Grocery stores are essential businesses for individuals, families, and businesses. If you've always wanted to be a business owner and have a passion for community and food, opening a grocery store might be a good option for you.
Of course, there are a lot of factors to take into consideration before jumping into a grocery store startup. Let's take a look at everything you need to know to open your very own grocery store business.
What's Required to Run a Grocery Store?
First, let's talk briefly about education. While you do not need a degree or certification to open and run a grocery store startup, having some background in business can help. For instance, if you have a business or marketing degree, the coursework you've accomplished can help you run a more successful market or grocery chain.
That said, you'll be able to learn along the way as long as you're committed and willing to do some research. If you don't have an advanced degree, it's still completely possible to make your dreams of owning a large or small grocery store come true.
What Goes Into Planning a Grocery Store Business?
To run a successful grocery store business, you first have to plan out how your business will operate. You'll want to run through these steps before registering your business so you can ensure that you file correctly and have the right permits.
You'll want to:
- Identify your target market
- Define your business model
- Create a pricing structure
- Plan for overhead costs
Identify Your Target Market
Before you get started, it's important to think about your ideal grocery store business. What do you want to sell? Will you be a niche store, a local market, or a convenience store for essentials? Do you plan to expand in the future? Would you rather open your own store or a grocery store franchise chain (e.g., Kroger, Safeway, Costco, or Walmart Neighborhood Market)?
It's important to consider these questions and weigh them against your community's needs and specific demographics. For instance, if your town doesn't have a local market, opening one could make a lot of sense and draw in the business you'll need. However, if grocery stores are plentiful in your area, opening a more niche store with a specific appeal or a combination grocery and retail store might be in your best interest.
Define Your Business Model
It's now time to define your business model by writing an official business plan. Your business plan will include all of the details about your business idea, how it operates, and your core mission and ownership structure. You'll want to draft this document before creating your grocery store business.
According to the Small Business Administration (SBA), your business plan should include:
- Executive summary: This is a high-level overview of what your company is, your mission statement, products and services you offer, leadership details, location, and why your business will be successful.
- Company overview: This section defines your company's market, issues your business solves, and who your company serves.
- Market competition analysis: This is where you'll put the competitive market research you performed on the grocery industry to use. Explain why your business will succeed, what its strengths and weaknesses are, and how your grocery store will perform better than local competitors.
- Organization and business structure: This section explains how your business will operate. Will you be the sole owner or grocer of a corporation with shareholders or will you be entering into a partnership? You'll need to decide between becoming a corporation, limited liability company (LLC), partnership, or sole proprietor.
- Product line: This is where you'll explain the types of products (or services) you'll be providing in your grocery shop. Include what you plan to sell and any other services you plan to offer (e.g., shipping, hosting P.O. boxes, or even having a cafe inside of your store).
- Marketing and sales strategies: This is where you explain how you plan to market your company to grow sales (though this strategy can change over time).
- Funding request: This is where you'll ask for funding (if applicable) from lenders, investors, or other interested parties. Explain the type of funding you seek and how you expect to be able to repay the financier. Note whether they'll own any shares of the business (specifically for corporations) in exchange for funding.
- Financial projections: This section details your projected revenue for the next five years (at minimum). Explain how you reached these projections and what you'll do to improve this forecast. You can include projected expenses here, as well.
Create a Pricing Structure
Next, you'll want to define how much you'll charge for your products. While you don't have to know the exact price you'll charge for every item you sell at this point, it will be helpful to reach out to local vendors and distributors to find out how much it costs to purchase and ship products to your store. Compare these costs until you find the best goods and services for your store at lower prices.
From there, calculate your expenses and do competitor research to determine if charging a flat markup (10%, for instance) on all goods will be enough to keep you competitive while still maintaining a good profit margin. According to the Food Industry Association (FMI), grocery stores in the U.S. typically make 1% net profit (after taxes). Keep this number in mind when planning out your pricing structure.
Plan for Overhead Costs
It's also important to plan for your overhead startup costs and business expenses. When opening a grocery store, here are some of the expenses you should keep in mind and plan for:
- Cash registers, self-checkout machines, point-of-sale software, shelving, freezers, carts, deli machinery, and other commercial equipment
- Credit processing machines and accounting software
- Food vendors
- Shipping costs
- Security systems and alarms
- Employees and management
- Training resources
- Building expenses (rent, utilities, permits, etc.)
The Business Recipe for Starting Your Grocery Store Business
Now that you've finished the initial planning and have an idea of what you'll need to get your business off the ground, it's time to dig in and get started. Here's how to formally start your grocery or food store.
Apply for Licenses, Permits, and Insurance Needed to Open Safely
Depending on the state in which you live, you'll likely be required to obtain a series of licenses or permits for your grocery store. For example, some states require grocery stores to secure a retail merchant's certificate, health inspection certification, franchise registration license, liquor license, or other permits. In addition, if you plan to accept food stamps (SNAP), you'll need to register with the U.S. Department of Agriculture. Some states may have stricter requirements while others will have looser, more general business licenses to obtain.
You can find most of the information you'll need regarding specific licensing on your state's secretary of state (or commonwealth) website.
Insurance is another important investment for grocery store businesses. When you staff employees and have shoppers actively moving around your store, there's always the case of an accident occurring. While some insurance coverage might be mandatory depending on your state, it's worth considering the below types of coverage:
- Business property coverage
- General liability coverage
- Business interruption coverage
- Equipment repair/breakdown coverage
- Data breach coverage
- Business auto coverage
Legally Form Your Grocery Store Company
After you know what types of licensing and insurance will be needed, it's time to officially register your business as a legal company within your state. To do this, you'll need to first search for a business name on your state's secretary of state website and reserve it. It's always a good idea to make a list of a few potential names in case your top choice is already taken. This will be your official grocery store name, so make sure you consider name choices carefully.
From there, you'll file your business registration depending on the business entity you decide on (corporation, LLC, partnership, etc.). Most states allow you to do this online via the secretary of state's website, by mail, or in person.
Apply for an EIN and Set Up Financial Accounts
You'll receive confirmation from the state once your business is legally registered. When this happens, you're ready to set up an employer identification number (EIN) with the Internal Revenue Service (IRS). Your EIN is similar to a Social Security number (but for businesses) and will be used when paying your employees or vendors and when filing your taxes. You can sign up for an EIN online through the IRS for free.
Next, you should sign up for a business bank account where revenue can flow and expenses can be paid. Even if you decide to operate as a sole proprietorship, you'll want a bank account to keep your business and personal finances separate. You'll need to provide your business registration paperwork when applying for any business financial accounts. You can also set up business credit cards or lines of credit (LOCs).
Lastly, you'll want to prepare for business taxes. Find out your legal tax requirements, depending on the state and city where your business is located. This will likely include sales tax (if applicable), property taxes, and setting up employee withholding. Your tax requirements will also vary depending on your business entity (LLCs, for instance, have different tax requirements than corporations). Visit your state's Department of Revenue website to learn more.
During this phase, you can reach out to a certified public accountant (CPA) or business attorney to help answer any questions. When finances, taxes, and legal compliance are at stake, it's always best to reach out to experts who can ensure your business is following all legal requirements.
Secure the Perfect Grocery Store Location
Before you can get your business up and running, you'll need to find a physical storefront for your grocery store. You can search commercial listings online using Zillow or Redfin or reach out to a local real estate agent who can help you find the perfect spot.
There are a few factors to keep in mind during your search: pricing, location, and accessibility. You need to find a building that is within your budget, in the right location, and has accessible parking. If you're in a city, this might mean finding a building in a popular part of town with a parking garage, while small towns and more rural areas might be more flexible.
Even if you plan to operate primarily as a delivery service (like Amazon) or online grocery store, you'll need a location to store food and essentials so delivery drivers can pick up orders.
Once you find the perfect location, you'll want to make an offer and close on your new property so you can begin planning for your big opening. After your closing is confirmed, you're ready to prep your store with shelving, machinery, supplies, and employees.
Market Your Grocery Store and Grow Your Customer Base
Once your business is fully registered and a location has been chosen, it's time to begin marketing your new brand. Your brand is your company's reputation and image. It's how customers view your business. You'll want to come up with a logo, slogan, and company colors. This involves design and content creation to ensure your brand's message is correctly presented to the general public. You can outsource this work or hire an agency to help you define your grocery store's brand.
After your brand work is complete, you should consider marketing your grocery store with the following:
- Build a website. This is important for customers searching for grocery store locations online and even more important if you decide to offer e-commerce sales, in-store pickup, or grocery delivery business services. You can create your own website using WordPress or Squarespace and integrate e-commerce options with Shopify. You can do this work yourself, hire an agency or developer, or look for a freelance website expert on Upwork or Fiverr.
- Conduct outreach on social media. One of the best ways to get your name out to your community and market your grocery store is through social media. Sign up for platforms like Instagram, Twitter, Facebook, Nextdoor, or TikTok to begin marketing and promoting your new store. You can even use these apps to advertise opening day specials, monthly promotions, and other seasonal events.
- List your store online. Be sure to sign up for Google My Business, Yelp, and other review websites. This allows customers to rate your services, which can help you make improvements and spread the word to more people.
If you want your grocery to become a beacon in your community, consider signing up for community events like charity functions or food drives. Make sure you connect with local leaders and other business owners in the community to spread the word about your new grocery store and why others should shop there.
Run Your Grocery Store With the Right Software
One obstacle you'll need to overcome is managing the financial accounting of your grocery store. For many grocery store owners, it's essential to save time by trusting experts to help you with your financial needs. You'll likely need to produce financial documents like invoices, quotes, receipts, bills of sale, packing slips, and more. Skynova offers easily customizable templates that can be used to cater these documents to your business's brand and specific needs.
In addition, Skynova can help you stay on top of your finances with our accounting software. Use this to manage all of your accounting needs and keep track of when payments are due with one core system. This will ensure that you have time to focus on growing your small business rather than staying tied to your desk managing all of your company's accounting details.
Continue to Grow and Refine Your Grocery Store
As time goes on, it's important to revisit your business goals and ensure your grocery store is growing or changing with the community's needs. If your growth is substantial, you might decide to expand and open one or more new chains. You may also change product offerings and partner with local vendors and restaurants, transforming your initial business goals.
Partner With Skynova to Bring Your Grocery Store Dreams to Life
Starting and running your own grocery store is a huge undertaking that can be extremely rewarding. Let Skynova help by taking some of the financial management burden off your shoulders with flexible templates and an intuitive accounting system.
Learn more about how Skynova can support your grocery store business today.