How to Start a Smoke Shop: A 9-Step Guide for New Business Owners

If you’re thinking about how to start a smoke shop, there are a lot of items to consider beforehand. Not only is the business age-restrictive but there are a lot of rules and regulations that control the industry. It’s important that you go into the process with full knowledge of legal implications and that your business complies with each of them.

Once you have the hard stuff out the way, opening a new tobacco shop can be a whole lot of fun. Business owners can combine it with liquor and wine sales or even add a small lounge area with food and drink service. You have a lot of options to make your smoke store stand out and be financially successful. But first, let’s take a look at the steps to opening a new smoke shop.

1. Set Your Budget and Write a Business Plan

The first step to any successful business is to plan ahead. A thorough business plan is the best way to start. There are several key areas to cover when writing a great smoke shop business plan:

• Explain who you are.

• Describe what you plan to sell.

• Identify your target audience.

• Exhibit what makes you stand out.

• Describe your operational plan.

• Show how you’ll market.

• Track future cash flow.

Starting with a business plan will keep you and your team organized and provide more opportunities for business loans or other outside investments.

2. Find Out Which Licenses You’ll Need

In such a heavily regulated industry, it’s critical to obtain all proper licenses and permits prior to opening.

You must get a retail tobacco license from your state government. This allows you to legally sell tobacco products and tobacco-related items. The application is typically submitted with a one-time licensing fee. Approved applications are valid for a year but are not transferable to other businesses or locations. If you have a smoke shop business with multiple locations, you’ll need to get tobacco licenses for each spot, though you can usually submit a single application for all locations.

If you sell tobacco products across state lines, you must get a tobacco wholesaler license from any state that you intend to sell to.

All required licenses must be prominently displayed at each location. You must also keep all receipts and invoices for all wholesale cigarette and tobacco products that you’ve purchased over the past 4 years. Failure to do both of these items will result in steep fines from your city/state governments.

3. Open a Business Bank Account and Register for Taxes

In addition to the business plan, you’ll have to figure out exactly what type of business yours will be legal. For most smoke shops, there will be four primary options:

1. Sole Proprietorship: a single owner
2. Partnership: two or more owners
3. Limited Liability Company (LLC): similar tax structure to the above but with more protections
4. Corporation: no actual owner and taxes are paid through the corporation

Most smoke shops will be LLCs. If you have a team and other investors, this should be one of the first items to figure out.

After deciding upon the type of business you’ll operate, you must register with your state and the federal government to set up your tax structure.

4. Register Your Business Name

Start by checking the registry with your local government to make sure your business’s name isn’t already taken.

Most small businesses will choose a “doing business as” (DBA) name. This means that your actual business could be registered under your own name, but your DBA will be different. The DBA is what customers will know your store by.

Remember, DBAs do not provide any legal protection against other businesses from using the same name. If you’re worried about copyright issues, you’ll need to go through the U.S. Trademark and Patent Office (USPTO).

5. Get Insurance for Your Smoke Shop

Business insurance from the very beginning is a must for any type of retailer. Smoke shops are certainly no exception. There are a lot of risks assumed when opening a new tobacco store, so you want to make sure you’re protected if anything goes wrong.

Additionally, if you’ve started to hire some people, make sure that you also get workers’ compensation insurance in case any of your employees is injured on the job.

6. Pick the Perfect Location

There are a LOT of smoke shops out there. By some estimates, the United States has close to 30,000 alone.

So when you’re choosing your location, make sure that you’re not entering an extremely competitive location.

You can also look beyond strip malls. It seems like most smoke shops are in small shopping centers, but there are other options!

While you don’t want to be in an overly competitive area, you still want to pick a location with a lot of foot traffic and a convenient spot for shoppers to stop. It’s not easy to find this ideal spot, but it’s worth the time and effort to find it.

7. Hire Motivated and Passionate Team Members

Your team will be the face of your store and your brand, so you need to be ready to find a great staff. 

The first thing to look out for is motivated and talented people. Smoke shops typically have a massive inventory and product selection. And many shoppers come in with questions and need some direction. Your staff should be prepared to be able to answer questions and help each customer navigate the shopping experience.

Start interviewing for positions early in the process and offer competitive pay so that you attract the best candidates out there.

8. Employ Some Marketing Efforts

Your retail marketing strategy will be an ongoing effort. And therefore one that you can worry more about down the road.

But you also need to have a few things in place from the beginning:

• Set up all social media accounts before your opening.
• Build a website and blog.
• Get listed on Google, Yelp, and any other applicable sites.
• Look at other media outlets that might be interested in announcing your opening.
• Come up with a grand opening deal or event.

9. Get Your Inventory Management System in Place

Keeping an accurate and efficient inventory system in smoke shops is the most critical part of getting started. You can’t afford to be out of products that customers want, and you never want to carry items that aren’t popular.

The best smoke shop POS systems offer great inventory management. Your point of sale will make business operations a lot faster and simpler.

KORONA POS comes with features built specifically for smoke shops, include, age verification prompts, carton and pack inventory settings, loyalty points program, and speedy transactions.

To learn more about KORONA smoke shop POS software, click the button below. Sign up for a free trial to see for yourself. And for more information on starting other types of businesses, see our other guides, too: