.) you plan to sell, and any additional offerings like music-related merchandise or accessories.
• Product and Services: Detail the range of music products and services you’ll offer, including new and used records, rare vinyl, music-related collectibles, and any additional services like vinyl cleaning or music events.
• Market Analysis: Analyze the market for music retail, considering factors like trends in music consumption, the demand for physical media, and your target customer demographics.
• Competitive Analysis: Identify competitors in the music retail industry and explain how your record store will stand out, whether through unique music offerings, special events, or exceptional customer service.
• Sales and Marketing: Describe your sales and marketing strategies, including how you’ll attract music enthusiasts, promote your store through events or online platforms, and build a loyal customer base.
• Management Team: Introduce yourself and any key team members involved in running the record store, emphasizing their knowledge of music and experience in retail.
• Operations Plan: Detail the day-to-day operations of your record store, including inventory management, customer interactions, and staffing requirements.
• Financial Plan: Present financial projections, including startup costs, revenue forecasts based on expected sales and growth, and profitability estimates for your record store.
• Appendix: Include any supplementary materials, such as images of your store’s interior, lists of record suppliers, or promotional materials, to support your record store 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 record 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 record 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. 

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

Step 8: Apply for Record Store Licenses and Permits

Starting a records 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 record 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 Lightspeed, Vend, or RetailPro, to manage your inventory, purchases, sales, and online store integrations. 

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:

1. In-Store Events: Host live music performances, album release parties, or themed events to create a vibrant atmosphere, attracting music enthusiasts and fostering a sense of community.
2. Local SEO — Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
3. Collaborate with Local Artists: Partner with local musicians and artists to showcase their work in your store, creating a mutually beneficial relationship that enhances the local music scene.
4. Vinyl Subscription Service: Launch a subscription service where customers receive curated vinyl selections regularly, enticing them to explore new genres and artists while creating a steady revenue stream.
5. Exclusive Vinyl Releases: Collaborate with record labels or independent artists for exclusive vinyl releases available only in your store, creating a sense of exclusivity and driving foot traffic.
6. Themed Merchandise: Design and sell merchandise related to iconic albums, genres, or music culture, providing fans with unique items while promoting your brand beyond the music itself.
7. Customer Loyalty Program: Implement a loyalty program offering discounts, exclusive events, or early access to new releases to incentivize repeat business and reward your most dedicated customers.
8. Interactive Listening Stations: Set up listening stations where customers can preview albums before purchasing, enhancing the in-store experience and helping them discover new music.
9. Social Media Challenges: Engage your social media followers with challenges such as “Best Vinyl Collection” or “Favorite Album Cover,” encouraging user-generated content and building a sense of community online.
10. Collaborate with Cafés/Restaurants: Partner with local cafes or restaurants for cross-promotions, offering discounts to customers who show receipts from both establishments, expanding your customer base.
11. Themed Nights or Workshops: Organize themed music nights or workshops focusing on topics like vinyl appreciation, record collecting tips, or the history of specific genres to attract diverse audiences and educate customers.

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 record 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 record shop could be: 

• Step back in time with our vast selection of vintage vinyl
• The hottest releases – all on fresh vinyl
• The largest record selection in town, guaranteed! 

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

• Store Clerk – assist customers, make sales
• Marketing Lead – craft a marketing campaign; social media posts 
• 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 Record Store – Start Making Money!

Vinyl has made one of the biggest comebacks in the history of analog products – it’s almost as crazy as everybody using the abacus again! But this shift represents a major opportunity for music lovers and vinyl buffs, so maybe it’s time to follow your dream and go vinyl. 

You’ve learned the ins and outs of the business, so now you’re ready to roll up your sleeves and open your wildly successful vinyl record store. 

Q&A

Is a record store profitable?

A record store can be profitable if you pick the right concept for your market and find a good location. You’re not going to make a fortune, but you can make a decent living if you’re successful.

What is the growth potential of a record store?

A record store is somewhat limited in growth potential since the industry is still declining. You can, however, increase your revenue by offering more products, such as turntables, posters, and music memorabilia.

What type of business is a record store?

A record store falls into the pre-recorded tape, compact disc, and record stores industry which is NAICS code 45122. In more general terms, it falls into the retail category.

Can you start a record store on the side?

Record stores are not hugely profitable, so it’s not likely to be worthwhile to have it as a side business. However, you can hire employees and a manager so that it doesn’t take a huge amount of your time.