How to Start a Warehouse Business

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Unless you run hot air balloons, empty space doesn't bring in much money. Fortunately, many businesses are willing to pay for space if you have it to lease and if you offer the supplementary services that go along with it. When companies look for warehouse space, they are often looking for the shipping, receiving and logistics services that go along with that space. Knowing your market is key to building a successful warehouse business.

Know Your Warehouse and Logistics Market

Market research is the first thing you should do for most business startups, and warehousing is no exception. Find out which warehousing businesses already exist in your area and what the demand is for similar services. According to General Steel Buildings, a warehouse manufacturer, the top cities for warehousing in 2020 are Atlanta, Chicago, Dallas, Houston and Detroit.

Even if there doesn't appear to be a market for a warehouse in your area, a closer look could reveal an untapped demand. The growth in home businesses and internet sales means there is a good possibility there are a few dozen budding entrepreneurs nearby who need a warehouse and distribution service that can store their goods and ship them to customers. Even a small warehouse could serve a few dozen small businesses using this model.

Research the industrial and logistics sector, both locally and on a national level, to determine the demand, the technology that is standard, and what may be on the horizon. You should know the cubic-foot pricing for space, how much of your space you expect to fill, and how the revenue will compare to your costs.

Select Your Business Model

The services you offer with your warehouse space are the key differentiators between your business and the competition. Few businesses are interested in a self-serve warehousing model like the type used for personal storage companies. Questions your customers ask will likely include:

  • What size inventory can you accommodate?
  • What size trucks can access your shipping platform?
  • How many employees do you have?
  • What security do you offer?
  • Will you pack and ship customized orders?
  • How fast and how often do you ship?
  • What inventory and tracking software do you use?
  • Do you have refrigeration and cold storage?
  • Do you offer environmental controls for humidity, heat and cold?

You also need to identify your primary market. An automotive parts manufacturer has different needs than those of a fresh produce supplier.

Warehousing franchise opportunities are currently rare to nonexistent. However, there are related franchises that could tie into your warehouse business, such as moving company franchises, self-storage franchises, or even a UPS Store franchise.

Starting Your Warehouse Business

Startup costs depend on the space you have, the size of your warehouse, and whether you own the property already or you plan to rent. In addition to the land and building, startup costs can range from $10,000 to $50,000. Typical equipment needs include forklifts, pallets, storage racks, conveyor belts, bar code scanners and computers.

Check out the zoning laws for your preferred location to confirm that the location can accommodate trucks. In addition to a business license, you may need additional licenses or permits depending on what you plan to store in the warehouse, such as hazardous materials or alcohol.

If you already own a warehouse that you are underutilizing and there isn't a market for warehousing in your area, there are many other things to do with empty warehouse space. An indoor dog park, fitness center or gym may be good options. There is even a growing demand for space among microbreweries, which are part of a booming industry and require space that a warehouse could provide.