1. Conduct market research
Standing out as a local grocery store among national brands can be challenging. How do you compete? You can’t show up like the national brands, but you can look at what the market demographics and customer base need.
When you understand consumer preferences, you can design your business to meet those preferences. For example, local grocery shops may need to fulfill the niche demands of diverse neighborhoods.
LaPointe noticed that tourists loved visiting his grocery store and seemed to gravitate to the specialized local products. He developed gift offerings at different price points to help customers buy vacation souvenirs and gifts more easily.
“Specialty grocery stores can do that, too. No matter where they’re located, take advantage of the local points of interest in their community,” LaPointe says.
He also saw a preference from locals and tourists to be more connected to their local food system.
“You kind of feel good that you’re supporting local intuitively, but secondly, the cleanliness of the store, the creation story of the store — that factors into [customers] willing to pay a little bit more because [they know they’re] supporting local.”
2. Write a small business plan
Every small business needs a business plan. It allows you to formalize your business model, target market and goals. It’s also something you will need when you seek funding.
Typically, you’ll find the following sections in a business plan:
- Executive summary
- Company background
- Business structure and ownership
- Market and competitive analysis
- Products and services
- Sales and marketing
- Financial plan and analysis
3. Price products to protect your margin
Pricing your products and ordering the right amount to sell is key to protecting your overhead costs. You will also need to factor in other expenses to remain profitable. Consider the following:
- Variable costs: costs that change depending on sales volume
- Fixed costs: costs that don’t go away, like your rent
- Profit margin: the difference between sales and expenses and where your profit lives
One way grocers can increase their profit margin is through ordering. Once you have your prices, you must look at how products sell at different times of the year. LaPointe explains that you need a reliable stock for your customers, but you don’t want to waste money on having too much.
During slower times, he advises, “Cutting back on anything that’s perishable so you’re not caught throwing away lettuce, milk or eggs that are past their expiration date.”
4. Learn how to fund your grocery store business
Traditional small business loans and credit cards are just one of the ways to start your grocery store. We’ve compiled a complete guide to funding your small business.
LaPointe knew that bootstrapping was the way to go. Though starting a retail store can be expensive, he wanted to maintain complete ownership. He did this by funneling money from his day job when he was first getting started. This allowed him to make his own business decisions, even if they hurt his profit margin.
“I have an obligation to my customers to deliver the best customer experience, the best food, the best brand presentation, and the best creation story that I can, so people are willing to pay that extra dollar or two per jar or whatever it is when they can go down the street and get it for a little less.
Whether bootstrapping or raising funds through grants and Small Business Administration (SBA) loans, a solid business plan will help you understand your initial costs, overhead and cash flow.
5. Choose the right grocery store location
Because LaPointe delivers a specialized food product, he has found success in delivering it to tourists in northern Michigan. When people go on vacation, they are enthusiastic about the local goods.
People wanted his product in tourist areas, and he saw demand grow, so he opened a second store in a different area.
“They were actually calling us up and saying, ‘Hey, I’m up in northern Michigan for the weekend in our second home or whatever, and we’re interested in buying your product.’”
This eventually led to his online business, allowing people to connect with his business nationwide. It’s possible to run a small town business, even in rural areas.
6. Pick your business structure
When registering your business, you must often indicate which business structure to choose. Each has its pros and cons. Some are easier to form but offer fewer protections. Some business structures are more complex, and you may need the assistance of a professional financial service provider like a CPA.
But your choices tend to be:
- Sole proprietorship
- Partnership
- Limited liability company (LLC)
- S-corporation
- C-corporation
You can read more about the differences in business structure in our guide.
7. Protect your business investment with small business insurance
Be sure to get the right grocery store insurance in place to make your business compliant with local laws and to help protect your business investment.
Typically, a small business insurance package could include one or more of the following:
- General liability insurance is one of the most common types of liability coverage for small business owners. It can help cover non-employee bodily injuries or accidental property damage.
- Commercial property insurance can help cover damage to a business property you own or rent. It can help to protect your inventory, equipment and some of the building structure. Property insurance can also help cover business interruptions and income loss due to temporary closures for some repairs.
- Business Owner’s Policy (BOP insurance) combines general liability insurance and commercial property insurance into one package, which is usually less expensive than buying them separately.
- Workers’ compensation insurance can help cover expenses related to illness and injuries for employees (and it’s required in most states).
- Commercial auto insurance could help protect drivers and vehicles related to your business.
Learn more about small business insurance for grocery store owners.
8. Choose a business name and brand
You’re already choosing to do something different from the big brands by forming a small grocery store. Differentiate yourself with your branding.
“You have to focus on the brand first because, as an independent grocery store, you’re not an e-commerce business,” explains LaPointe.
This starts with choosing the right small business name and implementing it in your store.
LaPointe explains that your brand story sets the tone, “Focus on why you’re there and why you’re there for the community.”
“When folks come in, they want to see your deli counter, the prepackaged food, the self-serve salad bar, and how yummy it looks from the videos and pictures created by the independent grocery store.”
9. Register your grocery store, apply for licenses and permits
All small businesses must register their businesses, but grocery stores need to apply for additional business licenses and permits related to food.
When handling and serving food, you need to satisfy additional licensure requirements. These licenses are similar to those required for restaurants. Check the regulations of your local government.
Additionally, you must register with the U.S. Department of Agriculture if you want to accept food stamps (SNAP).
10. Establish an accounting system
Open a business bank account early to establish your small business finances separately from your personal assets. It will also help you see your store’s finances and profitability more clearly.
If you are getting started with small business accounting and bookkeeping, consider hiring someone to do it for you. This is also helpful for more complicated tasks like payroll and taxes.
11. Choose the right tools and equipment
Selecting the right tools and equipment for your grocery store is crucial for smooth operations. Start with essentials like shelving, shopping carts, display cases, and refrigeration units. Prioritize quality, energy-efficient refrigeration for perishable items, and choose adjustable shelving to adapt to inventory changes.
Invest in a modern point-of-sale (POS) system that handles sales, inventory, and customer loyalty programs. It should integrate seamlessly with your existing technology.
Consider buying in bulk, second-hand and exploring leasing options for expensive equipment to manage startup costs effectively. Don’t forget signage to guide customers through your store layout.
TIP: Property insurance is essential for protecting your grocery store’s fixtures and equipment from unexpected events like a fire or damage from a power surge. This coverage helps ensure you can repair or replace critical items without a significant financial setback.
12. Stock your inventory
Your market research has given you an idea of what to sell. Diversify your product offerings by stocking a mix of well-known brands and local products to cater to different tastes and price points. This attracts a broader range of customers and supports local businesses, which can be a selling point for your store.
Pay attention to inventory turnover. Focus on stocking items that sell quickly to avoid overstocking and spoilage, especially with perishable goods like fresh produce. Consider starting small with high-demand items, then gradually expand your inventory as you get a better sense of what your customers want.
Finally, establish relationships with reliable wholesalers, suppliers and distributors. This ensures you can consistently provide fresh products at competitive prices. Regularly review your inventory to stay ahead of trends and adjust your offerings to keep your customers coming back.
TIP: In addition to fixtures and equipment, commercial property coverage helps cover your store’s inventory, protecting you from potential losses due to damage or theft, so you can restock quickly without straining your budget.
13. Hire employees
As your business grows, you will need to hire employees to delegate. Beyond the typical liability and workers’ comp risks, you must also choose and grow the right team.
For LaPointe, he has found success in hiring and managing employees. Many of his employees have been with his business for 10 to 15 years.
He says one of the best questions you can ask during an interview is, “What would you like to see from coming to work every day?”
According to LaPointe, that allows his employees to say, “You know what? I would like a little bit more flexibility with time. I’d like to leave here on Monday at two because I have to do something. I’d like job flexibility.”
That allows people to show the interviewer a few things with that answer:
- Applicants’ flexibility
- Applicants’ expectations for the job
- Applicants’ desire to learn
He also pays for his employees to attend professional development and trade shows. “That gives them the flexibility in knowing they’re part of a bigger business, not just getting a paycheck,” explains LaPointe.
14. Market your grocery store business to your community
People are looking for your specialty grocery store. The simplest way is to show up where they search for services and directions: Google Search and Google Maps. You can establish a Google Business profile to get your business listed in these places. You can also connect your store’s website and social media pages to this listing.
From there, it’s about using your marketing dollars effectively so you can manage your small business growth. For example, LaPointe did not spend the same amount of money advertising his small business monthly. His town’s population fluctuates due to tourism.
“Begin your major marketing campaigns at the beginning of your busy season,” says LaPointe. He started investing money in marketing in late April, at the beginning of summer. He backs off from advertising in the winter months.
15. Open your grocery store
Once you are ready food store’s grand opening, LaPointe offers this final advice for new business owners regarding how to get customers:
“They live right down the street, or they’ll seek you out. The only other way they will want to seek you out is to have that unique customer experience — that interaction when they walk in the door.”
Don’t be afraid to lean into what makes your offering unique.
