How to Start a Butcher Shop
Butcher shops have a long-standing reputation for being a prime place to get locally sourced, fresh, and rare meats. And not only do butcher shops offer a wide meat selection, but they also offer expertise and knowledge about meat and how to prepare it. So, if you enjoy working with meat and helping customers, starting a butcher shop is an excellent opportunity to apply your unique skills and passions.
A butcher shop’s main task is to prepare meat for sale. Butcher shops generally get meat locally, meaning the meat is fresh and supports local farms. First, farms sell livestock to a slaughterhouse, which then sells to butcher shops.
Preparing meat includes cutting, grinding, cleaning, and removing bones. Butchers also prepare meat for individuals or groups who purchased a cow from a cattle farm. Similarly, hunters may use a butcher shop to prepare their game.
Some other butcher shop tasks include:
- weighing, packaging, and displaying meat
- setting up deliveries
- performing quality inspections
As of 2022, meat markets in the U.S. generated $8.1 billion in revenue. However, this is a 0.2% decrease from 2021. Although the industry has seen decreased revenue, a trend that began in 2020, the industry has seen overall growth between 2017 – 2022.
Currently, there are 8,784 meat market businesses in the U.S., a figure which has grown by 1.7%. So, although revenue has declined, the number of meat markets has grown, increasing competition.
Current industry trends have challenged growth for meat market businesses. For example, businesses are still experiencing delays and setbacks that began in 2020 and have increased competition in the market.
Butcher shops and meat market industries took a steep dip in 2020 when the world was affected by the covid pandemic. With many individuals staying home, consumers made fewer meat purchases in groceries and marketplaces. The meat industry also experienced shortages due to temporary closures and inadequate staffing. Coupled with the decline in consumer spending and production delays, meat markets and butcher shops have experienced a decline.
As the cost of meat usually determines how meat markets perform, a rise in the cost of red meat is a good indicator of an increase in revenue. However, although increased costs are a positive revenue indicator, the increase in competition can make it challenging for butcher shops to be successful.
An optimistic future
Although obstacles during 2020 hindered meat production and sales in the U.S., many people are returning to purchasing meat in stores, and unemployment has decreased. These two facts imply that people have more discretionary money to spend on finer cuts of meat.
Butcher shops have versatility in their target market. For instance, here are some of the primary markets:
- Individuals— Butcher shops sell directly to consumers out of a storefront. Customers come inside and make their selections and purchases. Additionally, individuals may hire a butcher shop to prepare hunted and farm-raised animals, such as cows, deer, or elk.
- Retail markets— Grocery stores and farmer’s markets may use a butcher shop’s services to prepare meat for resale.
- Restaurants— Butcher shops may have contracts with restaurants to prepare meat for the restaurant’s menu. Some restaurants market their dishes as being locally sourced and ethically raised, leading them to butcher shops for specific cuts of meat.
Checklist for Starting a Butcher Shop
A butcher shop can be a lucrative business, but there are many things to consider before starting. From writing a business plan to finding funding, and more, this checklist has some tips to help start a successful butcher shop.
Step 1: Write a Business Plan
A business plan is essential for any business, and a butcher shop is no exception. A business plan will help get the ideas out of your head and help to solidify your business goals and strategies.
Not only will a bank require you to have one, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Name the Business
When naming your butcher shop, it is important to choose a name that is descriptive and memorable. You may want to consider naming your shop after the products you offer, such as “The Meat Shop” or “The Butcher’s Block.”
You can also choose a name that reflects your location or the type of customers you serve.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a butcher shop, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
When starting a butcher shop, it is important to choose a location that is accessible and convenient for your target market. Make sure to do your research and select a location that has the potential to be successful.
A few factors to consider include:
– Space for the retail area, work area, and cold storage for inventory
– Demographics of the area
– Parking and ease of access to the shop, not only for customers, but also for suppliers to unload product
– Cost of the location
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A butcher shop will need a variety of licenses and permits that are needed in order to operate. Requirements also vary by location but will commonly include a business license, sales tax license, food handler’s permit, health department permit, and more.
Additionally, a shop that slaughters will have additional FSIS/USDA requirements and inspection.
Step 6: Research Suppliers
Having access to reliable and high-quality meat is essential to the survival of your butcher shop. Getting fresh meat from a local farm is ideal, but they may not be able to supply a sufficient amount of meat on a consistent basis.
Your supplier choice will depend on the different types of meats being sold, as your shop will likely sell a combination of red meat, sausage, pork, chicken, lamb, bacon, and turkey. To sell a wide variety, it will likely take a combination of local, regional, and national suppliers to keep your shelves stocked.
Step 7: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a butcher shop is another.
The cost to start a new butcher shop can be expensive, especially due to the cost of acquiring and renovating a storefront.
Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 8: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 9: Get your Marketing Plan in Place
The next step is to start thinking about how to spread the word and get customers in the door. Advertising is a key part of any business, and it’s important to differentiate your shop from the local supermarket. Here are a few ideas for promoting a new butcher shop.
Traditional print and broadcast media are always an option, but with the rise of digital media, there are now more choices than ever before. Where does your target market spend its time online, and what social media platforms do they use?
Another way to promote a new butcher shop is to host a grand opening event. This is your chance to show off your shop and attract attention from the community. Invite local dignitaries and the Chamber of Commerce and then hand out flyers and offer grand opening special discounts.
Getting involved in the community is a long-term approach to marketing your shop. Attend local events, sponsor youth sports teams, or donate to charity. This will help you build relationships with potential customers and make them more likely to support your business.
Step 10: Get Business Insurance
A butcher shop business will need insurance to protect against liability for injuries that occur on the premises, damage to the property, and losses due to theft or equipment failure.
The type and amount of insurance coverage will vary depending on the location and size of the butcher shop, as well as the value of equipment and inventory.
While all butcher shops should have at least worker’s compensation, basic liability, and property insurance, insurance covering the loss of inventory or business interruption insurance is also recommended.
Step 11: Hire Employees
Hiring a good team will be important to the long-term viability of your business. Preferably, finding employees with experience working with meat is ideal, but it’s also important to find people who are able to work under pressure, value food safety protocols, and will provide excellent customer service.
It is also important to consider the personalities of potential candidates when making your decision. After all, working in a butcher shop can be a challenging environment, so you will want to make sure that your employees are able to work well together.
Related: Hiring your first employee
Step 12: Set up an Accounting System
Setting up an accounting system for your butcher shop is critical to your business’s long-term success.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a butcher shop?
Starting a butcher shop will take time and planning to get all the pieces in order. One of those planning steps includes setting a reasonable budget. So, what are some of the costs to include in the budget? Let’s take a look.
Business Formation Costs. One of the first steps in setting up a business is acquiring all the essential permits, licenses, and insurance. Permits and licenses are regulated by the state (and sometimes the city).
Retail Space. Most butcher shops have a retail storefront to welcome customers. Whether you purchase space or rent, this expense can be a large portion of your initial budget. Typically, retail space rents per square foot per year. For example, you may see an ad for space available at $10/sq ft/yr, which translates to rent costing $10 per square foot per year.
The cost of retail space fluctuates based on location and population density. The cost per square foot would be lower in a less popular location compared to a high-density metropolitan location. Prices can range from $10/sq ft/yr to $40/sq ft/yr.
So, for example, let’s say your location is 1,000 square feet and is in a modestly populated neighborhood. Here your rent could be $10 per square foot each year, costing you $10,000 annually.
Butcher Shop Supplies & Equipment. The type of equipment will vary depending on how much processing will be done in the store. Some common equipment will include a walk-in freezer, refrigerators, display coolers, prep tables, cutting boards, processing equipment, meat slicer, grinders, bone saw, commercial knives, trays, plastic wrap, butcher, paper, etc.
Employee Wages. Employee wages are another expense that is important to include in your startup budget. For example, the base hourly cost for hiring butchers in the U.S. is approximately $18. Additionally, you may hire employees to manage the cash register and clean the store. Typically, retail employees earn around $18 per hour as well.
Having some upfront money saved for employees will be essential, as outgoing expenses are often more than inflows during those first few months.
Meat Purchases. Meat prices are largely based on the value of red meat. So, as the prices of red meat increase, it is likely that other meat sources like poultry and fish will also increase. Butcher shops typically purchase meat based on weight.
How profitable is a butcher shop?
If you can manage low costs, such as meat purchases and employee wages, and sell your meat at a high price, you can secure a profit.
Red meat, such as ground beef, retails at $4.46 per pound, whereas sirloin steak retails for over $10.59 per pound. So, if you purchase cattle at $1.41 per pound, your profit ranges from $3.05 – $9.18 per pound of meat. (Note: The price of beef is likely higher than $1.41 after the slaughterhouse fee.)
After a cow has been slaughtered, the hanging weight (its weight minus non-food parts, such as the head and hide) is about 62% of the live weight. The average cattle weighs 1,300 pounds, so the average hanging weight is about 800 pounds. Therefore, your profit from one cow comes in between $2,400 – $6,800.
Are there grants to start a butcher shop
It’s extremely rare to find a grant to start a butcher shop. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a butcher shop?
A butcher shop must be clean and reliable, which builds trust and an overall reputation. Your store’s reputation is ultimately what keeps customers returning time and again. Here are some valuable skills to help build your brand reputation.
Sales and Marketing. In today’s competitive market for butcher shops, your ability to sell your products can determine the difference between success and struggle. You will need to sell your products at a competitive price yet maintain a comfortable profit margin. And, with the ever-changing cost of red meat, keeping the profit margin steady can be tricky. However, with good marketing and sales, you can keep income flowing, regardless of price fluctuations.
Organization. Although butcher shops can operate with a sole operator, you may find it convenient to hire employees (i.e., butchers, managers, accountants, and marketing managers). With employees comes the need for management and organization. The ability to organize schedules and manage employee expectations and standards are helpful skills.
Understanding of Meat. Patrons often rely on the knowledge of butcher shops to help them make meat purchases and learn how to prepare the meat. This is where understanding different animal meats and cuts can come in handy. Further, when you educate your clients and help them make purchasing decisions, it builds trust, which in turn, makes it easier to sell to them.
What is the NAICS code for a butcher shop?
The NAICS code for a butcher shop is 445210, which is classified as a Meat Market.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Owning a butcher shop is a great way to sell locally sourced and fine cuts of meat within your community. Although high competition and fluctuating meat prices pose challenges, many shops still turn a profit. So, despite the challenges, with a little determination and passion, your butcher shop can be successful.