Permits, finance, Ipass CA location insurance, inventory, and marketing are all covered in our tutorial on opening a hardware business.
In this day and age, opening a hardware store is a brick-and-mortar business that sells brick and mortar (along with everything else you need to construct a home, repair a leaking faucet, or paint the garage) — may sound overwhelming.
Smaller hardware shops, like small companies in every sector, face fierce competition from large box stores like Home Depot and e-commerce behemoths like Walmart and Amazon, as well as smaller local businesses.
Don’t be discouraged if you have the skills and desire to operate a hardware business. To enhance your chances of success, you can manage some aspects. Before you get your hardware shop up and running, look through these five procedures to determine whether you have a decent chance of remaining afloat.
What you should know before opening a hardware business
According to IBISWorld, the United States now has approximately 20,000 hardware shops, generating roughly $24 billion in sales and employing over 148,000 people.
Its assessment of the industry is consistent with anything you may have seen if you’re considering a career in the sector: The housing market has grown as the economy has improved over the previous five years, resulting in a rise in the number of home repair projects that need visits to the hardware store.
Low mortgage rates have also encouraged individuals to purchase and repair houses, placing national retailers such as True Value and Ace Hardware in a solid position to profit.
According to the analysis, hardware store development is anticipated to decelerate in the next five years, but the sector as a whole has a bright future.
In 5 easy steps, learn how to open a hardware business.
1. Decide if you want to operate your own hardware business or join a franchise.
Around the nation, there is a slew of fully independent hardware businesses catering to the ultra-local community. If you’ve found a market for which you believe you might create a hardware store and become the near-exclusive supplier — and if you’re a control freak who wants to make 100 percent of the choices regarding how your company functions — you may consider it. It also costs less money to open a hardware business on your own.
However, another option is opening a hardware shop under a well-known franchise, which gives you access to a famous brand, a proven operating model, and an efficient supply chain. You may still be the store’s owner with a lot of freedom to make business choices.
The scenario at Waverly Ace Hardware in Baltimore, Maryland, is part of an Ace Hardware-affiliated co-op.
According to Michael Marren, assistant manager of one of the 11 Waverly Ace Hardware stores in Maryland, Washington, D.C., and northern Virginia, the connection between the shop and the parent firm is beneficial and profitable.
“Our parent firm, A Few Cool Hardware Stores LLC, is situated in the District, and the name accurately describes the company’s mindset. “We’re a tiny company with autonomous and local leadership, but we benefit from Ace’s logistical support,” he explains.
Marren, for example, claims that his firm pays “far over minimum wage” and provides a “strong benefits package,” which he describes as a “distinctive option” that makes workers happy.
It’s also convenient to have a supply chain and shop operations ready to go instead of having to figure it out on your own when opening a hardware store inside an existing franchise.
2. Come up with a business idea
Whether you choose to work for a franchise or go it alone, you’ll need a business plan that outlines how you’ll place your hardware shop in the best possible position to thrive.
The following are essential topics to discuss:
- Knowing who your client is: What is the profile of your average customer? Are they do-it-yourself landlords and contractors or do-it-yourself homeowners working on side projects? The way your shop is built and the weight of your product will alter depending on who you’ll be catering to.
- What is the state of your finances? How much money do you need to get started? What is your break-even point once you get started? What do you anticipate your monthly cash flow to look like? If you’re joining an existing brand, IBISWorld estimates that you’ll need at least $150,000 in available capital to invest in True Hardware. In contrast, Ace would need between $820,000 and $1.5 million, depending on the size of your shop and other criteria.
- Your marketing strategy: When you join a national brand, you’ll have access to various initiatives and events that you may utilize to increase your visibility. However, local, possibly even offline marketing efforts, loyalty programs for returning consumers, and a flexible national catalog scheme should all be considered.
- This is a no-brainer in terms of location. You’ll want a place with a lot of foot traffic that doesn’t kill other shops’ revenue — or put you in a position to be cannibalized.
3. Spend money on supplies and provide outstanding customer service.
According to IBISWorld, the ability to regulate stock on hand, having an experienced team, and having a loyal client base are the three most significant determinants for success.
These are the same views that Marren expresses when asked why customers visit his hardware store instead of purchasing on Amazon or at a large box retailer.
“People come to us for engagement, knowledge, personalization, and closeness,” says the author. He claims, “We’re closer, kinder, and we’ll genuinely assist you when you come in.”
Even the most excellent shop staff can’t help consumers if the item they want isn’t in stock.
“Having the item that someone wants to purchase is the fundamental rule of customer service,” Marren explains. “Invest in inventory and point-of-sale software that can assess stock and keep your inventory responsive,” says the author.
According to IBISWorld, the most challenging aspect of opening a small hardware business is competing with more prominent merchants and home improvement stores. Marren agrees, pointing out that larger retailers benefit from economies of scale.
So, if you can’t rival the significant retailers on pricing, beat them with better, more helpful, and happier personnel. Keeping those workers pleased (e.g., with Marren’s benefits package) can go a long way toward acquiring the loyalty and quality effort you need to thrive.
4. Get all the required licenses, insurance, and a company bank account.
You’ll need to file a business registration form with your secretary of state, apply for an IRS business tax identification number (also known as an employer identification number, or EIN), and create a business bank account.
Establish revolving lines of credit with your hardware wholesalers and your financiers, whether conventional banks or internet lenders, if you have them.
You may require individual municipal, state, and city permissions depending on where you’re starting up a business. You should consult an attorney or accountant knowledgeable with local standards to ensure you comply.
Finally, make sure you have the right business insurance: If you have employees (and it’s unlikely you’ll be running one of these stores on your own), you’ll need workers’ compensation insurance, which is a commercial insurance policy that protects your store’s inventory against loss or injury claims from customers.
5. Make an inventory, marketing, and personnel adjustments.
Your hardware shop will not be a one-dimensional thing. You’ll need to adjust your inventory, marketing efforts, and personnel demands if the residential market changes, the season’s move, or new obstacles (and challengers) emerge.
What should always be the case is that you:
- Maintain inventory levels to ensure that you are never out of stock at a critical time.
- Your dedication to keeping your employees up to date and engaged is strong.
- Instead of overextending yourself, always search for methods to expand within your area.
“We take a more ecological perspective of the market – we fit a niche,” Marren says. We’re not in the business of closing down other companies in the area.”
After all, because you’re opening a hardware shop, you’ll be assisting people in improving their houses and, by implication, their lives. Professionally conduct yourself.