How to Start a Musical Instrument Store

Part 1 - How to start a Musical Instrument Store business - Background

Musical instrument stores sell new and used instruments to customers. They offer instruments used in traditional music ensembles, including brass, percussion, wind, and string instruments. Some stores also offer electronic keyboards, upright pianos, and classical grand pianos. They may also sell musical instruments for rock bands such as guitars (acoustic and electric), bass guitars, and drum kits.

Music instrument stores typically also carry sound reinforcement equipment such as speakers, amplifiers, mixing consoles, and microphones. Music accessories are also offered. This includes many items such as sheet music, song books, guitar effects pedals, replacement strings, rosin, reeds for wind instruments, picks, drumsticks, training guides, and music software.

Our guide is in 3 parts:

• Part 1 - How to start a Musical Instrument business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a musical instrument store?

The cost for beginning a musical instrument shop depends on the inventory you carry. Besides paying the rent, lease deposit,and utilities, you will need fixtures, a cash register(s), and the things need to run a retail store. You will need to carry inventory. Inventory investment can be very significant and an average store will carry about $50,000 to $100,000 in inventory. This is important because you want to give your customers a variety of choice.

Some manufacturers will loan the instruments on consignment to help a new store get up and running. You will have to have good credit to get the manufacturers to lend you equipment to sell, and sign a pledge agreement that makes you responsible for the instruments; however, this is a great way to start with less capital investment.

What are the ongoing expenses for a musical instrument store?

Like any retail store, the main costs are the carrying costs of maintaining the inventory, rent, insurance, utilities, and staff. Triple-net leases are the type where the tenant pays all the utilities etc. They are typically, $3 to $5 per square foot for highly visible locations depending on the rental costs in the local marketplace.

Ongoing marketing expense is very important. National chains such as Guitar Center are always having a promotion that is announced on popular radio stations. These campaigns can easily cost many thousands of dollars per month.

Who is the target market?

Your primary customers are parents looking to get their kids into music and music enthusiasts.

How does a musical instrument store make money?

A retail musical instrument shop buys at wholesale prices and then marks up the price by an average of 40% to sell to consumers. For example, the wholesale price of a quality guitar might be $300 and that guitar would sell for $420, giving the store $120 in profit. By selling goods to customers at a marked up price, they cover the cost that they spent on the goods while also earning a profit. Many musical instruments are pricy, so the opportunity to make profit is high. 

How much can you charge customers?

Usually, the markup in this business is an average of 40% above wholesale cost. You may have some items on sale and others that are called “loss-leaders,” which are sold at bargain prices to attract customers to the store that might also buy other items.

How much profit can a musical instrument store make?

Some music instrument stores are family–owned businesses that operate from the same location for decades. Smaller communities can typically only support the operation of one of these stores, so they gain the benefit of having a local monopoly.

If a store maintains an inventory of $100,000 and turns the inventory six times per year, this means the annual sales would be $140,000 times six which equals $840,000. Of that amount, $240,000 would be the gross profit.

Rent and utilities could be around $3,000 per month and staffing costs might be $5,500 per month. Marketing expense could be budgeted at $2,000 per month. In this example, the total expenses for the year would be $126,000 leaving a nice healthy profit, before taxes, for the business owner of $114,000.

How can you make your business more profitable?

It’s important to separate yourself from bigger chains. One way to do this would be to offer vintage instruments or rare items. Another option would be to set up an online store to allow for the sale of instruments by delivery or pickup. It’s important to have employees who know how to play instruments and how to fix instruments as well.

Side businesses like music lessons and instrument repair are other ways to increase profit.

Day-to-Day and Growth

What happens during a typical day at a musical instrument store?

First and foremost, your job is to sell musical instruments and accessories. Also, as the business owner you will need to make sure the store is clean, the inventory records are accurate, the cash register(s) have enough change, the marketing campaign is ongoing, inventory and supplies are replenished as needed, and the staff shows up on time to manage the operations. 

What are some skills and experiences that will help you build a successful musical instrument store?

Having in-depth knowledge of musical instruments and the differences in quality is very important. Your customers will rely on you to help them make good choices for instruments that they are able to afford. Most business owners in this business are also musicians. Workers in the store are also typically musicians. It is easier to help customers if you know how to play the instruments and can make good recommendations based on personal experience. Another key skill is instrument repair, which can be learned through experience and some classes.

What is the growth potential for a musical instrument store?

There are some very successful national chains, such as the Guitar Center. Many business owners start with a single location and then expand to multiple locations. It helps to be located in a town with lots of high school or college students who could be potential customers.

Competition is very severe in the major metropolitan areas known for music, such as Los Angeles and Nashville, so it may be easier to start in a smaller market area with the first store. If there is a local music academy or a school with a major music program that is a good area to consider.

How and when to build a team

You will need to have enough staff working in the store so that customers do not feel neglected. Many stores of this type offer the salespersons a minimum wage with the ability to earn sales commissions as well for the sales that they make.

Part 2 - Is a Musical Instrument Store business the right fit for you?

Part 3 - Action plan to launch your Musical Instrument Store business in 90 days