By Benjy Feinberg
The vaping industry is booming and nowhere near a peak. Estimated to become a 17 billion dollar industry by 2017, opening a vape shop seems like a great business move. But, you’ve probably heard about emerging regulations in the industry. Is it even worth it to try to open your own?
Challenges Posed By Regulations
While the FDA has yet to start regulating, cities, counties and states across the nation have taken vaping restrictions into their own hands, making it essential for you to check local reforms. In a reported matter of months, the FDA’s regulations should be published, likely having an affect on your cash flow.
For example, if the government decides to regulate all flavored juices that contain nicotine, the price of these juices will rise. This higher cost could, of course, seriously hurt your profit margins.
Another potential challenge is that the FDA might require vape shops to only serve people 18 years of age and above, removing a large portion of your potential client base.
With unknown costs and even more potential regulations on the horizon, you’re probably doubting whether opening a vape shop pays off. Are you the best per son to take this jump?
Tips To Be A Successful Vape Shop Owner
The vaping industry is huge, numbering as many as 1,300 shops in some states. With a total tally of arguably more than 6,500 vape shops across the nation, you have to get creative to stay competitive.
How Can You Differentiate Your Business?
Map out what vape shops already exist in your area, and how you can create a memorable experience for the customers who walk into your shop. If your area has lots of kiosks around, think about opening a lounge or a hang out spot for vapers. Scalable business plans, as simple as stocking hard-to-find e-liquid flavors, can set your business apart and keep the door to your shop open.
With a market as competitive as vaping, your business plans need to constantly be adapting to stay ahead of the curve. Sometimes innovation requires extra financing, especially when you’re starting out. Don’t be afraid to think outside the box when it comes to your financing options in order to differentiate your store.
Financing Tips For Getting Started
Navigating the different financing options may seem complicated, but it doesn’t have to be. For starters, understanding the different loans can help you choose the financing option that best suits your vape shop.
Traditional Financing- For the largest loans with the longest repayment plans, your best bet is with a traditional bank or the Small Business Administration. However, banks generally only will lend to businesses that have been active for two to three years, and the SBA will only lend to business owners who have a FICO score of above 700. Even if qualifications are met, keep in mind that approval for these loans can take weeks.
Alternative- Alternative lenders, such as finance companies, offer loans with fast approval rates (sometimes only a matter of minutes!) Alternative finance loans start out smaller (usually under $50,000) and with shorter terms. Some finance companies will increase your line of credit and your terms as your revenue grows.
Credit Cards- Many credit cards offer easily accessible loans to small businesses. However, the repayment fees often are pretty heavy. Defaulting will lower your credit score and could put your business at risk.
Vendor Financing- Some vendors offer financing terms, which helps you build your credibility with them. While the terms offered are usually short, having a clean financing rapport with vendors can lead to deals or better terms in the future. On the flip side, having a bad relationship with a vendor could give you a bad name in the industry.
As you choose the financing that fits you best, decide what repayments take first priority. It might be important for your business’ long term success to repay vendors first. Also, consider the effects of late loan repayments on your credit score, or on late and revolving fees.
Keeping your lending options adaptable is important as you grow, because it helps you maintain flexibility in a rapidly changing industry.
Bigger loans can help you pay off large overhead costs, but you’ll pay interest on the whole amount, even if you don’t end up using it all. Smaller loans may charge higher interest rates, but enable you more room to innovate without the burden of hefty debt. You can also choose to use multiple financing sources for different business needs. For example, you could use a bank loan to help finance your employees’ salaries, and alternative financing to fund your inventory purchases.
Looking To The Future
Demand for vaping is rising as its popularity grows throughout the country. New regulations are likely going to make competition fierce, creating a reality of buyouts and mergers in the market. Planning ahead and doing your market research can help you get in on the action, and might even make you a leader in the field.
For more information, follow @BehalfInc for latest updates and news in the space https://twitter.com/BehalfInc.
Benjy Feinberg is co-founder and CEO of Behalf. Committed to the power of building relationships between small businesses and vendors, Behalf provides small business purchase financing and works with vendors to increase sales by offering financing options to their small business customer base.