Even before opening the doors of your vape shop business to your customers, there are certain costs that you’ll have to deal with already. These include your initial inventory of pod systems, atomisers, batteries and the best vape brands Australia has to offer.
You could be asking, “Where can I get the initial capital I need to start my vape shop?” Well, here are some of your options.
The process of funding your vape shop or any other business with your savings and other personal finance is commonly referred to as bootstrapping. Depending on your budget, you may want to open your shop with minimal pieces of vape pod systems, vape juice brands, vape mod brands and vape tanks Australia has to offer, and then build your inventory as you gain profit from your initial sales.
As long as personal funds are sufficient, running a self-funded business provides a sense of accomplishment when operations continue to thrive. Take note, though, that bootstrapping can be risky as the business may struggle to scale and may not be able to reach its full potential. On the bright side, this will challenge you to develop a business plan that produces immediate and long-lasting cash flows.
An important advice if you’re self-funding your vape shop business is to avoid using your credit card or taking out a personal loan. These options could leave you with a huge personal debt if ever your endeavour fails later on.
Family and Friends
Another form of bootstrapping is borrowing money from family, relatives and/or friends to fund your vape shop business. This option is more advantageous than traditional sources (e.g. banks and loans) because there’s potentially low or no interest rate. However, money is often a sensitive issue especially when lenders are personally close to you, and thus, it’s advisable to put the loan terms in writing to establish the legal obligations of the parties involved.
Crowdfunding is when you’re seeking investment or donations of money from the public to start your vape shop business. There are crowdfunding websites you can use to launch your campaign, but if you don’t reach your target amount within a given timeframe, you won’t get the funds at all because they’re returned to those who made the pledges.
Thus, it’s important that you have a solid business and marketing plan before running a crowdfunding campaign. You’ll also have to incentivise the public to fund your campaign, such as providing eliquids Australia brands and other products from top vape brands when certain milestones are met.
Business Loans from Banks
Taking a bank loan is a common solution for entrepreneurs to fund their business. However, this will involve a lot of paperwork considering that the banks will need to ensure your company’s financial stability and ability to make repayments. Most often, the banks perceive start-ups as risky entities, and thus, new entrepreneurs might face high interest rates if they get approved at all.
Angel investors are generally wealthy individuals who use their own money to fund startup companies. While it might not be easy to find an angel investor interested in a vape shop business, it’s also not impossible especially if you have something new to introduce to the industry. In fact, a China-based vape brand was reported to have received around AUD2 million of funding from an angel investor in 2019.
Other Funding Sources to Monitor
The following funding sources may lead to low or zero success for anyone with vape shop business ideas, but they’re still worth keeping an eye on just in case the opportunities start to arise for those in the vaping industry.
- Venture capital firms
These companies provide capital to start-ups and small businesses, and often take a minority stake in return. They’re often focused on tech companies with high growth and potential.
- Government grants
The government of Australia is financially supporting small businesses and start-ups that meet specific criteria depending on the program. Unfortunately, there’s currently no grant that aspiring vape shop entrepreneurs can apply for, but it’s still worth checking the business.gov.au website regularly to be updated on potential opportunities.
A sound businesses plan goes a long way
Having a concrete business plan is important before seeking capital funding for your vape shop business. This can help boost the confidence of your potential lenders in providing the finances you require to kickstart your business.
For more vape-related marketing and business tips, check out our other blog posts.