How To Start A Smoke Shop: Step-By-Step Guide

How To Start A Smoke Shop: Step-By-Step Guide

You want to start a smoke shop. You’re motivated. You have seed money. You’re ready to be a leader, not a follower. You have a passion for the industry, and you’re excited about providing goods and services to customers. It is time. So, where do you start the process? One, get your business listed on headypages.com. But we’ll get to that later. For now, we’ve done the research. Here are the six essentials you need to do to start a successful smoke shop.

In this guide, we’ll focus on the following steps to setting up your new smoke shop.

  1. Name and business structure
  2. Creating a detailed business plan
  3. Essential business operations
  4. Find a store location
  5. Hire the right staff
  6. Get your brand out there

1. Name & Business Structure

Deciding on a business name is probably the most fun part. In essence, you might have had a name tucked away in the recesses of your mind for ages, just waiting for the right moment to appear. Or, once you’ve decided to start a smoke shop, you might begin to put your mind to create the perfect business name. My only advice here is to choose a business name that is clear, concise, and emphasizes what the business provides. If you’re going to start a smoke shop, in other words, naming your business ‘Randy’s Smoked Meats’ isn’t going to accurately convey what you’re offering to the public. When picking your business name, consider how it will look on signage and in your marketing efforts. We’ll talk more about that later.

Let’s move on to the business structure. How do you plan on operating? Claiming income? How do you want to mitigate liability? Debt? There are a few different business structures, although most will want to structure as a sole proprietorship or an LLC. What’s the difference between business structures? Let’s check them out.

Sole Proprietorship: this structure is also known as a DBA (doing business as). This business arrangement is not separate from the owner. In this setup, the owner is personally liable for the company and all of its debt. The owner claims all of the business income on their personal tax return. In most cases, DBAs are acknowledged at the city/county level. Still, they are not recognized at the state level, so consider the implications of that. What’s good about this arrangement? A DBA is easy to set up and simple to maintain. The negatives? Well, it’s about liability. Owners are personally liable for the company and all of its debt. That means, if you are sued, your house, cars, personal assets, etc., are on the line.

Regular Corporation: the Corporation is the oldest and most prestigious form of business structure. Also known as C-Corporations, or C-Corp, they are taxed at a lower rate on profits. C-Corps can deduct things like healthcare, entertainment, and travel that other entities (like LLCs and S-Corps) cannot. This structure is more complicated with tax and management issues than an S-Corp, which we’ll get into next.

S-Corporation: the S-Corp is ideal for one-person corporations. While more expensive to set up initially than a DBA, there’s also more paperwork and formality required to operate under this structure (shareholders must be U.S. citizens). The tax implications are similar to that of an LLC, which we will talk about now.

LLC (Limited Liability Company): the LLC is the business structure of choice for startups with 1-5 people. LLCs are easy to manage and have limited compliance requirements. It provides the liability protection of a corporation without the corporate formalities like board meetings, taking meeting minutes, etc., or additional levels of management. The LLC structure is taxed at the same rate as a sole proprietorship. While typically more expensive to form than a DBA, it also requires more paperwork and more formal business operational behavior.

2. Business Plan

Planning pays dividends. Creating a proper business plan is essential, and this part will take time. I guarantee that the time invested in this stage will help create a foundation for success. When creating a business plan, write down who you are, figure out who your target market is, what you plan to sell and services you plan to provide. How much money do you have to spend to get your business off the ground? How could those figures change once the store is open? What if business is slow to pick up initially?

Now delve deeper. Write down what you think will make your smoke shop stand out and how your business will operate – and how those operations will support your success. Draft a marketing plan and decide on how you will track cash flow, too. Think of every scenario ahead of time. Having a business plan will keep you focused, minimize distraction, and show that you’re the right candidate for a business loan or outside investment.

3. Business Essentials

When we say business essentials, we’re talking the bare-bones things you need to actually operate a business. Think banking, inventory, keeping records, getting the proper permits and licenses, etc. Compare business banking options with your local banks, and look into other options, including online banks, for the best rates and banking fees. Remember, everything affects the bottom line, including banking fees.

You must have a taxpayer identification number. The two most common kinds of I.D. numbers are social security numbers (used typically in the case of a sole proprietor, or DBA structure), and an employer identification number (EIN). The taxpayer identification number exists so that the IRS can process your tax returns. The EIN is a number issued to sole proprietors, partnerships, corporations, and other entities by the IRS.

Your smoke shop will have inventory, too. So how do you plan on tracking that? Do you have any idea what your distributor relationships will look like? These are all things to consider when approaching the subject of inventory management. While you might not know right now how your distributor or supplier relationships will pan out, start working through some general concepts to create a rough inventory management strategy now.

For example, how much inventory do you estimate you’ll need? What’s too much? Too little? If you’ve got your retail space identified, do you have adequate inventory storage? How much initial inventory are you planning on ordering? What method of inventory control will you use? First in, first-out (FIFO), just-in-time inventory management? What tools will you use to track and maintain your inventory? There’s plenty of choices out there, from inventory tracking software, POS (Point of Sale Systems), and even simple spreadsheets. Think about your inventory, how you want to track it, and how much you can afford to monitor this area. There are also smoke shop specific POS systems out there, like Korona’s unique POS system.

Before you can officially operate a business, you need the proper licensing and permits. These are mandatory. Depending on where you’re opening your smoke shop, there might be various licenses and permits required. For example, if your business has employees or sells taxable goods, you need to register with the taxing authorities. This might mean getting licenses and permits from federal, state, and local governments. If your smoke shop is planning on selling tobacco, you need a state’s retail tobacco license. If your smoke shop has multiple locations, you’ll need those licenses for each spot. Additionally, if you plan to sell tobacco products across state lines (e-commerce, for example), you’ll need to look at a tobacco wholesaler license from any state you plan to sell to.

And finally, how will you maintain your business records? You must keep documentary evidence that supports your income/deductions/credits on your tax returns. That means you need to identify a system to manage your receipts, bank statements, invoices, payroll records, insurance docs, legal documents, permits, and licenses, along with a history of your business transactions. There are plenty of options, from Intuit Quickbooks to ZipBooks to Zoho Group to Sage Group. What matters here is that you have identified how you want to manage these areas and, from there, locate the software or system that works for you. If you know other small business owners, ask them what systems or software they use and why they like or dislike it.

4. Find your spot

There are a few essential considerations when selecting your retail location, especially when opening a smoke shop. This type of business isn’t like most others out there – it sells age-restricted products. Because of this, it must comply with additional permit and license requirements that other retailers might not have to deal with. Specific permit requirements will depend on the city and state, along with the particular products you plan on selling. No matter what, the location must be within your budget, and accessible for customers. It will ideally be in a visible place. Is the retail space attractive but parking is nonexistent? Those are things that can impact your business, so look at each location option from the customer’s perspective, too.

5. Now hiring: Awesomeness

Hire good people and treat them well. If your employees are happy, your customers can tell. Nothing drives customers away like hearing disgruntled employees badmouth the business or the owner. On the flip side, happy employees exude palpable positivity, and most customers prefer to engage with employees that love where they work and what they do. Those are the people you want to hire and keep.

When you have selected the right people to represent your business and its products, train your staff about the products you sell. And don’t quit when your business takes off, either. Make employee training a frequent event, and pay them for their training time. Well-trained employees can help guide customers to just the right product or present them with various options to consider. Having informed staff helps the customer, and that helps the business in the end. Create an environment where your business is the best subject matter expert in the area. You’ll get referrals from other satisfied customers, guaranteed.

Last piece: Make sure you have the proper worker’s compensation insurance in place before anyone officially starts working on site.

6. Expose yourself

Marketing-wise that is. Let potential customers know where you’re at, and what you have to offer. Advertise, and not just on social media. To have repeat customers, you need first-time customers. And if potential customers don’t know your business exists, or can’t find your location or hours of operation, you have failed in a big way. Create an advertising budget. Make sure you have an internet presence. Do not assume that printed flyers stapled to bulletin boards or telephone poles are going to drive business your way. Think about how you locate information and build that strategy into promoting your business.

Join the Chamber of Commerce or local business association. Network. This circles back to advertising, too. These avenues not only offer publicity, but they also allow you to network with other local businesses. Have a question about online advertising? Interested in creating a blog? Ask your fellow business owners. In many cases, these groups support their members with unique advertising opportunities and networking opportunities that aren’t found elsewhere.

Marketing and gaining exposure will be a continual effort, and you can adapt and iterate as the business grows. But from the very start, before you open your doors for commerce, you need to have your social media accounts up and running. That means your website needs to be active. Create a blog post or two relating to something about your pending grand opening, your story, or an interesting topic.

Most importantly, get your business listed on Google and cannabis industry-specific sites like headypages.com. Headypages.com is a smoker’s go-to, no matter where they are. The directory site includes current and verified retail locations across the country. Headypages.com also features detailed shop profiles, complete with information on inventory, hours of operation and contact information. Love a smoke shop? Leave a review on the site. Headypages.com can be your marketing companion, helping you gain exposure and market share. How can you say no to that?

Again, put yourself in the shoes of a potential customer and deliver on the way they look for information. Realize that most people do a Google search for whatever it is they need, and make sure your business information is included whenever anyone is looking for a smoke shop, glassware, smoking accessories, etc.

When you’re getting ready to roll out the green carpet for your grand opening, in addition to your online presence, look at other ways to announce your arrival. If you have a unique and energizing idea for a grand opening event or super deal, that might entice other media outlets to promote your opening. Make your grand opening just that, grand!

The takeaway

Planning and performing due diligence is essential for anyone interested in starting their own business, period. Additional care is needed when starting a smoke shop, however. Regardless of whether a state has legalized cannabis for medical or recreational adult use, smoke shops are restricted to selling only smoking devices and paraphernalia. Put in the time to ensure you’re going to operate within all local regulations. 

About Jessica Ginet

Jessica writes for Green Scene Marketing and lives in southern Oregon. A former Tier II recreational cannabis farm manager, she cultivates (and enjoys) smokable hemp and sun-grown cannabis.