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 July 22, 2021 Updated on February 13, 2024
$12,500 - $62,500
$1 million - $5 million p.a.
Time to build
3 - 6 months
$200,000 - $900,000 p.a.
As online retail continues to rapidly expand, you may have considered jumping on the Amazon bandwagon. But what if there was another way?
Starting your own warehouse or fulfillment business could be the solution for you. With demand outpacing industry supply and aging warehouses making up the majority of storage options, now could be the perfect time to start your own warehouse business.
Fortunately, you’ve come to the right place. This step-by-step guide will walk you through everything you need to know to develop and launch your warehouse business, all the way through to making your first dollar.
Let’s get started.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
To gauge whether starting a warehouse business is right for you, it’s a good idea to learn about the industry. In this section, you’ll learn about where the industry is heading, what to expect, and potential costs and revenues.
Let’s get started with some pros and cons.
Pros and cons
Before diving into a business venture, it’s prudent to look at both the positives and the negatives of the opportunity. Viewing an opportunity this way will help you determine whether it’s viable.
Growth potential thanks to startups
Cut marketing by providing quality service, generating word-of-mouth
How much does it cost to start a warehouse business?
You could start a warehousing business for as little as $12,000, or lay out $60,000 or more for a more ambitious firm. The average startup cost for a warehouse business is around $37,000. On the lower end, you’d be looking at a smaller warehouse dedicated to serving a niche market, while the higher figure would cover a large warehouse meant for a variety of clients.
Across the board, though, your main startup costs will be the building, wages, and any necessary equipment such as storage shelves and machinery.
The type of equipment you need depends on your warehouse and the type of stock you hold. Here is a list of general equipment that you may need:
Lift Equipment: Forklifts, pallet jacks, hand trucks, and service carts.
Dock Equipment: Dock boards and plates, dock seals and shelters, edge-of-dock levelers, integrated dock levelers, dump hoppers, yard ramps, truck restraints, dollies, and casters.
Conveyors: Flexible conveyor, gravity conveyor, power conveyor, and lifts and carousels.
Facility Equipment and Accessories: Rolling ladders, security cages, lights, wheel chocks, bumpers, large ceiling fans, workbenches, strip doors, and air curtains.
Bins and Containers: Bins, bulk boxes, totes, and wire mesh baskets.
Packaging Equipment: Industrial scales, strapping and banding equipment, stretch wrap machines, and packing tables.
Safety and Security: CCTVs, fire extinguishers, and barriers.
Office Equipment: Furniture and fixtures, computers and IT equipment, and telephones.
Licenses and permits
$100 - $400
$1,000 - $3,500
Warehouse and office equipment
$7,750 - $40,000
Paper and stationery
$50 - $100
Branding, marketing, and advertising
$1,000 - $5,000
Website and software
$100 - $1,000
Wages (first month)
$2,500 - $12,500
$12,500 - $62,500
How much can you earn from a warehouse business?
The average warehousing company generates $1-10 million in annual revenue and employs 12-22 people. With profit margins of 18-20%, you could expect to earn $180,000 to $2 million per year not long after launch.
The main way a warehousing firm generates revenue is by holding stock for businesses — shoes or dresses or electronic devices. Another way is by providing a long-term storage option for people with inadequate space for their belongings. Finally, there is the third-party logistics segment, in which the warehousing company’s revenue comes from storage and from the shipment of products.
The largest ongoing expenses for a warehouse business are rent and wages. Wages will typically make up the bulk of your expenses as operating a warehouse requires a lot of manual labor, but this could be lowered by investing in machinery.
In your first year or two, you could simply provide storage services and make $1 million in annual revenue. This would mean $200,000 in profit, assuming a 20% margin. As your brand gains recognition, you could expand to third-party logistics and earn a total of $5 million in annual revenue. At this stage, you’d hire more staff, reducing your profit margin to 18%. You’d still make a tidy profit of $900,000.
What barriers to entry are there?
When it comes to the warehouse industry there are a couple of entry barriers to be aware of. The first barrier is high fixed operating expenses such as rent and wages. But these can be counteracted by having enough operating capital saved for at least the first six months in business.
Secondly, high levels of competition will make it more difficult to break into the industry. In the beginning, you’ll likely need to endure minimal profits to compete with bigger players.
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 have an idea of the different segments of the industry and what to expect, it’s time to fine-tune your business idea. First, we’ll start with why you’re starting your business and identifying an opportunity.
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
Before you start your business it’s important to understand why you’re starting it and the gap you’re going to fill in the marketplace. If you already know how you’re going to differentiate yourself from your competition and have a rock-solid value proposition, that’s great! If not, here are a few ways to identify market opportunities.
Segment Potential Clients: By segmenting potential clients and customers you can analyze the needs, wants, and pain points to find an opportunity.
Analyze Competitors: Analyzing competitors is a great way to find gaps in the market that they aren’t satisfying. Look at what their clients and customers say about their services. Is there a service that can be improved, streamlined, or made more valuable?
Evaluate Market Storage Options: Evaluating storage options will give you a holistic view of potential opportunities. Delve into the why behind client choices. What are the differences between clients who self-manage inventory versus those who prefer to outsource?
Now let’s dive into a current real-world opportunity. Aging warehouses signal a potential market need.
E-commerce is booming and all those online retailers need somewhere to keep their goods. As a result, US warehouses are struggling to keep up with demand, but this isn’t the only problem the market faces.
The average age of a warehouse is 34 years old, according to real estate firm CBRE. While that may not seem very old in human years, for a warehouse that’s elderly. Many US warehouses are dilapidated and aging fast, and many of these older warehouses are far from urban areas and more suited for industrial use.
Now, with e-commerce on the rise, there is great demand for the development of new modern warehouse facilities.
Leading the list of cities with the oldest warehouse space is Northern New Jersey, where warehouses average 57 years. It’s followed by Pittsburgh, Boston, Philadelphia, and Cleveland. The cities with the newest warehouse space, on the other hand, are Inland Empire, Las Vegas, Phoenix, Salt Lake City, and Nashville.
What? Determine your services
In the modern age, warehouses are increasingly offering special facilities and services that are a world away from your grandfather’s warehouse. These services range from logistics to fulfillment and anything in between.
The most common services include:
Inventory Storage and Handling: As per the client’s requirements.
Supply Chain Management: Helping client create a fast, reliable, and cost-effective supply chain
Storage and Fulfillment: Product packaging, returns, stock management, and tracking deliveries
End-to-End E-Commerce Solution: One-stop e-commerce solutions, from supply chain to fulfillment
There are various types of warehouses. The most common types are outlined below:
Now that you know about potential solutions, it’s time to figure out which one will best fit your chosen market and how you can stand out. To start you might want to answer these questions:
What are your competitors doing? What services do they provide in your area?
Do your competitors target varied customers or do they prefer to focus on a niche?
How can you make your services unique?
What are warehousing companies doing in other cities? What do they offer? Is there any service or value that local competitors lack?
Are there current services that I can improve to provide better value for my clients?
What are my ideal clients’ needs and how can I best serve them?
While this isn’t an exhaustive list of questions, it’s a good place to start. Remember, you have to make your service fit your market, not the other way around. So make sure to put your effort into this step.
How much should you charge for your warehouse service?
Your prices will vary greatly based on the services you provide and the storage space required. Some warehouses charge per cubic foot while others set monthly rates for a minimum amount of space.
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
Now that you know what you want to provide to clients it’s time to get crystal clear about who those clients are. While there may be a range of clients that can benefit from your services, it’s a good idea to narrow your market to those who gain the most.
In the warehousing business, the principal target market usually consists of B2B clients. Some B2C clients may have small stores and need warehousing and fulfillment solutions but prefer not to work with big companies like Amazon.
Here’s a list of where you could find your potential target market:
Startups and online retailers
Brick-and-mortar shops with inadequate space
Wholesalers and manufacturers
Etsy sellers looking to store and ship their goods
Where? Choose your warehouse location
A crucial step is of course finding and renting, or buying, your first warehouse. It needs to be the right size for your needs, in good condition, and in a decent location. Find commercial space to rent in your area on Craigslist, Crexi, and Commercial Cafe. When choosing a 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
You may target a wide customer base or choose a niche, such as specialty e-commerce and Etsy sellers.
Step 3: Brainstorm a Warehouse Company 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
The name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “storage” or “warehousing”, boosts SEO
Choose a name that allows for expansion: “Universal Storage Solutions” over “Hazardous Materials Warehouse” or “Food & Beverage Warehouse”
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 set 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 Warehouse 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: Summarize the main objectives and strategies of your warehouse business, emphasizing its role in providing storage and logistics solutions for various businesses.
Business Overview: Describe your warehouse business’s focus on offering storage space and logistics services, including inventory management and distribution support.
Product and Services: Detail the services offered, such as goods storage, inventory management, order fulfillment, and shipping services.
Market Analysis: Assess the demand for warehousing services, considering factors like e-commerce growth, local business needs, and supply chain dynamics.
Competitive Analysis: Compare your warehouse operations to other local providers, highlighting advantages like location, technology integration, or specialized services.
Sales and Marketing: Outline your strategy to attract clients, using methods like digital marketing, industry networking, or partnerships with transportation companies.
Management Team: Highlight the expertise and experience of your team, particularly in logistics, supply chain management, and business operations.
Operations Plan: Describe the operational aspects of running the warehouse, including inventory control, safety procedures, and staffing.
Financial Plan: Provide an overview of financial aspects, including startup costs, pricing strategy, and expected revenue.
Appendix: Include supplementary documents such as floor plans, equipment lists, or detailed market research data 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
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 warehousing.
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 warehouse business 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 needs 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 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.
Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
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 options, other than friends and family, for funding a warehouse business. You might also try crowdfunding if you have an innovative concept.
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 warehouse 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 any 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.
Warehousing software such as 3PL Warehouse Manager, Deposco, and ShipHero will help boost your company’s efficiency, cutting shipping costs, sync distribution and help with forecasting, management and workflow.
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 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.
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.
Here are some powerful marketing strategies for your future business:
Specialized Services Showcase: Highlight your warehouse’s specialized services, such as temperature-controlled storage or efficient order fulfillment, to set yourself apart from competitors and attract businesses with unique storage needs.
Partnerships with E-commerce Platforms: Forge partnerships with e-commerce platforms to position your warehouse as a preferred storage and distribution partner for online retailers, leveraging the growing e-commerce trend.
Local SEO Optimization: Optimize your online presence for local search engine optimization (SEO) to ensure that businesses in your vicinity looking for storage solutions find your warehouse easily.
Educational Content on Industry Trends: Share informative content about the latest trends, technologies, and best practices in warehouse management through blogs, webinars, or workshops to position your business as an industry leader.
Referral Programs for Clients: Implement a referral program that rewards existing clients for recommending your warehouse services, encouraging word-of-mouth marketing within the business community.
Social Media Visibility: Utilize social media platforms to showcase your warehouse facilities, share success stories, and engage with potential clients, building a strong online presence that fosters trust and credibility.
Attend Trade Shows and Conferences: Participate in relevant industry trade shows and conferences to network with potential clients, suppliers, and partners, gaining exposure and credibility within the warehouse and logistics sector.
Customer Testimonials and Case Studies: Collect and showcase customer testimonials and case studies that highlight the efficiency, reliability, and cost-effectiveness of your warehouse services, providing social proof to potential clients.
Flexible Pricing Structures: Offer flexible pricing structures to accommodate the diverse needs of businesses, allowing you to attract a wide range of clients, from startups to established enterprises.
Invest in Sustainable Practices: Emphasize sustainable and eco-friendly warehouse practices, appealing to businesses that prioritize environmentally responsible partners, and differentiating your business in the market.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that set 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 warehouse 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 warehousing business could be:
Same day in-state delivery; 48 hours anywhere in US
Complete order fulfillment and storage solution
Flexible storage & good rates with full insurance & 24/7 service, security
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 warehouse business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in warehouses 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 warehousing. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
Step 12: Build Your Team
As your business grows, you will likely need workers to fill various roles. Potential positions for a warehouse business include:
Marketing Lead – leads SEO, social media strategies
Supply and Logistics Manager – deliveries, procurement, logistics, and distribution services
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 Warehouse Business – Start Making Money!
It’s time to get the word out about your warehousing solutions. Combining your USPs with a solid marketing strategy will help you stand apart from the competition which is a must in the crowded warehousing industry.
Aside from implementing the marketing ideas listed above, it’s important that you become an International Warehouse Association member to get listed as a local warehouse. It’s also wise to build business-to-business relationships and advertise in leading industry magazines and journals.
You can also do affiliate marketing, in which you compensate third parties in order to generate traffic to your website. You’re now ready to open your warehouse and start making good money!
Warehouse Business FAQs
Is owning a warehouse profitable?
Owning a warehouse can be extremely profitable as e-commerce demand continues to rise. This demand is fueled by reduced physical shopping activities and the ease of online shopping.
How do empty warehouses make money?
If your warehouse is mostly empty, you may still be able to utilize the space to generate revenues. You may consider letting it to other warehousing companies, event organizers, entertainment businesses, art galleries, gaming organizations, or you could even convert it into a parking space.
How do I start a small warehouse?
You can start a small warehouse by focusing on a niche segment and handling products that don’t require racks, shelves, or a controlled environment (e.g., refrigerated storage). If possible, the stock should be stored in easy-to-move boxes that can be transported with minimal equipment. You should also focus on reducing equipment costs as it can take a while to generate a return on investment when operating on a small scale.
How can I make my warehouse profitable?
To make your warehouse profitable, you’ll need to choose the right location and market niche. You should also work on automating warehousing tasks that reduce labor needs and increases efficiency. Besides these, you will simply need to ensure that you’re providing value to your clients.
How do I rent my warehouse?
To find an available-for-rent warehouse in your target area, you may look into various commercial property rental platforms such as Warehouse Space, LoopNet, and Showcase.
How to Start a Warehouse Business
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Warehouse Company Name
Create a Warehouse Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Warehouse Business Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run a Warehouse Business - Start Making Money!
Warehouse Business FAQs
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