The rising cost of rent has forced many brick-and-mortar companies to shut their doors and take their products to the internet. While this may be a solution for some, businesses in the service industry require face-to-face interaction with their customers.
Instead of fronting the high overhead costs of establishing a storefront, many business owners are taking their product on the road. Owners of these shops-on-wheels benefit from flexible schedules, low startup costs, and the added flexibility of mobility. Instead of waiting for customers to come to the store, the store can go to them.
Now more than ever, these businesses are booming. The barebones food trucks of days past have transformed into boutique experiences. From hip barbershops to gourmet restaurants, these mobile shops are popular across America. Smartphone apps and social media have changed the way mobile business owners can reach their target audiences, allowing companies to update loyal customers on specials and their current location with ease.
Though going mobile comes with some advantages, there are some costs and risks involved. Unforeseen vehicle maintenance, local licensing issues, and bad weather can come between you and your customers. The key to success is planning. If you have the next best idea for a mobile business, follow this guide to help you start the company of your dreams.
1. Develop your business plan
Before you hit the ground running and start gathering investors, start with your business plan. Take a hard look at the market and think about how your company will succeed. Your business plan should include a thorough description of your company, a market analysis, details about your product and how you will market it, and financial projections. Spend time on your business plan. If you plan on approaching investors, a detailed plan will help you get the funding you need.
2. Set your budget
Many business owners are attracted to the idea of running a mobile business because of the lower overhead costs. Though operating a business free of rent and utility charges sounds like a dream, startup costs exist.
- Vehicle: Investing in your vehicle may be the largest startup cost. If you choose to buy a pre-owned vehicle, expect to pay $10,000 or more for a used trailer or $30,000 or more for a truck. If you choose to invest in a new custom vehicle, it can cost anywhere from $100,000 to $200,000.
- Vehicle outfitting: If you purchase a pre-owned automobile, outfitting it to suit your business-specific needs could cost you more than the price of the vehicle.
- Registering a new company: The cost of registering your business should be around $300. This may vary depending on your state.
- Website/app design: If you plan on launching a website or an app, you can do it yourself for roughly $100 to $500, or hire a professional for between $3,000 and $6,000 upfront. Consider website hosting costs will be an ongoing expense.
- Point-of-sale system: You'll need a point-of-sale system to allow your customers to pay with credit or debit cards. These systems generally have processing fees or monthly subscription costs.
- Licenses/permits: License and permit costs vary depending on your state and your industry. To stay organized, make a checklist of the required licenses in your area.
Once your startup costs are taken care of, the key to your continued success is planning and budgeting. You will have ongoing costs that will continue even if business is bad, so plan ahead.
- Vehicle insurance: If your vehicle is used for business activity, you will need to purchase a commercial auto policy. This will provide liability coverage and protect you against accidents, vandalism, and theft. Note: if your business operates out of a trailer towed by another vehicle, the trailer and the vehicle should be insured separately. Get started by receiving a commercial auto insurance quote from our trusted partner, Progressive.
- Inventory insurance: If you are robbed, your vehicle insurance will only cover the automobile, not your inventory.
- Commercial insurance: You will need small business insurance to fill any gaps in your coverage. Make sure to discuss all possible scenarios to ensure your business is well protected. A good starting place for many small businesses is a business owners policy (BOP).
- Inventory: When you make your budget, make sure your inventory is a priority. After all, your business can’t succeed without your product.
- Staff pay: Decide early on how much money you want to pay yourself and your employees.
- Fuel: One cost that brick and mortar companies don’t pay is fuel. You will need to budget fuel for your generator and for your tank.
- Parking: If your home is not equipped to park your automobile, you will need to rent a secured space. These spots can cost $200 to $500 a month.
One of the biggest challenges brick-and-mortar companies face is convincing customers to travel to the establishment. Mobile businesses have the benefit of packing up and meeting their target market closer to home. Though this is an advantage, you may still benefit from putting effort into your promotion strategy.
Even if you keep your budget on track, unexpected costs are almost unavoidable. Plan ahead to help mitigate some of the specific risks mobile businesses face.
- Vehicle repair: Unexpected vehicle repair is the biggest risk for any business. Even the smallest repair can put you out of business for days or weeks. The best way to protect yourself from this issue is to treat maintenance as an expected cost. Put away money every month for vehicle repair so that when the day comes, you'll be ready.
- Bad weather: Mother Nature is unpredictable. If you are not careful, a rainy season or heat wave can set back your business. Plan ahead and use the bad weather as an opportunity to spend time honing your social media strategy or training employees.
Financing your mobile business
Whether you plan on spending a few thousand dollars or a few hundred thousand dollars to get your business off the ground, you will need access to capital. It's important to compare all options for financing to find the perfect fit for your company.
- Out-of-pocket: Save up and pay for your business as you go.
- Investors: Use your local small business organizations and personal contacts to acquire investors for your venture.
- Business line of credit: If you have decent credit, you can apply for a business line of credit to get started.
- Business credit card: This will give you a small line of credit to get your business up and running.
- Crowdfunding: Take your idea to the internet and raise funds for your venture.
3. Pick and register your business name
As you choose your name, reference the market analysis that you completed in your business plan. Knowing your market and competition will help you understand the audience that your name needs to attract. At this stage, it’s helpful to check Google Domains to see if the domain name is available for your business name idea, and how much it would cost. See if your name is available on social media sites, as this can impact your ability to market your business.
Your name will help you solidify your business plan and identify exactly what type of customer you will be targeting. Once you choose the perfect name for your company, register your business with the state.
4. Purchase your vehicle
Choosing your vehicle is among the most important investments you make. Your automobile will transport you and your product to your customers, so it must be in tip-top shape. Whether you choose to lease, buy pre-owned, or order a new ride, ensure your vehicle is attractive, personalized, and functional.
Check out online marketplaces for pre-owned vehicles. Keep in mind that mobile business automobiles are typically custom-made, so it is unlikely that you will find a perfect match. When you purchase your vehicle, make sure to budget the cost of customizing it for your business. Since food trucks are the most common type of mobile business, many of these pre-owned vehicles will be outfitted for food service. If you are planning to start a food truck or coffee shop, this could be the perfect solution.
Leasing a vehicle
When you launch a business, it is always smart to start small. If you would like to try leasing a vehicle before you invest in your own, there are companies all over the United States that offer this service. Bear in mind that you will not be able to customize it to perfectly fit your business. Most leased vehicles will only be outfitted with basic equipment. This type of vehicle would work best for business owners who can operate with minimal equipment.
New custom vehicle
This is the most expensive option for investing in a vehicle, but you will be set up with a brand new automobile and you won’t have to spend any money on customization. There are several companies that specialize in creating custom mobile businesses. Hiring professionals to build a custom automobile will ensure that you are well equipped to run your business out of the vehicle. This is the perfect option for any business owner that can afford it.
5. Acquire the necessary licenses
Once you own your vehicle and you have a registered business, the next step is getting your mobile business licensed. Every city has specific requirements for mobile businesses so make sure you gather all pertinent information for your area. For example, New York City caps the number of food truck permits it issues. If your city has similar limitations, and the cap is maxed out, you could be placed on a waiting list that could take years to clear. Review this list of licenses, checking to see which your state or city requires.
State business license
Before you operate any type of business you will need general business licensing from your state. Once you have your vehicle and business name, this should be the next step. Visit your state’s government website for details.
Local business license
Depending on your city, there are various specific licenses for mobile businesses that you might need to apply for. Every city has vastly different requirements and regulations. City business licenses, tax permits, signage permits, or zoning permits are some common licenses and permits you might be required to have.
Before you start selling products you will need a seller’s permit. This will allow you to collect tax from your sales. This permit is your state’s way of controlling tax collecting and reporting so it is very important to obtain it before you open your business. Go to your state's Department of Revenue website to file your application.
Most cities require a fire inspection when the initial business licenses are filed. If you operate a mobile business with propane or gas, you will be given an initial inspection and subsequent inspections make sure that everything stays up to code.
Health department permit
For salons, restaurants, and other service-based companies, your business will be inspected by the health department and given a rating based on the safety of your services. This inspection will be conducted at the same time as the fire inspection.
Any industry-specific licenses such as food handlers permits, TABC licenses, or cosmetology licenses will need to be filed and paid for. The process for obtaining these licenses is the same for mobile and traditional brick and mortar companies.
In addition to these permits and licenses, look into your city’s requirements for operating your mobile business in public. Some areas prohibit vendors from selling in public, so you will have to find private areas to operate your business. After you receive this information, you will be able to plan out where you will operate and what it will cost.
6. Hire your team and get selling!
Once your vehicle is complete, your inventory is stocked, and your permits are filed, hire your first team. Whether you just hire your best friend or you employ a whole staff, make sure everyone is excited about this thrilling new venture. To commemorate the launch of your new business, plan a grand opening and start selling!
Starting a business can be daunting. The long hours and never-ending paperwork will pay off when the business of your dreams has its grand opening. Whether you roll out the next big mobile boutique or your very own rolling flower stand, protect your company with auto insurance. The key to success in this business is a thoughtful plan and bold execution.