Do you want to start a head shop company and need to write a business plan? If YES, here is a sample head shop business plan template & feasibility report. If you are conversant with some of the trends in the United States of America especially as it relates to legislation of substance consumption, you will agree that cannabis or marijuana is being legalized across most states hence opening the doors for new businesses along the cannabis business value chain. One of such businesses is the head shop business.
These types of shops are called HEAD shops because it is a common slang term for a hippie. Again, items that are usually found in a headshop were called “head.” That term emanated from the fact that the drug culture was often focused on items that expanded one’s mind, or one head.
Before you open a head shop, you have to first look at the existing laws in the country or State you reside in. Although marijuana is still very much prohibited in most countries and even in some states in the united states of America, some states still allow it as an alternative source of medicine and for leisure hence the need for head shops in such states.
So, if you want to start your own head shop business, then you need to talk to a lawyer to know if it is allowed in the area you want to establish the business and the limit that is expected of you. No doubt, a head shop business generates huge profits especially when located in the right location. Below is a sample head shop business plan template that can help you to write your own with little or no difficulty.
A Sample Head Shop Business Plan Template
1. Industry Overview
A head shop is a retail outlet where paraphernalia used for consumption of cannabis and tobacco and items related to cannabis culture and related countercultures are sold. They emerged from the hippie counterculture in the late 1960s, and at that time many of them had close ties to the anti-Vietnam War movement as well as groups in the marijuana legalization movement like LeMar, Amorphia, and the National Organization for the Reform of Marijuana Laws.
In a standard head shop, some of the products sold are magazines (e.g., about cannabis culture, cannabis cultivation, tattooing, and music), clothing, and home décor (e.g., posters and wall hangings illustrating drug culture themes such as cannabis, jam bands like The Grateful Dead, psychedelic art, etc.).
Some head shops also sell oddities such as antique walking sticks and sex toys. In time past, some head shops have sold clothing related to the heavy metal or punk subculture, such as band T-shirts and cloth patches with band logos, studded wristbands, bullet belts, and leather boots.
Other items offered typically include hashish pipes, “one hitter” pipes; pipe screens; bongs (also referred to as water pipes); roach clips (used for smoking the end of a marijuana “joint”); vaporizers used for inhaling THC vapor from cannabis; rolling papers; rolling machines; small weighing scales; small ziplock baggies; cannabis grinders; blacklight-responsive posters and blacklights; incense; cigarette lighters;
“stashes”, which include a range of standard consumer products such as clocks, books, tins of cleaning powder, and toilet brushes which have hidden compartments for cannabis and non-camouflaged “stash boxes” which are tins or wooden containers for storing marijuana; and legal highs such as whipped-cream chargers (which contain nitrous oxide) and Salvia divinorum (both of which are illegal in some countries and some US states for recreational purposes).
Some head shops also sell items used for home cultivation of marijuana plants, such as hydroponic equipment and lights and guidebooks on cultivation. Since the 2000s, some head shops also sell e-cigarettes and the flavored liquids used with these devices.
History shows that American head shops originated in the 1960s in cities with high concentration of college-age youth, often growing out of independently owned poster or candle stores. Historically, U.S. head shops proliferated on St. Mark’s Place in New York City’s East Village, in West Los Angeles, in San Francisco’s Haight-Ashbury neighborhood, and in Chicago’s Old Town.
Sources cite the Psychedelic Shop on Haight Street in San Francisco as the first head shop in the United States. In the United States, head shops are legal so long as they only sell items used for legal substances. Shops typically place signs stating that the products sold are “for tobacco use only” or “not for use with illegal substances”.
In many head shops, a sign will be posted (and often reiterated verbally) stating that customer references regarding the use of the shop’s products for illegal drug use will result in suspension of all sales for that time period, and/or removal of the customer from the shop. In some shops, simply saying the word “bong” is grounds for removal from the shop.
The legality of cannabis varies widely in the United States, but in states where medical cannabis is legal, cannabis dispensaries often double as head shops. Notably, in the state of Florida, items, “designed for use in ingesting, inhaling, or otherwise introducing cannabis, cocaine, hashish, hashish oil, or nitrous oxide into the human body” are illegal, while “pipes primarily made of briar, meerschaum, clay, or corn cob” are legal.
Any entrepreneur who wants to start a head shop business in the US would definitely be confronted with tough legislation, which is why you must get facts and figures and all the needed license and permits before opening your head shop or else it will be shut down and you might even be fined or jailed for breaking the law.
2. Executive Summary
Mike Morgan® Head Shop, LLC is a neighborhood head shop that will be located in a fast – growing community in East Rutherford, New Jersey. We have been able to secure one-year lease of a vacant shop within the city’s largest shopping mall. We are fortunate to secure a facility with an option of renewal for 5 years at an agreed rate.
We are going to be involved in the sale of paraphernalia used for consumption of cannabis and tobacco and items related to cannabis culture to the people of East Rutherford in a conducive environment that is specifically designed for socializing and networking and free from all forms of violence.
Mike Morgan® Head Shop, LLC is designed to meet both health and safety standards as recommended by the local authority. Our customers are going to be treated with good music at all times. We have made provision for live band, karaoke, country side music, jazz et al.
We are in business to make profits at the same to give our customers value for their money; we want to give people the opportunity to choose from the wide range of paraphernalia used for consumption of cannabis and tobacco and items related to cannabis culture.
We will ensure that all our employees are selected from a pool of qualified and customer centric people in and around East Rutherford – New Jersey. We will make sure that we take all our workers through the required trainings that will position them to meet the expectation of the company and to compete with other players in the United States.
Mike Morgan® Head Shop, LLC is owned by Mike Morgan. Mr. Morgan has managed several head shops, smoke shops, and vape shops in East Rutherford and Las Vegas prior to opening his own shop.
3. Our Products and Services
Mike Morgan® Head Shop, LLC is going to operate a standard head shop that will make available paraphernalia used for consumption of cannabis, tobacco and items related to cannabis. These are some of our product offerings;
- Sale of magazines (e.g., about cannabis culture, cannabis cultivation, tattooing, and music)
- Clothing, and home décor (e.g., posters and wall hangings illustrating drug culture themes such as cannabis, jam bands like The Grateful Dead, psychedelic art, etc.).
- Sale of oddities, such as antique walking sticks and sex toys.
- Sale of other items such as hashish pipes, roach clips (used for smoking the end of a marijuana “joint”); vaporizers used for inhaling THC vapor from cannabis; rolling papers; rolling machines; small weighing scales; small ziplock baggies; cannabis grinders; blacklight-responsive posters and blacklights; incense; and cigarette lighters.
4. Our Mission and Vision Statement
- Our vision is to establish a standard and secured head shop in East Rutherford, New Jersey that will be the melting pot of all lovers of tobacco, cigarette and marijuana et al.
- Our mission is to establish a head shop business that will make available all paraphernalia used for consumption of cannabis and tobacco and items related to cannabis at every given time to our highly esteemed customers, and a place where people can network and socialize.
Our Business Structure
Mike Morgan® Head Shop, LLC is established to be a pacesetter when it comes to how standard head shop should be run in East Rutherford – New Jersey. We have a goal of assembling a team of dedicated workforce who will give our customers excellent customer service at all times, a team that will ensure that we continue to have repeated customers.
We will work hard to ensure that we only attract people with the right mindset to help us achieve our business goals and objectives in record time. Below is the business structure that we will build Mike Morgan® Head Shop, LLC;
- Chief Executive Officer (Owner)
- Head shop Manager
- Accountants/Cashiers
- Procurement Officer
- Customer Service Agent
- Cleaners
- Security Officers
5. Job Roles and Responsibilities
Chief Executive Officer – CEO:
- Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job result
- Responsible for providing direction for the business
- Creating, communicating, and implementing the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy
- Defining job positions for recruitment and managing interviewing process
- Carrying out staff induction for new team members
- Responsible for training, evaluation and assessment of employees
- Design job descriptions with KPI to drive performance management for clients
- Responsible for signing checks and documents on behalf of the company
- Evaluates the success of the organization
Head shop Manager:
- Responsible for managing the daily activities in the head shop
- Ensure that the facility is in tip top shape and conducive enough to welcome customers
- Interfaces with vendors
- Reports to the Chief Executive Officer
- Attends to Customers complaints and enquiries
- Responsible for Training and Development in the organization
- Responsible for procuring of supplies and equipment
- Handle any other duty as assigned by the CEO
Accountant/Cashier:
- Responsible for preparing financial reports, budgets, and financial statements for the organization
- Provides managements with financial analyses, development budgets, and accounting reports
- Responsible for financial forecasting and risks analysis.
- Performs cash management, general ledger accounting, and financial reporting for one or more properties.
- Responsible for developing and managing financial systems and policies
- Responsible for administering payrolls
- Ensuring compliance with taxation legislation
- Handles all financial transactions for the company
- Serves as internal auditor for the company
Customer Service Agent
- Ensures that customers feel relaxed and at home
- Handle customers enquiries
- Assess customers’ needs and preferences and make recommendations
- Provide recommendations and suggestions to guests for choosing paraphernalia used for consumption of cannabis and tobacco.
- Serve customers in a friendly and helpful manner.
- Handle any other duty as assigned by the head shop manager
Cleaners:
- Clean up after customers and clean work area.
- Clear ashtrays as and when required.
- Wash glassware and utensils after each use.
- Maintain a clean working area by sweeping, vacuuming, dusting, cleaning of glass doors and windows, etc. if required.
- Ensure that toiletries and supplies don’t run out of stock
- Handle any other duty as assigned by the head shop manager.
Security Officers
- Ensure that the facility is secured at all time
- Control traffic and organize parking
- Patrols around the building on a 24 hours basis
- Any other duty as assigned by the head shop manager
6. SWOT Analysis
Mike Morgan® Head Shop, LLC is established with the aim of becoming the melting point for smokers and socialites in East Rutherford – New Jersey which is why we have taken our time to conduct SWOT analysis so as to identify areas we need to work on if indeed we want to achieve our business goal.
No investor would want to invest his or hard – earned money without assessing the risks involved in the venture and also his or her capability to deliver and make profits from the business. The ability to make profits from any business and to favorably compete with competitors in the industry starts with the result you get from your SWOT analysis.
In view of that, Mike Morgan® Head Shop, LLC hired a business an HR specialist to help her conduct SWOT analysis for the business and below is a summary of the result that was generated;
- Strength:
Our strength as a company are, excellent and detailed customer service, wide range of paraphernalia used for consumption of cannabis and tobacco and items related to cannabis, excellent facility, excellent ambience and perfect location for a head shop in metropolitan city like East Rutherford.
- Weakness:
A major weakness that is obvious to us is the lack of economies of scale which may slightly affect the prices of our products.
- Opportunities:
There are unlimited business opportunities available to head shop businesses in busy cities like East Rutherford; East Rutherford is one of the cities in the world where social life is fast growing. Besides the shopping mall where our head shop is located is one of the busiest in the New Jersey and it is open to loads of opportunities due to the influx of shoppers.
- Threat:
Products sold at head shops are mainly available online or in dedicated “vape” storefronts. They are also available at grocery stores, coffee shops, conventional retailers, mass merchandisers, mass retailers, tobacco retailers, convenience stores, gas stations, dollar stores, pharmacies (drug stores, liquor stores, shopping malls) and at small kiosks in shopping malls means that they will compete for customers with us.
7. MARKET ANALYSIS
- Market Trends
A recent trend in the United States shows that head shops are becoming increasingly popular. Over the few years leading up to 2018, head shops have proliferated in a number of countries such as the US, at retail locations, as well as online. Over the few years leading up to 2015, head shops have increased in a number of countries.
In 2013, online search engine searches on head shops surpassed searches on e-cigarettes. The markup of e-cigarettes as high as 200 – 400% may play a role in the prevalence of head shops. Worldwide, retailers have sold millions of devices.
Around a third of all sales of tobacco and marijuana products take place in head shops. In 2017, head shops were believed to produce the highest sales for the tobacco market. For the uk in 2018, retailer head shops were the most prevalent point of purchase, with above 40 percent of sales.
Head shops in the US have emerged in large cities, and additionally in smaller metropolitan places. In 2014, the Smoke-Free Alternatives Trade Association estimated that there were 35,000 head shops in the US, more than triple the number a year earlier.
The availability of vaping products in US stores is increasing, especially in places with low taxes and smoking bans. As of 2017, new head shops are opening, in some cases close to schools. Head shops in the US are more frequently to be located close to private universities and colleges in cities rather than rural places.
In the US, e-cigarettes sold at retailers are more likely available in places with a higher median family income. Head shops in southern New Jersey are found in places with a higher percentage of the Hispanic population, a 2018 report suggests.
E-cigarettes sold at retailers is greater in US states with minimal clean indoor air policies and in areas with low cigarette taxes. Head shops in the US are frequently located in census tracts where retailing of tobacco is strong, and where less racial minorities reside.
Head shops were more frequent in places where more White people reside. Head shops in the US are more frequently located in places where people with a greater possibility for vaping and smoking reside.
Lastly, a notable trend shows that head shops have been targeted by the Drug Enforcement Administration. In 2003, The U.S. Department of Justice indicted fifty-five people on charges of selling drug paraphernalia in Idaho, New Jersey, Iowa, Pennsylvania, Florida and Ohio as part of Operation Headhunter and Operation Pipe Dreams, including comedian Tommy Chong.
During the investigation, government officials also targeted customers of the shops, arresting those who were in possession of drugs like cannabis and heroin. Chong was caught by sending shipments through the mail. Today, online head shops have also become prevalent; there are hundreds of head shops willing to sell their products online.
8. Our Target Market
Before starting our head shop business in East Rutherford – New Jersey, we conducted a market survey and feasibility studies and we are certain that there is a wide range of people who would patronize our head shop on a regular basis.
In view of that, we have created strategies that will enable us reach out to various groups of people who are likely going to become our customers. Below are our target markets;
- Corporate Executives
- Celebrities
- Taxi Drivers
- Socialites
- Business People
- Sports Men and Women
- College Students
- Tourists
Our Competitive Advantage
We are mindful of the fact that there are stiff competitions in the head shops industry in the United States of America, hence we have been able to hire some of the best business developers to handle our sales and marketing.
Part of what is going to be our selling point at East Rutherford is the fact that we operate a standard head shop, in a perfect location (one of the busiest shopping malls in New Jersey) and also the fact that our head shop facility is highly secured.
Another factor that will give Mike Morgan® Head Shop, LLC competitive edge is that we have enough packing space to accommodate the number of customers our head shop can contain per time. We are not ruling out the fact that we have a dedicated and customer centric workforce that are willing to go the extra mile to give our customers full value for their money and time.
We are not ignoring the fact that we are among the few neighborhood head shops in downtown East Rutherford that sells almost all the brands of paraphernalia used for consumption of cannabis and tobacco, and obviously, that will surely count towards our advantage in the market place and also the robust experience of our CEO and the head shop manager is also a positive for Mike Morgan® Head Shop, LLC.
Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and objectives.
9. SALES AND MARKETING STRATEGY
- Sources of Income
Mike Morgan® Head Shop, LLC is established with the aim of maximizing profits in the head shops industry and we are going to do all it takes to attract our target market. The sources of income for Mike Morgan® Head Shop, LLC are stated below;
- Sales of magazines (e.g., about cannabis culture, cannabis cultivation, tattooing, and music)
- Clothing, and home décor
- Sales of oddities, such as antique walking sticks and sex toys.
- Sales of other items such as hashish pipes, roach clips (used for smoking the end of a marijuana “joint”); vaporizers used for inhaling THC vapor from cannabis; rolling papers; rolling machines; small weighing scales; small ziplock baggies; cannabis grinders; blacklight-responsive posters and blacklights; incense; and cigarette lighters.
10. Sales Forecast
One thing is certain when it comes to head shop business, if your head shop is cozy, relaxing, well stocked with paraphernalia used for consumption of cannabis and tobacco and is centrally positioned, you will always attract customers cum sales and that will sure translate to increase in revenue generation for the business.
We are well positioned to take on the available market in East Rutherford, New Jersey and we are quite optimistic that we will meet our set target of generating enough income / profits from our first six months of operation and grow the business and our clientele base.
We have been able to examine the head shop market, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. Below are the sales projection for Mike Morgan® Head Shop, LLC, it is based on the location of our business and other factors as it relates to head shop startups in the United States;
- First Fiscal Year (FY1): $180,000
- Second Fiscal Year (FY2): $320,000
- Third Fiscal Year (FY3): $500,000
N.B: This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor offering same products and customer care services as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.
- Marketing Strategy and Sales Strategy
Top of the list on our marketing and sale strategy is generating a buzz for our head shop via word-of – mouth. Despite the fact that our first outlet is located inside East Rutherford shopping mall, the model of head shop we intend running is a neighborhood head shop hence we are not going to rely only on the conventional ways of marketing.
We don’t have the plans to run paid adverts on local TV stations, radio stations or even local newspapers but we will sure maximize every other available means to promote our business.
Our unique selling proposition is that we have a collection of almost all the brand paraphernalia used for consumption of cannabis and tobacco produced in The United States in our head shop, we also have assorted tobacco and cigar products et al.
In view of that, we are going to adopt the following marketing strategies to ensure that we do not only attract customers but generate repeated sales from them.
- Open our head shop in a grand style with a party for all.
- Ensure that we have a wide range of paraphernalia used for consumption of cannabis and tobacco at all times.
- Make use of attractive hand bills to create awareness and also to give direction to our head shop
- Position our signage / flexi banners at strategic places all around East Rutherford
- Position our greeters to welcome and direct potential customers
- Create a loyalty plan that will enable us reward our regular customers
11. Publicity and Advertising Strategy
Mike Morgan® Head Shop, LLC is a neighborhood head shop and we will ensure that we create the buzz that will make people in our area know about us and what we do. We are quite aware that one of the effective ways of promoting our head shop is to create special internal promotions which in turn will help us achieve our aim of leveraging on word of mouth publicity.
Here are the platforms we intend leveraging on to promote Mike Morgan® Head Shop, LLC;
- Encourage the use of word of mouth publicity from our loyal customers
- Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Google+ and other platforms to promote our business.
- Ensure that our we position our banners and billboards in strategic positions all around East Rutherford – New Jersey
- Have in-store ads to promote the fact that people can get a discount if they share a photo of our products on Instagram and mention our brand. We will also use a sign outside our store, and have our staff mention this to customers.
- Run Instagram contests where customers can share their photos of our products and shop. The photo that receives the most “Likes” can be rewarded with a discount or a free product.
- On certain days of the week (ideally in areas where we have low foot traffic), let people know they can get a reward (like a free product) if they post an Instagram photo of our products and mention our brand’s hashtag(s).
- Distribute our fliers and handbills in target areas in and around our neighborhood
- Advertise Mike Morgan® Head Shop, LLC business in our official website and employ strategies that will help us pull traffic to the site
- Brand all our official cars and vans and ensure that all our staff wear our branded shirt or cap at regular intervals.
12. Our Pricing Strategy
The prices of our paraphernalia used for consumption of cannabis and tobacco will be what is obtainable in the market. In fact, we will try as much as we can to sell below the industry’s average so as to attract loads of customers. We also have plans in place to discount our products once in a while and also to reward our loyal customers.
- Payment Options
The payment policy adopted by Mike Morgan® Head Shop, LLC is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America. Here are the payment options that Mike Morgan® Head Shop, LLC will make available to her clients;
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
In view of the above, we have chosen banking platforms that will enable our client make payment for products purchase without any stress on their part.
13. Startup Expenditure (Budget)
From our market survey and feasibility studies, we have been able to come up with a detailed budget for establishing a standard head shop in East Rutherford, New Jersey and here are the key areas where we will spend our startup capital;
- The total fee for registering the business in East Rutherford, New Jersey – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $1,200.
- Marketing promotion expenses (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- The cost for hiring business consultant – $2,500.
- Insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
- The cost of accounting software, CRM software and Payroll Software – $15,000
- The cost for payment of rent for 12 months at $1.76 per square feet in the total amount of – $105,600.
- The cost for shop/facility remodeling – $25,000.
- Other start-up expenses including stationery – $500
- Phone and utility deposits – ($2,500)
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000
- The cost for start-up inventory (stocking with a wide range of paraphernalia used for consumption of cannabis and tobacco and items related to cannabis culture and related countercultures et al) – $16,027
- The cost for store equipment (cash register, security, ventilation, signage) – $13,750
- Office equipment and furniture – $3,600
- The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al) – $4,000.
- The cost of launching a website – $600
- The cost for our grand opening party – $5,000
- Miscellaneous – $2,500
We would need an estimate of $250,000 to successfully launch our head shop in downtown East Rutherford, New Jersey.
Generating Funds/Startup Capital for Mike Morgan® Head Shop, LLC
Mike Morgan® Head Shop, LLC is a private business that is owned by Mr. Mike Morgan he intends to finance the business alone. Although they have plans to make the shop manager part owner of the business after 5 or 7 years of service, but that does not stop him from reserving over 80 percent stake of the business for himself and his family.
Mike Morgan has decided to adopt the following means to generate startup capital for the business;
- Generate part of the startup capital from his personal savings and sale of his stocks
- Source for soft loans from family members and friends
- Apply for loan from the bank
N.B: Mr. Mike Morgan has been able to generate $100,000, and the breakdown shows that they generated $75,000 from their personal savings and sale of their stocks and they generated $25,000 from soft loans from their family members and friends. The balance of $150,000 will be generated as loan facility from the bank.
14. Sustainability and Expansion Strategy
Part of the plans we have in place to sustain Mike Morgan® Head Shop, LLC is to ensure that we continue to make available quality products, services, improvise on how to do things faster and cheaper. We are not going to relent in providing conducive environment for our workers.
From our findings, another factor that kills new business is financial leakages. In order to plug financial leakages, the management of Mike Morgan® Head Shop, LLC will adopt the use of payment machine and accounting software to run the business.
We are quite aware that our customers are key components to the growth and survival of our business hence we are going to continuously engage them to give us ideas on how to serve them better. We will not waste time in adopting new technology, best practices and diversifying our services; expand our product and service offerings once the need arises.
We know that if we implement our business strategies, we will grow our head shop business beyond East Rutherford – New Jersey to other states in the U.S in record time.
Check List/Milestone
- Business Name Availability Check:>Completed
- Business Registration: Completed
- Opening of Corporate Bank Accounts: Completed
- Securing Point of Sales (POS) Machines: Completed
- Opening Mobile Money Accounts: Completed
- Opening Online Payment Platforms: Completed
- Application and Obtaining Tax Payer’s ID: In Progress
- Application for business license and permit: Completed
- Purchase of Insurance for the Business: Completed
- Renting of facility and remodeling the facility: In Progress
- Conducting Feasibility Studies: Completed
- Generating capital from family members: Completed
- Applications for Loan from the bank: In Progress
- Writing of Business Plan: Completed
- Drafting of Employee’s Handbook: Completed
- Drafting of Contract Documents and other relevant Legal Documents: In Progress
- Design of The Company’s Logo: Completed
- Printing of Packaging and Promotional Materials: In Progress
- Recruitment of employees: In Progress
- Purchase of the needed furniture, electronic appliances, office appliances and shop accessories: In progress
- Creating Official Website for the Company: Completed
- Creating Awareness for the business both online and in the neighborhood: In Progress
- Health and Safety and Fire Safety Arrangement (License): Secured
- Opening party planning: In Progress
- Establishing business relationship with vendors: In Progress