How to Start a Grocery Store
December 19, 2022 | Last Updated on: January 27, 2023
December 19, 2022 | Last Updated on: January 27, 2023
will always need food that’s a fact. And with it, starting a grocery store business could be one of the shrewdest moves any small business owner could make. But knowing how to start a grocery store has a whole lot more to it before you open its doors to consumers, as you’ll see throughout this article.
With the evermore challenging economic times today — and what’ll possibly come ahead of us — this could be a good idea for a small business owner to expand or for a new business owner to start a new business. It’s one of the few business models that are considered recession-proof, and in this article, you’ll learn everything you need to know on how to start a grocery store, and also:
And more along the way. After this article, you’ll learn everything you need to know and be confident to apply what you learned here. So, let’s get going.
As you saw above, a grocery store business can be considered one of the few examples of recession-proof business models. No matter how bad the economy may look, people will always need food. Grocery stores, convenience stores, and supermarkets are the ones that offer it, and consumers will always look for the best deals — which is a good idea to implement on your own.
Putting into perspective, here’s a quick checklist of the possible advantages available to a grocery store owner:
While you could say that the U.S. has a tremendous number of grocery stores — with 63.328 supermarkets and grocery stores in 2022 — competition is serious in highly populated cities with grocery stores all over.
But on the topic above, we said that in 2018, grocery stores thrived, even when some large retailers saw difficulties. That’s the power of small, local businesses with a well-built business structure. They’re highly customizable, and with a good business structure, a good idea of your target market and demographics, and a more personable approach that large retailers cannot do, grocery stores can become very lucrative.
An example, in a highly populated city like New York, you’ll see a local grocery store on every corner. Each grocery store owner will have its business edge and have a different type of business than its competitors.
Continuing with the example, if he looked at the target demographic and saw a majority of Indian-speaking people, a good business idea could be a grocery store that imported high-quality goods from India. Even in a highly competitive city, that would have its edge and draw business to his store.
By now, you had a few examples of how a grocery store business could be a lucrative endeavor for any small business owner, but it’s not all easy. Startup grocers will see a lot of difficulties starting, and a new business owner must account for every variable. Let’s look at a few examples of what you might encounter:
All these points are challenging for any small business owner, new and veteran ones alike. But they can also be avoided or, at the very least, minimized by investing capital into your business. Looking for ways to fund your grocery store will be vital going forward, so you must reach out and keep tabs on the SBA and banks that can provide you with loans.
But, if you’re already having difficulties getting funded or approved by them, you can also reach out to alternative lenders that are much easier to see your loan request go through — like Biz2Credit.
Your business plan must contain everything you need for your grocery store business to succeed. You know the old saying:” Failing to plan is planning to fail” and many entrepreneurs swear by that idea. It should contain everything from your business model, target demographics, projected sales, and even steps you can take when things don’t go accordingly. Here are a few ideas:
Once you’ve created a business plan that covers everything your grocery store will need, it’s time to tackle the business structure of your small business:
With this step, you’ll have a better understanding of the costs involved with the initial capital outlay for your grocery store. To have an idea of what’s involved, here are a few more examples:
If you have registered your business structure, you can now get your employer identification number (EIN) from the IRS, which allows you to register for state and federal taxes. After it, you have to open a business bank account to separate your personal and business costs and help you protect your personal assets.
With it, you can also apply for a business credit card. A credit card can help you take benefits of business-related purchases and expenses and help you build your business credit score for a small business loan later on. Learn how to apply for a business credit card here.
Now it’s time to acquire the necessary business licenses and documents to open a grocery store business. You can always reach out to the Small Business Administration’s Small Business Development Center (SBDC) if you need help in this area. But generally, most grocers need:
If you follow these steps, you should be opening — or be very close to opening — your grocery store business. You’ve researched your potential customers and locations, started a social media marketing campaign, and now have your business name at the entrance. All is looking well — but what about cash flow?
With the current economic hardships going, it’s normal for most small businesses to be affected — actually, they’re the ones who suffer the most with one. Maintaining good relations with lenders and a solid credit score will allow you access to funding that can be essential. For example, quick funding options such as small business lines of credit, business credit cards, or even online lenders like Biz2Credit, can make a difference in your grocery store in just a few days.
Whatever it might be, you must have a backup plan like funding registered in your business plan. It’s better to be there and don’t need it than to end up needing it later when the recession comes — and financial institutions are too strained to pass them.
As you saw throughout this article, people will always need food, and the market size will continue to grow in the foreseeable future. Food and grocery retail market projections point to a growth of $17.1 trillion by 2030.
While it’s true that the net profit margin of grocery store businesses is considerably shorter and must come from the volume of sales, it doesn’t mean that grocers can’t be profitable themselves. Many factors contribute to the equation, but a grocery store owner can make anywhere between $60.000 to $300.000 a year.
It depends on the type of grocery store — meaning the number of licenses you’ll need — and the state can play a role too. It’s important you take time into consideration as it can take anywhere around 4-8 weeks to get your licenses approved, and it might involve an inspection of your new business.
It depends on the size and what you offer. Small grocery stores cost around $25.000 to $50.000, while bigger, more ambitious stores can easily surpass $100.000.
Getting the funding needed might be the hardest part. With threats of recession, traditional lenders won’t pass many loans. But if you’re in need of a fast and nearly guaranteed injection of capital, take a look at Biz2Credit’s offers and talk with our small business funding expert to see what’s the best option for you.