So you’ve chosen a vape shop as your next – or possibly first – business endeavor. This means that you must have some idea how vaping, the popular term for e-cigarette use, is a quickly growing industry across the United States.
In fact, in 2014, the Oxford Dictionaries chose “vape” as its Word of the Year.
More recently, a survey by Reuters revealed that approximately 10.8 million people in the United States are vapers. More than half of these are under the age of 35, and one in three vapes on a daily basis. If you play your cards right, you can get some of these vapers into your own shop.
No matter what kind of business you’re starting, you need to think it through before you take any action. Here you’ll find a complete guide to make sure you don’t miss anything you need to do when starting a vape shop.
Table of Contents
- Step 1: Learn The Relevant Regulations
- Step 2: Stay on Top of the Legal Landscape
- Step 3: Write a Business Plan
- Step 4: Get an Ecigarette Merchant Account
- Step 5: Build Business Credit
- Step 6: Market & Brand Yourself Well
- Step 7: Never Stop Being Creative
Step 1: Learn The Relevant Regulations
The first thing you need to know is that the United States government considers e-cigarettes to be tobacco products. Therefore, your vape shop will need to abide by all FDA regulations that govern tobacco sales. These include:
- Selling only to customers who are of age in the state of sale
- Checking the photo ID of any customer who appears to be under 27 years of age
- Not giving out free samples of products, parts, or components
- Not selling your products in vending machines accessible to minors
Individual states also have their own rules regarding the sale of e-cigs and other tobacco products. Make sure that you research those regulations in any state where you plan to conduct business.
Step 2: Stay on Top of the Legal Landscape
Laws governing tobacco product sales change often. In 2016, the US Food and Drug Administration (FDA) first classified E-cigarettes and other electronic nicotine delivery systems (ENDS) as tobacco products.
Now, the FDA regulates not only e-cigarettes themselves but also any of their components that are made specifically for e-cig use. And if you sell a vaporizer that comes pre-loaded with a nicotine-based substance, you have to adhere to tobacco regulations when selling it.
Vaporizers that are not pre-loaded, however, don’t count as “covered” products and are thus not subject to the same regulations.
Required Health Warnings
One particularly recent change came into effect in the summer of 2018. Now, all sellers of ENDS products must include a specific health warning on all advertisements and product packaging. The wording must inform the purchaser that the product contains the infamously addictive chemical nicotine.
Step 3: Write a Business Plan
The sooner you start checking the FDA website regularly, the more prepared you will be to open your vape shop. In the meantime, it would be a good idea to get started on your business plan.
Entrepreneur magazine breaks a business plan down into eight key elements.
- An executive summary: a one or two page overview of your plan. This goes at the front of your business plan document, but you may find it easier to write once you’ve compiled the rest of the plan.
- A business description: a definition of everything related to your business, from industry trends to personal goals.
- Products and services: a list of what you offer. Make sure you mention what makes your vape shop stand out from all the other vape shops out there.
- Sales and marketing plan: how you intend to get noticed.
- Operations: your strategy for the administrative side of things.
- Management team: a list of key positions and, if applicable, names of people who hold them.
- Development: your vision of the business’s future.
- Financial summary: The real nitty-gritty. Details of everything related to the finances of your business, including where you sourced your funding and a projection of where you will be at the end of each month.
Backers tend to consider vape shops to be relatively high risk, so make sure that your business plan is rock solid. Leave the smoke and mirrors to your customers.
Step 4: Get an Ecigarette Merchant Account
Potential backers will want to know that you’ve thought through all the details of running a stable business, so make sure you find find a reliable merchant account to facilitate transactions 24/7. Finding such an account can be difficult for newer vaping companies or ones with a poor reputation since simply operating in this industry classifies a business as “high risk.”
Don’t panic. Just prepare and take steps toward getting your account approved.
Conduct Your Due Diligence
First, clarify what you need. Do you want….
- a full point of sale (POS) system, or just an account for processing?
- to be able to accept credit cards in person?
- to accept mobile payments?
- to conduct eCommerce?
Knowing the answers to these questions will help you choose the most suitable processor for your business.
Next, get all of your financial ducks in a row.
Specifically, make a copy of your business plan and put it with any of your business structuring paperwork, relevant bank statements, and any processing records you might already have.
Talk to a Professional
Yes, setting up a high risk merchant account and a linked point-of-sale system can be an intimidating process.
Fortunately, Motile has been working with such businesses for more than 20 years, and we know how to find you the solutions you need to thrive.
Some of our processing options and tools include:
- Automated Clearing House (ACH) for recurring billing and direct deposit
- Diverse credit card solutions suitable for businesses all across the risk spectrum
- E-check systems and Check 21 processing
- Remote Deposit Capture (RDC) technologies
- Complex chargeback management and chargeback reduction programs
Whatever your revenue processing needs are, Motile can help you identify the optimal path toward securely and affordably handling transactions.
A Word on Offshore Accounts
You may hear the phrase “offshore account” and think of shady business deals between smarmy Wall Street men, but that’s all Hollywood. Offshore bank accounts are actually a legitimate option for merchants, and they can be especially helpful for owners of high-risk businesses. Some of their benefits include:
- A more relaxed approval guidelines (great for newer businesses)
- Not relying completely on the US banking system (just in case)
- Available capital in case of a bank-related issue
If you believe in not putting all of your eggs in one basket, think about opening an offshore merchant account as part of your vape shop’s financial strategy.
Step 5: Build Business Credit
Chances are that at some point, you’ll need to borrow some money to help your vape shop grow. For that, you’ll need good credit.
There are some similarities between business and personal credit. Experian and Equifax, two of the major credit bureaus, have business credit divisions that can give you a company’s credit report just like they can give you your personal one.
As a business, though, there are several other steps you need to go through to start setting up a credit history. You’ll need to apply for:
- a D-U-N-S number from Dun & Bradstreet
- a legal business classification, most likely a limited liability company (LLC) or S corporation
- an Employer Identification Number (EIN), sometimes known as a Federal Tax Identification Number
- a business bank account
When you have these, you can open a company credit card and trade liens with suppliers. Pay all of your bills on time from the start and you’ll become a trustworthy business borrower in no time.
Step 6: Market & Brand Yourself Well
In order to effectively market your products, you have to know who your buyers are.
You already know that younger adults make up the majority of vapers. Twenty-somethings are particularly inclined to pick up the habit, when compared to their late thirty-something counterparts.
Once you know who your target audience is, you can develop a stronger brand.
Why Branding Matters
Your brand is the identity and the personality of your business; it’s how people know you. It’s the content as well as the look of your marketing materials, and it’s also your inherent purpose as a business.
If you have a strong brand, people will know what you stand for, how you’re unique, and what kind of people you attract to purchase your wares. An effective brand is one of the most valuable assets a business can leverage, so put in the necessary energy to make yours excellent.
A Word of Caution for Marketing / Branding
Please note, however, that both the FDA and certain state governments monitor vape advertising and branding closely. For instance, if you market yourself toward younger consumers in a playful way and neglect to properly warn them that vape juice *is* a harmful tobacco product, you could find yourself in a heap of legal trouble.
You also can’t package your vape juice in a way similar to food or beverage products either, because vape juice is toxic when consumed and could be fatally harmful to children if ingested. If you’re careful and market your product to adults in an effective way, however, you’ll be positioning yourself to profit nicely – just be sure to exercise tact when doing so.
Step 7: Never Stop Being Creative
To help your business thrive, you have to keep drawing people in. Google and other search engines have rules against vape businesses advertising through them, so you’ll need to get your audience in other ways. Think outside the box and use your imagination.
Here are a few ideas to get you started.
- Create Twitter, Facebook, Reddit, and/or Instagram accounts. Keep them updated with clickable content.
- Invest in a good website domain name and try to rank for keywords vapers will be entering into Google search
- List your shop on the major navigation apps and business review sites
- Create a fun referral incentive program
Now that you understand the process of how to start a vape shop, it’s time to actually do it. Remember, don’t cut corners – do your research; know your business. Dot your i’s and cross your t’s. Get a merchant account and build up that business credit.
It may seem like a long process, but a strong foundation is as important for forming a stable business as it is for actual construction. Before you know it, you’ll be opening your doors to customers (or sending them products online, the choice is yours).
Finally, don’t stop working to make your products and services as good as they can be. Customers know quality, and no amount of advertising can beat it. Are you ready to get the process started with effective payment processing?