One thing is for sure: people will always need food.
Grocery stores are the perfect place to stock up on the essentials for the week. They’re convenient, customers know what they’re going to get, and due to the demand for everyday items, opening a grocery store is an excellent idea for anyone who wants to start their own business.
Although big chains dominate the grocery store industry, there is still room for small, independent grocers to thrive.
Local people often like local stores, and small grocery stores that provide essentials like food, household essentials, and cleaning items can weave their way into the fabric of a community. Small grocers also offer unique, local products that large grocers don’t carry.
But you can’t just decide to open a grocery store, find a location, and hope for the best. You need a plan of action and a process to follow. This blog post will guide you through the process of opening a small grocery store in eight clear steps, so that you can open a business you’re proud of.
8 Steps: How to Open a Small Grocery Store
Some people categorize grocery stores as small supermarkets. But there’s far more to it than that. Grocery stores often stock products that cater to specific communities. For example, if you need chorizo to make an authentic Mexican dish, you’ll find it at a small Mexican grocery store instead of a large grocery chain.
Small grocery stores can better position themselves to change their inventory to match the needs of shoppers from their neighborhoods. For instance, younger, socially-conscious customers tend to shop multiple times per week. Instead of doing weekly shops, they want somewhere they can purchase ingredients for their meals and cut down on waste.
Now we’ve established that a small grocery store isn’t a mini-supermarket, how do you go about opening one?
We’ll break it down into eight simple steps:
- Create a business plan.
- Determine your startup and ongoing costs.
- Choose a business structure.
- Set up your business bank accounts.
- Obtain the correct permits, licenses, and insurance.
- Purchase the equipment you need.
- Invest in a modern point of sale (POS) system.
- Market your store and establish your brand.
Keep reading to learn how to make your store a success!
1. Create a Business Plan
Fail to plan, plan to fail. It’s an old adage, but it still rings true.
You need a clear, simple, quality business plan you’ve researched thoroughly and will execute to open your store successfully. Your business plan starts as a snapshot of your store as it is in your mind, and where it will be years from now.
Your business plan should include:
- An executive summary: An introduction and summary of each section of your plan. Give a brief overview of the grocery industry and how you fit in the market. Include industry analysis and market trends.
- The type of store you want to open: Are you a traditional grocery store, or will you cater to a niche or specific community?
- Customer analysis: Which customer segments will you serve? College students and baby boomers want different things from a grocery store and will respond differently to marketing and promotions. Also, consider the average income of your neighborhood, median age, and the number of residents.
- Competitive analysis: Who are your direct and indirect competitors? Which businesses are in a five-mile radius? And how can you set yourself apart? Think of your competitive advantage.
- Marketing plan: Focus on your unique value proposition. For example, your location might be perfect for morning commuters near the train station. Decide on your promotion and pricing strategies.
- Operations plan: What will your opening hours be, and what personnel will you need to function optimally? Who is part of the management team? Include milestones and goals here.
- Financial plan: Where will your revenue come from, and how much capital investment will you need? Include income statements, balance sheets, and cash flow statements.
This is an overview; you’ll need to get more granular when you write your plan.
2. Determine Your Startup and Ongoing Costs
Leave no stone unturned. You must factor in any cost you can think of so you don’t have any surprises after opening your store.
- Opening costs – site preparation, modifications, and any expenses you’ll need to operate for your first year
- Counter equipment
- Hardware (shelves, food cases, etc.)
- POS system
- Initial inventory
- Rent and insurance
- Legal expenses for licenses and permits
Don’t forget about ongoing costs, including software subscription, employee wages, taxes, and utilities.
3. Choose a Business Structure
You’ll need to establish a legal entity. Your choice impacts your tax and liability exposure. Become familiar with laws and regulations at a local, state, and federal level. There are various legal entities, but for small grocery store owners, we’ll focus on three:
- Sole proprietorship - a single owner. The owner is 100% responsible for the business and liable should any lawsuits be filed against the company.
- General partnership - two or more people contribute money, labor, or skill and share in the profits and losses of the business.
- Limited liability company (LLC) - owners are called members. Most states don’t restrict membership; members may include individuals, corporations, and other LLCs.
Each has its pros and cons, and your circumstances might dictate the option you choose. You might want to go into business with someone who shares a passion for opening a store, and if that’s the case, a partnership could be the best option.
As a single owner, you’re responsible for everything. That’s a lot of pressure to carry. An LLC might be your best bet because it protects you from liability if someone sues your store. You can avoid paying corporate taxes and only be taxed on the profits made by each owner, and there’s no fixed structure – so owners can make decisions and conduct business as they wish.
NOTE: we are not tax or financial professionals, so please consult your accountant, CPA, or financial expert to determine which business structure is ideal for your unique business.
4. Set Up Your Business Bank Accounts
Once you’ve registered your business structure, obtain an employee identification number (EIN) from the IRS. You can then register for state and federal taxes. You’ll also need a business bank account. Your store needs a dedicated banking and credit account to protect your personal assets.
Business credit can help you get credit cards and other financing in your business’ name, affording you better interest rates and higher lines of credit. For example, a Net 30 account helps you establish and build business credit. You can purchase goods and repay the balance within 30 days.
Finally, set up business accounting. You don’t want to upset the tax man, so ensure you record various expenses and income to make your life easier when you file your annual tax return.
5. Obtain the Correct Permits, Licenses, and Insurance
Each state has different licensing requirements. You’ll need to check your state requirements and reach out to your state’s Small Business Association (SBA) if you get stuck. You’ll more than likely need a retail food store license, a license to sell alcohol (if you’re planning to), and permits from the Department of Health if you serve prepared food.
General Liability Insurance protects against accidents inside and outside of your store, and protects against product liabilities. You’ll also need workers’ compensation insurance to provide financial assistance and medical care if any employees are injured or become ill as a direct result of working in your store.
The National Grocers Association (NGA) is a trade organization dedicated to helping independent grocers. You’ll find helpful information on their website, and they can guide you through the startup process.
6. Purchase the Equipment You Need
You’ll need a lot of equipment to get started. Some of your purchases might depend on the products you plan to sell, but generally, this includes:
- Refrigeration units and freezers
- Display cases
- Industrial cleaning supplies
- Deli supplies
- Prepared food department supplies
- Shopping carts and baskets
- Food and product packaging
You can probably think of more. In any case, be fully prepared.
7. Invest in a Modern POS System
OK, we’re a little biased, but a modern and robust POS system makes managing your store so much easier.
Features and benefits include inventory management, employee management and payroll, a streamlined checkout process, vendor management, payment processing, customer loyalty programs, custom label printing, an unlimited product database, and more!
The more tasks you can automate, the more time and capacity you have to focus on your customers and to create the atmosphere that you want for your store. And with built-in reports, you can track virtually every aspect of your business.
8. Market Your Store and Establish Your Brand
Decide what you want your brand to say. Will you focus on natural and organic produce? Locally sourced meats and cheeses? Perhaps you want to serve the communities in your neighborhood and open a specialized store. This is where a business plan with thorough demographic, location, and competitor research is crucial.
Regardless, you’ll need a marketing plan. First, choose a name, logo, and any other brand assets. Then decide how you’ll promote your store. You can choose to focus on billboards and signage. Maybe you’ll hand out flyers or run a social media contest to create a buzz around your grand opening. Perhaps you’ll try all of the above!
Register with Google My Business, Yelp, and other business directories to collect reviews.
You might also create a website for your store and encourage customers to sign up for your newsletter. Once you have an email list, you can send relevant coupons and discounts to customers, start a referral program, and create loyalty programs.
There are various ways to market your store. Figure out who your customers are and go and find them.
How to Open a Small Grocery Store: The Final Step
Open your doors to the public!
You’ve made it. You’ve followed all the steps above, have a killer business plan, and are ready to open your store. At POS Nation, we’re proud to say we work with small grocery stores across the country to provide a reliable POS system that caters to your business.
You’ll get integrated hardware, software, training, 24/7 support, payment processing, and all the features and benefits of a modern POS system.
The next step is to use our build and price tool to build the POS system you need for your store and get a quote!