Key Things to Know Before Investing in a Vape Business

 If a vape shop wants to grow or shift its focus to a new product category, it may require an investment of tens of thousands of dollars – and securing those funds from a bank or credit union isn’t always easy.

If you have an opportunity to invest in a vape business, what are the things that you need to know first? Obviously, you need to know how much revenue the business currently earns, what they intend to do with the investment capital and what your expected return will be – but that’s only the beginning. The vaping industry is unique, and you don’t want to go in blind. Here’s what you need to know before investing in a vape business.

What’s the Vape Shop’s Market?

The first thing that you need to know is what the vape shop’s market is. If it’s a brick-and-mortar vape shop, the only competition will come from other vape shops in the immediate area. If the vape shop that’s offering you an investment opportunity is the only one in the region, you’re in luck because they’re probably very safe from a competitive standpoint. It’s likely that there are other nearby vape shops, though, and you’ll need to evaluate that fact when making your decision.

For an online vape shop, on the other hand, the competitive landscape is completely different because an online store’s competition is every other online store in the same industry. Achieving consistent success as an online vape shop is extremely difficult. 

What Revenue Streams Does the Vape Shop Have?

For many vape shops, traditional nicotine vaping products represent only one of many revenue streams. Some of the other revenue sources for a typical vape shop may include:

• Tobacco products like cigars, pipe tobacco and rolling papers
• Vaporizers for loose leaf and concentrates
• Herbal supplements like CBD oil
• Alternative nicotine products like nicotine pouches

For most of the types of products that a vape shop typically carries, the legal and competitive landscapes can change with little notice. The more revenue streams a shop has, the safer it’s likely to be.

Is the Vape Shop Legally Compliant?

Speaking of the legal landscape, compliance is a major issue for any vape shop because many nations treat vaping products in basically the same way that they treat tobacco products. Complying with all legal requirements can be expensive and challenging, but failure to comply with a major regulation can sink an otherwise successful vape shop. 

It’s crucial for any vape shop to:

● Check the customer’s ID before selling a product.

● Collect and distribute all required taxes and duties.

● Comply with the PACT Act in the United States, which means that all shipments of vape products need to be fulfilled by private courier services.

What’s the Vape Shop’s Plan to Return Your Investment?

Before investing money in a vape shop, you need to know how that business plans to return your investment while still remaining profitable. Will the business be able to retain its existing price structure and deliver a return on your investment, or will they need to raise their prices in order to remain profitable? If the shop does need to raise its prices, what assurance do you have that they won’t lose their customer base as a result?

What’s the Vape Shop’s Marketing Plan?

Marketing is one of the most crucial keys to success in the vaping industry. If the shop isn’t successful yet, you need to know how they intend to achieve success. In a local market, it’ll be extremely difficult to convince vapers to change their buying preferences because they probably already have vape shops that they prefer. For online vape shops, the competition is even more cutthroat. If the business is already doing well, you need to know how they plan to stay on top.

You also need to know how the business plans to keep up as the industry’s landscape changes. In the vaping industry, product preferences can change seemingly overnight. A brand like Fume Vape might be on top right now, but a new company could appear and change everything. Has the business successfully weathered previous industry shifts?

What’s the Vape Shop’s Community Standing?

Money can buy inventory, and it can greatly assist in a vape shop’s marketing efforts. One thing money can’t buy, though, is a strong reputation. You should learn everything you can about a vape business’s reputation before investing money in it because a spotless reputation will help to ensure the timely return of your capital. 

• If the business is a brick-and-mortar vape shop, is it well-lit and positioned in a nice part of town? Do people of all ages feel comfortable shopping there? Is the vape shop a valued contributor within the local community, or does it have a seedy reputation?
• If the business is an online vape shop, can you find honest customer reviews? Do people praise the solid customer service and fast shipping, or are the message boards filled with complaints?

How Loyal Is the Vape Shop’s Customer Base?

Before investing money in a vape shop, it’s crucial to have a good understanding of how sticky its customer base is. You should be granted full transparency into the business’s numbers, and here are some crucial details that you should examine.

• If it’s a brick-and-mortar vape shop, what typical demographic does it serve? There are many older vapers because smoking used to be much more common than it is today. Does the vape shop also have a younger customer base, though, to replace those older customers as they age out? You should also take a look at the vape shop’s loyalty program because that will tell you a lot about the volume of repeat business the shop receives.
• If it’s an online vape shop, how do people typically get there? It’s normal for a significant portion of an online store’s customers to arrive through search engines because that’s how every online business grows. You should also see plenty of purchases from direct visitors, though, because that indicates a high level of customer loyalty.