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To succeed as an entrepreneur, you must develop the ability to select and offer the right products or services to your customers in a competitive market. More than any other factor, your ability to make this choice will determine your success or failure. Fully 80 percent of the products and services being consumed today are different from those that were being consumed five years ago. And five years from today, fully 80 percent of the products being used will be new and different from those being used today. There are thousands of products and services available to consumers today. And there are unlimited opportunities for you to enter the marketplace and compete effectively with a new product or service that's better in some way than what's already being offered by your competitors. Remember, your skill at choosing that product or service is critical to your success. The most important thing you can do before deciding what to sell is to think. And the more you think about a product or service before you bring it to market, the better your decisions will be. So how do you start? To make a product successful, you must be personally and emotionally committed to its success. Once you've got a product or service in mind, you need to begin with a self-analysis:
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What kinds of products do you like, enjoy, consume and benefit from? Do you like the product or service you're planning to sell? Can you see yourself getting excited about this product or service? Would you buy it and use it yourself? Would you sell it to your mother, your best friend, your next-door neighbor? Can you see yourself selling this product or service for the next five to 10 years? Is this a product or service that you intensely desire to bring to the marketplace? Then analyze the product or service from the customer's point of view:
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What does the product achieve, avoid or preserve for the customer? How does the product improve your customer's life or work? What kind of customers will you be selling the product to? Do you personally like the customers who'll be buying this product or service? Imagine that you've hired a management consultant to get advice on introducing this new product or service. They're going to cut right to the chase and ask you these very objective, bottom-line questions about the product:
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Is there a real demand for the product at the price you'll have to charge? Is the demand large enough for you to make a profit? Is the demand concentrated enough so you can advertise, sell and deliver the product at a reasonable expense? Dig even deeper into the potential success of your product or service by determining the answer to the following critical questions:
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What is to be sold, exactly? Describe the product in terms of what it does for the customer. To whom is the product going to be sold? Describe your ideal customer. What price will you have to charge for the product for it to be profitable? Who's going to sell the product? How is the product to be sold? What method of sales, or process of promotion, will you use? How is the product or service to be manufactured or produced?
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How is the product going to be paid for and by whom? How is the product or service going to be delivered to the customer? How is it going to be serviced, repaired, guaranteed or replaced? And you're not done yet. There are a series of additional questions you need to ask before you make a final decision on a new product or service offering.
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Is there a real need for the product or service in today's market? Is your new product or service better than anything else currently available? What are the three ways that your product is superior to your competition? Is your product lower priced or of better quality than anything else that is available? Do you think you could become the number-one supplier in the market for this product or service? For a product or service to succeed, it must be the right product, being sold at the right time, to the right customer, in the right market. It must be produced and sold by the right company, and the right people. What you have to decide is this: Is this product right for you?
Countdown to Startup
Not sure where to begin your startup efforts? This 12-step process will help you be up and running before you know it.
By Romanus Wolter June 22, 2005
Step 1: Gain Personal Focus
Starting a business is tough. Whenever we have an idea, others may provoke our self-doubt by asking, "Where will you get the start-up money? How will you market it?" Your best strategy for redirecting this energy is to create a personal focus that's rooted in your passion. Start by defining your intent, your goal and your purpose. This is the underlying emotional foundation of your business. There are two forms of intent: internal and external. Your internal intent states the main objective that your business will accomplish in your life; your external intent defines how your business benefits others. Write down your internal intent, and share it with others. It provides you with direction and selfconfidence. When people hear and understand your objective, they become motivated to help you. Next, record your external intent, describing the problem your product or service solves and who it will ultimately help. People relate personally to benefits, and they'll give you ideas on how to improve your product rather than question its validity. Most likely, someone else has started a business similar to yours. However, no one has your intent. Gain your true focus, and you will inspire others rather than pique their doubts.
Step 2: Create an Instant Impact Message
When most people hear about a new product or service, they immediately ask themselves "How will I or someone I know benefit from this idea?"
People process this question instantly-usually within 10 seconds. To inspire others to help you succeed, you need to develop an "instant impact message" that helps people immediately recognize the value your business offers. Your instant impact message is a brief, powerful message that's based on the benefit you offer to your customers. Benefit distinguishes your business from the competition and makes it easy for people to remember you. They then become part of your sales team as they share information about your business. Creating a winning message that clarifies your purpose and maintains a specific focus is really quite simple. First, write down how your business helps your customers. Circle any key descriptive words--ones that resonate with your heart. Then use the most exciting words to form a single statement that focuses on the key benefit your business provides. For example, if you own a restaurant, you can use "Healthy food that satisfies any appetite." Use your instant impact message everywhere--at business functions and on your business cards. The more people hear about your business, the more business and ideas you'll generate.
Step 3: Discover What Works
Companies pay millions of dollars to professional market researchers to find out what people really want and how they want it. You can uncover a wealth of information by taking field trips to discover how your product or service will satisfy people's desires. Get out of your head, unplug yourself from the computer, and speak with others who have succeeded to discover what really works. The real-world information you gather will save you time, money and frustration. Visit business owners in your neighborhood and in other cities. Ask them how you can succeed faster and what mistakes you should avoid. Simply ask them to brainstorm with you and share any ideas and strategies that come to mind, without censoring or judging. In addition, research recent articles written about your industry. A reporter's job is to investigate the marketplace and report the latest trends and best strategies. Learn from them, and uncover new resources, outstanding marketing ideas and new contacts that will help you grow. Don't lose any of your ideas. Purchase a "product notebook," a place to store any information, ideas and articles you collect.
Step 4: Protect Your Idea and Yourself
Great ideas need protection. You don't have to register your business name, logo or slogan to obtain copyright and trademark protection. Protective laws work under the first-use rule--whoever uses an item first owns it. However, these rules work more like "No Trespassing" signs. You must be willing to go to court to enforce them. A wonderful preventive measure is using a daily planner and creating a paper trail--tracking all meeting dates, attendees and discussions. If necessary, this information can someday serve as evidence in court. Continue as a sole proprietor as long as possible; this will allow you to test out the entrepreneurial waters without incurring any extra expenses. If you discover any risk for which insurance is either too costly or unavailable, consider protecting yourself by creating an LLC or a corporation. Consult a lawyer early in the startup process, and obtain his or her advice on how to best protect your business. For great referrals, contact your local SBA office or chamber of commerce.
Step 5: Stop Struggling to Convince Others
Instead, inspire them with a one-page sales script. When you speak positively about your business, it inspires others to help you succeed rather than question your abilities. Your one-page sales script quickly generates trust by showing key supporters the value you offer and how you will successfully deliver on your promises. In your script, confirm your passion and share your successful experiences by:
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Focusing on the benefits: State the name of your business and your instant impact message. Telling what's for sale: List your top three products or services. Showing that it works: Provide at least two real-life testimonials--from paying or nonpaying clients who have experienced your work. Proving you can make it a success: Share a brief biography of yourself outlining why you created your business and your related experiences. Making it easy to find you: Cite your contact information. Your one-page sales script becomes the foundation for all your marketing efforts. It can be used to open conversations at networking events or when speaking to potential customers.
Step 6: Conduct a Reality Check
As you begin developing your business, you will uncover unforeseen threats that may shake your confidence. This doesn't mean you are no longer passionate about your business; it means you are grounded in a new reality. To succeed, don't dismiss any threats. Reaffirm your commitment, and create a strategy to move forward by conducting a reality check.
Review everything you have accomplished, and list any business opportunities you uncovered. Write down any threats you've discovered, and mark them either avoidable (if there's a way to counter them) or unavoidable. Create action steps to manage any unavoidable threats by connecting with someone you trust. Ask that person how he or she would overcome the threat and turn it into an opportunity. Create your own "three rules to live by" that states the key opportunities you will take advantage of and the actions you will take to counter any threats. Gain confidence by promising to work through any threats you encounter.
Step 7: Use Focus Groups to Test and Improve Your Idea
Passion sometimes clouds judgment. Thinking that you know what is best for your customers is one of the most common mistakes in starting a business. To avoid "selling only to yourself," seek real-world advice by holding regular focus groups. A focus group gathers together potential customers, friends, family and other entrepreneurs who can provide unbiased, objective feedback on how to improve your business. It's important to obtain these fresh ideas early in the startup process because you can improve your business for a relatively low cost. Think of your focus group as a business meeting. Open by reading your one-page sales script, and then ask for honest feedback: "How can I improve my idea?" "Is the business name appropriate?" During the session, keep an open mind and don't defend your business. Write down every idea. Afterward, analyze the ideas, and keep and implement those that are most useful. To continually discover new ways to improve every aspect of your business, hold a focus group once every two weeks.
Step 8: Get Price Quotes From Manufacturers
Your business's identity begins with those things that need to be created or produced--such as business cards, menus or a product. To get the best price when requesting information from outside entities, prepare a request for quotation (RFQ). 1. Clarify your idea. Create a detailed example of what you want produced, even if it's only a drawing. 2. Develop a list of manufacturers. Sources include colleagues, the Internet, association lists and store owners. 3. Create a table with three columns. The first column lists your specific requirements, the second shows responses from company contacts, and the third is for evaluation purposes. 4. Send your RFQ to one company as a practice run. Update your RFQ with industry-specific terms. Showing that you are knowledgeable about the industry will lead to better prices. Then send your RFQ to three more companies. 5. Evaluate your responses with a trusted colleague. This keeps your bias at a minimum. 6. Negotiate with your top two manufacturers. This is a business relationship, so make sure you like and trust your chosen partner.
Step 9: Create Your Marketing Strategy
Marketing is not about persuading people they need something. It's about telling the right people about the benefit your business provides. You can maximize your resources by using "octopus marketing"-creating one program that reaches lots of your customers. Hit an octopus on the head, and its tentacles stretch out in many different directions. The head of the octopus represents any organization or person who has contact with many of your customers. The tentacles spread out, sending information about your business over and over again. Follow these steps to create a marketing program that works for you: 1. Define your customer. What is the unique benefit you offer? Create a list of customers who need that benefit. 2. Create a list of "octopus marketing" ideas to spread the word. Invite your friends, family and colleagues to provide you with ways you can reach your target customers. 3. Implement your favorite idea. Choose one program you would love to do, because then you will actually do it! 4. Test it. If the idea works, do it again. If it doesn't, try another. Conduct at least three different marketing programs each month.
Step 10: Set Prices for Success
Your product or service must be priced to entice buyers and cover your overhead, production, distribution, labor and marketing costs. And most important, you need to make a profit. To do that:
Define your personal financial goals. Your goals impact your pricing strategy. Some people want to make a million dollars on one idea. Others want to make $50,000 to help fund their business development activities. Investigate market trends. Pricing is subject to market forces and consumer demands. Obtain information to help you predict your market in terms of sales potential, growth prospects and trends. Obtain competitive information. Consumers price shop. Walk into stores, and use the internet to uncover your competitors' pricing strategies. Unless you provide special features for which consumers are willing to pay more, your price has to be competitive.
Cover your cost of doing business. At first, you will be using your "best guess" cost estimates. As your business grows, track your real costs of doing business, and reflect them in your pricing structure.
Step 11: Organize Your Future With Process Sheets
Process sheets define the action steps and resources associated with key day-to-day business activities. They enable you to identify, develop and test your back-end business support systems, saving you time and frustration. Together, they form your "operations manual"--the policies for running your company. Writing your processes down shows people how you will conduct business, which makes it easier for them to offer enhancements. Develop your own process sheets using these steps: 1. Put the name of the process at the top of each page--for example, "customer service" or "order fulfillment." 2. Build a three-column table beneath the name of the process. The first column lists the action steps necessary to complete the process, the second shows the person who is responsible, and the third states the expected time frame for completing each step. 3. On your first sheet, define your customer service process. The steps alleviate your customers' fear of the unexpected, giving them a sense of control and speeding up your sales cycle. 4. Create process sheets for other areas of your business as appropriate. In addition, improve your process sheets by periodically reviewing them with colleagues.
Step 12: Stay Motivated With a Business Action Plan
Congratulations, you've reached the last step in our 12-step startup plan. Most startup plans ask you to begin with a business plan. Instead, we've had you take real-world action to create a business that works. But now it's time to put something in writing by creating your business action plan. Similar to a business plan, the business action plan synthesizes your research and describes your business. However, it also identifies the necessary steps you will take to keep your momentum going. 1. Start your plan by clearly defining your business. State your business's main benefit, and finalize your sales script. (See "Countdown to Startup" in the June 2004 issue for details.) 2. Break your plan into sections by outlining the operational and administrative areas of your business, including legal, marketing, pricing, finance and internal process controls. 3. In each section, explain the work, research and market testing you've completed to date. 4. Conclude each section by specifically stating the next action steps you will take to create results. Your business action plan continually evolves as your business grows. It monitors and allows you to evaluate what has worked to date--resulting in your continual business success.
Low-Cost Startup Secrets
Overwhelmed with monetary stress over launching your business? Here are some cheap--and free--ways to get the job done.
By Marisa Liza Pell
So . . . you have a great idea and you're brimming with excitement about being your own boss! But then you do some research and find out you need more money, legal papers, an accountant, business loans . . . the list seems endless. Suddenly, the prospect of starting the business seems to be more trouble than it's worth-and you end up staying with your current job. But starting a business doesn't have to mean emptying your pockets, draining your back account and maxing out your credit cards. Here a eight ways to cut your expenses when starting a business: Get free advice from a successful mentor who's already been through the rough-and-tumble first stages of starting a business. You should find someone who has 100-percent faith in you and your business idea. And your mentor should preferably be someone who's already stable and established, not some overnight success: A good mentor who's already experienced business success will have been through a lot of ups and downs and can offer useful advice on what not to do when developing your business. This alone could save you thousands of dollars! Because they're established, this mentor will most likely have a long-term, trusted relationship with their lawyer and accountant. So that's who you should use, too. Because if your mentor does a lot of work with these professionals, they'll likely put more effort into getting your paperwork taken care of quickly because they want to make their established client happy. They may also offer you a discounted rate. Have your business plan drawn up for free by submitting your business to an MBA class. Most MBA students are required to take a class on devising complete business plans. If your business idea is well organized and creative, you could score a pretty snazzy A-list plan at no charge! Plus you'll be able to see your company from the perspective of numerous objective eyes. This will give you insight into any loopholes you may have overlooked when drafting your original plan. Pinpointing these errors early could save you money in the long run and will also help you be better prepared and organized for the future. Barter strengths with other business owners. Start networking with other small-business owners by joining your city's chamber of commerce or other local business group. At the networking events, don't by shy-ask questions. What are the needs these other businesses have? How are they struggling with different aspects of running and growing their companies? Pinpoint the areas in which they need help and creatively offer those services of yours that can enhance their business. In exchange, propose that they provide you with help in their area of expertise in the areas where you need help. Small-business owners love to barter: Hiring outside consultants can be pricey, but objective suggestions on improving your business are priceless. Get low- or no-cost advice from a university-affiliated Small Business Development Center (SBDC). These centers, which are sponsored by the U.S. Small Business Administration and scattered throughout the country, offer free advice and free-to-very-cheap workshops to new companies. They provide resources and information regarding every aspect of business. More often than not, entrepreneurs are creative people with great products but are lacking in some of the other, "not so exciting" areas of business. Services at these centers include such things as one-day seminars on getting started, free one-on-one counseling, legal clinics, online resources and downloadable forms. You can log on to the SBDC's Web siteto find the small-business center nearest you. Hire a virtual secretary. Most small-business owners are so busy multitasking their primary responsibilities that keeping on top the small stuff-like answering the phone-can be a challenge. So most new business owners set up voicemail boxes to answer their calls. But this can result in a major loss in business: In a world full of new technology, customers appreciate personal attention. Impatient and demanding, they want to hear a human voice on the other end of the line, someone who can answer their questions or take their order immediately. And remember, if you don't answer, someone else will. Hiring a virtual secretary provides the illusion of a professional office atmosphere, even if you're just working out of your den. Virtual secretaries can do anything from setting up appointments and taking messages to answering FAQ's and even answering your calls 24 hours a day, seven days a week.
Hiring a virtual secretary could cost you as little as $40 a month to start, a small price to pay for excellent customer service. Hire college interns to help with the small tasks. When you're just starting out, it's critical that you focus on the things that will bring in the business-developing your marketing strategies, perfecting your sales skills, performing the work your customers expect from you. But if you're going to find success, you won't have time to do it all. So don't. Interns can help out by running errands, making copies or helping with mailings. They can also be trained to answer customers' initial questions about your product or service or can handle PR duties or Web design-it will depend on the expertise of the students you hire. By hiring smart, you can carve out the time you need to deal with bigger and better things. Give the illusion of having more than one location by renting office space on an hourly basis. Why pay monthly rent for office space when you're just starting out? Instead, employ a "pay as you use" approach. Do most of your work out of your home office, and then when meeting prospective business associates or clients, rent space by the hour. Try to find a business center company that has numerous office locations under one corporate umbrella. One example of such a company is ExecuTec Suites.Having the option to work out of various locations will be more impressive to your clients and will look great on your marketing materials. Oh, and yes, you'll save money, too. Enlist the help of your support network. When you start a business, it's imperative to enlist the help and support of people you trust. It's easy for entrepreneurs to get into the mindset of "If I need to get something right, I have to do it myself." While this may be the case, spreading yourself too thin keeps you from building your business properly. In addition, as your business grows, you won't have time to be the janitor, the accountant, the secretary and the CEO! No one knows you better than your family, close friends and partners. Trust that they know your strengths and weaknesses, and allow them to help you out by offering complementary assistance. Doing this early on will help you learn to trust that other people can get the job done and will give you practice in the art of management and delegation. Those who believe in you will want to see you succeed, so determine their strengths, get them excited about your vision and ask them to help you out.
How to Find Product Sources
Got a bright idea but no idea how to locate suppliers for the products you want to sell? With our how-to guide, stocking your new business won't be such a chore. It seemed like such a great idea: You found the ideal niche market, complete with potential customers by the dozens and profit potential galore. Maybe you already found the ultimate location, or you've put together a stellar e-commerce site that would even put Amazon.com to shame. There's just one problem. You haven't the foggiest idea where to find all the products you need in order to stock your shelves. Don't be dismayed. This scenario happens time and again with new entrepreneurs, and it's understandable. Even if you come up with a brilliant idea of a product you want to sell, there's still the tiny detail of finding the actual product. You want to sell XYZ, but you're wondering, "Where exactly can I get a supply of XYZ to sell-and get it for a fair price?" The good news is, finding what you need isn't quite the needle-in-a-haystack task it's envisioned to be. "My experience is, there are a lot of existing channels used to match up manufacturers and distributors of products. Trade shows and trade magazines are two of the best," says Roger Green, co-founder of Cullinane & Green Inc., an executive coaching, consulting and publishing firm. Trade shows alone offer multiple opportunities for you to not only spot upcoming trends, but also to network with potential suppliers and hopefully find just the right product source. The New York International Gift Fair, for instance, attracts thousands of exhibitors, organized by type of product. Attending a trade show also gives you the opportunity to demonstrate you mean business. "By being
there, you establish yourself as someone being in business as opposed to being a consumer. The overwhelming majority [of attendees] are serious buyers," says Green, who, along with partner Joe Cullinane, has a diverse background in sales, marketing and senior management that's familiarized him with the ins and outs of product sourcing. "You also get to compare prices across a range, and you get a good sense of the business without having to put a lot of air miles into it." Trade magazines, meanwhile, can be an inexpensive way to find companies with which you want to correspond. Scour them frequently for mentions of any companies that might offer the products you need, then try to find out whether they'll be exhibiting at any upcoming trade shows you can attend. Trade organizations or industry associations related to the products you're interested in are yet another potential source of valuable contacts, including international companies. "[These organizations] have trade missions, and they have access to manufacturers from other countries," says Green. He notes that one of their main goals is to match up buyers and sellers. So how do you go about finding the right industry association? Check out these resources for help in locating the proper channels:
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Directory of Associationsfrom Concept Marketing Group Inc. Gale's Encyclopedia of Associations. And if you're not interested in purchasing your own set, most large public libraries carry a copy in their reference department. National Trade and Professional Associations of the United States "You should also look at companies that are regional," adds Cullinane, author of 21st Century Sellingand adjunct professor of marketing at DeVry University's Keller Graduate School of Management. "[Look at] retail stores that are very successful in one [geographic] area and not selling anywhere else." Start by contacting someone at the company or store and asking them whether they might want to sell their product in your hometown. "If something's been successful in one area, you'll find the company will want to expand but just don't have the resources to do it," says Cullinane.
Finding the suppliers you want is just the first step toward stocking your shelves with the proper inventory. Next, you've got some impressing to do. "You have to be perceived as a company and not a consumer," stresses Cullinane. "You have to present yourself as someone who is seriously interested in building a business," adds Green, who advises establishing yourself as a business entity as opposed to a sole proprietorship. " 'Inc.' makes all the difference in the world in [the company extending you] credit in the future." Keep in mind, also, that some firms, especially international ones, often prefer working with registered wholesalers of their products as opposed to retailers, says Green, so be prepared to inquire with a particular company about how you might become one. Companies that offer this option to buyers will likely ask you to fill out a few forms and provide some details on your banking history and so forth. You may need letters of credit and references in order to prove your ability to make good on your word. The advantage of becoming a wholesaler? Wholesale rates, which are often well below the retail prices of a given company. When making that initial contact with a potential vendor, be prepared to talk about what you do and why they would want to do business with you. Letters of credit from your bank, and letters of reference from people who know you and can vouch for your credibility, are also key-those can help you get an appointment with the vendor in the first place. Green advises starting small: "Find an easy one, and then build from there. If you start dealing with someone local who knows you and can see you, in a few months, you'll have a track record and can use the first one as a reference. It's like starting a fire-use kindling first, not the log." Look to your social network to determine whether you might know anyone who can help you. Make sure you tell friends and family what you're doing-you never know who they might know. "It's amazing the results you'll get [when you spread the word]," says Cullinane.
One caveat: If you do business with someone you know, make sure you clearly establish the terms of the relationship from the start. As Green cautions, "It's still a business relationship at the end of the day," cautions Green. "There's a saying among lawyers: The best contracts are drawn between people who don't trust each other." So enlist the help of an attorney who knows the ins and outs of drawing up the kind of contract you need-the money will be well-spent in the long run.
So You've Got a Supplier
Once you've found the companies that manufacture the products you want to sell, you need to get samples and be sure they're exactly what you want. "Be prepared to invest in that," says Green. "Sometimes companies will supply samples at no charge, but not always. And don't go looking for freebies-that can ruin your credibility." How many vendors do you need? "Just enough," says Cullinane. In B2B situations, you'll likely want at least two suppliers, maybe three. It's a good idea to have backup suppliers in case something ever falls through with one of your regulars. "A lot of times you build your business around one supplier," explains Cullinane, "and if something [happens to them], you could be out of business." Above all, remember the most important element of a successful retail business: the customer. Even if you've got a handle on where to get your product, you'll want to make sure you haven't forgotten the crucial step of determining whether that product will be met with a warm reception. "An entrepreneur needs to look at 'What do my customers need that they can't get?' " says Cullinane. "Satisfy that niche. Be the person who provides that." Click Here
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Check out Entrepreneur.com'strade-show finder for help in finding a trade show in your industry. After you find what you're looking for, do some research on the exhibitors beforehand so you can walk in prepared to sell yourself to the companies in which you're most interested. · Use the Web in your search for suppliers. "With powerful search engines like Google, you can locate suppliers all over the world," says product-sourcing guru Roger Green. "It's a low-cost way to go exploring." · TheThomas Register online will help you locate companies and products manufactured in North America. You can also place orders online and view thousands of online company catalogs and Web sites. Don't overlook the U.S. Department of Commerce in your search for suppliers. "Let them know you want to do business, and they'll do some match-ups," says Green.
Traditional storefronts aren't your only retail option. Here's a crash course in the fastest ways to start selling.
By Marcia Layton Turner
Forget what you've heard about retail businesses requiring tens of thousands of dollars, long-term lease agreements and several months to get up and running. The truth is, there are plenty of retail opportunities that break all those rules, requiring little time or money to start. From online storefronts to mall-based kiosks to shop-at-home events, we found several retail businesses with plenty of profit potential.
The Latest Retail Phenomenon
When Randall Pinson took a full-time job as manager of a cell phone store during college, he expected to earn some extra money for school. He didn't expect to learn how to start an online retail business that would ultimately support him and his family.
Pinson, 29, had only vaguely heard of eBay in the spring of 2000, when his boss asked him to try to sell some phones on the website. So he followed the step-by-step instructions on eBay.com and listed a shipment of phones for sale. Less than an hour later, a woman in New York offered to buy 15 of the phones for $125 each, making Pinson's employer $100 in profit on each phone. The 400 percent markup the store earned got Pinson's attention. He started selling cell phones and accessories on eBay himself on a part-time basis, and in 2002, he quit his job at the cell phone store and started his own online business using his last paycheck and a $2,000 American Express line of credit. By his college graduation a few months later, he was earning close to $60,000 a year selling on eBay. Always aiming for a 50 percent markup on his sales, Pinson (eBay User ID: rocket-auctions) occasionally does much better. "My most profitable eBay sale was a piece of telecom equipment I bought for $5 without really knowing what it was. I sold it for $750." Five years after starting, Pinson says confidently, "Anyone can make a living on eBay." His company, Rocket Auctions, based in Farmington, Utah, generated $400,000 in sales in 2005, with 2006 projections of $500,000. To bring in that kind of money, Pinson has one full-time employee who handles the day-to-day logistics of inventory management and shipping the 400 or so items that are sold in completed auctions from the company's warehouse each week. One of the advantages of starting an online retail business is that you can ease into it-you can easily try it out before committing, with little risk or expense. Dennis L. Prince, author of How to Sell Anything on eBay... and Make a Fortune!, recommends first taking a weekend and gathering items you have around the house, because "everyone has $3,000 to $5,000 worth of [merchandise] at their feet they want to get rid of," he says. Then research what you've got by reviewing completed eBay auctions in the Seller area of the site for the product category you want to sell in. Although the process of selling on eBay is extremely easy, selling stra-tegically and successfully can be hard work--"more work than you realize," says Prince, who has made several hundred thousand dollars on eBay in the last 11 years by selling in his spare time. Sole proprietors can make as much as $5,000 to $10,000 a month, Prince says. If you bring in employees, those numbers can grow substantially. Says Prince, "An online business [has] the lowest cost and potentially highest yield for a retail startup."
The Other Online Powerhouse
eBay may be the first name in online auctions, but Amazon.com is still the gorilla when it comes to etailing. If you prefer dealing in fixed-price sales rather than auctions, becoming an Amazon seller may be for you. Steve Crounse, 48, of Fredericksburg, Texas, hadn't thought much about starting a retail business until the company he and his wife, Le Anne, 48, worked for collapsed in 1999, and they suddenly found themselves without jobs. Given the opportunity to start over, they both decided the internet might have more potential than other traditional jobs. Steve says they soon learned that "the real trick to being successful on the internet is to find a niche market with products you can't find locally." As sports fans, the pair settled on sports apparel as their niche and founded Best Sports Apparel to sell licensed caps, jerseys and T-shirts. "The bulk of our market is [made up of] displaced sports fans who can't find their team's apparel nearby," he says. In addition to carefully choosing their merchandise and hiring a company to design their website, the Crounses also evaluated their competition, who were selling the same products but shipping in 10 to
14 days--a lifetime in online terms. So Best Sports Appareladvertised in huge letters on its website that it ships orders on the same day they're placed. The fledgling business, started in the Crounses' attic, grossed $100,000 in 1999 and grew steadily at about 30 percent to 40 percent a year, to the point that they needed to hire employees and move into a commercial space in 2001. And in 2003, Amazon called asking to partner with them. Amazon would perform all the front-end work, such as handling credit card transactions, and take a 15 percent commission, while Best Sports Apparel would acquire all the inventory. "We got a tremendous boost from partnering with Amazon," says Steve. "We saw a 50 percent increase in sales within just a couple of months, and [sales through] Amazon now account for about one-third of our total sales." That's a lot, considering Best Sports brought in $3.5 million in 2005. The remaining two-thirds of sales came from the company's website, which it continues to market and maintain. Although Amazon approached Best Sports Apparel about partnering, virtually anyone can sell on Amazon, Steve says. To get started as an Amazon seller, locate what you want to sell at the website, then click on "Sell yours here." If you'd like to sell items not in Amazon's inventory, or if you plan to sell in large volumes, you'll want to register as a Pro Merchant seller, which costs $39.99 per month. In addition to selling items of their choice, Pro Merchant sellers receive volume-listing tools, frequentseller programs, special selling rates, and downloadable inventory information. Whether you're a Pro Merchant or not, putting your item up for sale is a snap since the product image and details are already in the Amazon system. Once the merchandise sells, you receive the sale price minus selling fees. Amazon also takes care of all the billing and payment processing.
Home Is Where the Sales Are
If your idea of the perfect retail business doesn't include the internet, then direct sales may be more your speed. Instead of having a permanent selling space, you can use your customers' homes. In 1993, Terri Newberry, 43, was looking for a way to earn extra income without having to put her kids in day care. When a friend told her about direct-sales company The Pampered Chef, Newberry decided to look into it. She learned that the more than 70,000 Pampered Chef consultants worldwide sell the company's line of cooking products to consumers in their homes, at friendly gatherings called cooking shows. She also heard that her $100 startup investment could yield hundreds per month in income, so she decided to try it out. During her first month as a Pampered Chef consultant, Newberry held five cooking shows and made $502. By her fourth month, she made $1,000. "The business grew much faster than I expected," she says. In 2005, her income from Pampered Chef demonstrations was $118,000, or nearly $10,000 a month, and she is now an executive director, a position for the company's top-performing consultants. The key to Newberry's success is discipline, she says. "Direct sales is an industry that anyone can try, but not everyone can be successful in. Some people need someone telling them what to do," and that doesn't happen in a direct-sales business. To keep her business on track, Newberry typically works from 9 a.m. to 3 p.m. four or five days a week, plus a couple of nights a week. Although The Pampered Chef specializes in selling cookware, Newberry doesn't believe you need to be a gourmet chef to be successful. You do, however, need to be passionate about what you're selling, whether it's cookware, cleaning products or makeup. Before committing to becoming a direct-sales representative, carefully research the company you intend to represent. Do you love their products? Will you enjoy telling others about them? If not, keep looking for something that excites you.
Another consideration: "Make sure the company will stand behind its products," says Newberry. The last thing you need is to spend your time handling returns. Finally, check to see how many sales consultants are already in your area. Will you be in demand, or has everyone already attended a similar home party?
Big Bucks, Small Footprint In 2004, Richard Marston, 32, and his
business partner, Gerel Ransfer, 43, took over a Southern California Color Me Beautiful kiosk with a $5,000 investment and confidence that the makeup would sell if marketed properly. A little more than two years later, Marston--who handles the day-to-day operations of the business--now has two kiosks and more than 2,000 customers, 40 percent of whom are regulars. What sets Marston apart from many kiosk owners is his willingness to approach customers and actively demonstrate his products. He also operates his kiosks year-round, while most other kiosk owners only operate during the busy two-month holiday season, when 80 percent of kiosk sales occur. "Opening a cart [or kiosk] is a fabu-lous way to get started and open your first business," says Patricia Norins, author of the Ultimate Guide to Specialty Retail: How to Start a Cart, Kiosk or Store, and publisher of the industry's trade journal, Specialty Retail Report. "It's low risk, and you're not locked into a long-term lease," since carts and kiosks are typically rented on a month-to-month basis. The only major downside is the long hours--kiosks must be open whenever the mall is. Twelve-hour days are typical, although Marston works 16--from 5 a.m. to midnight most days. To staff his two locations, he has eight employees. The upside, of course, is the money. Norins has seen kiosks make as much as $15,000 during nonholiday months, while the eight weeks of the holiday season have generated more than $120,000 for some businesses. Marston's business is beating those numbers. In 2005, his two kiosks generated $350,000, and he projects sales of $500,000 in 2006. As with other retail businesses, find-ing a product or industry you love is critical. According to Norins, products that typically sell the best in a cart or kiosk are personalized, such as ornaments or gifts, and easy to demonstrate, such as makeup or toys. They should also offer at least a 300 percent markup, she says. Once you've decided what you want to sell, find a mall with a cart or kiosk available--the mall specialtyleasing manager can fill you in. But before committing to a space, check the traffic figures and the demographic profile of the mall's typical customer. Make sure it matches your target audience. Finally, line up part-time help. The more you staff your kiosk yourself, the lower your expenses will be, but you'll want to have a backup plan in case you become ill or need a break.
Get Started Now
Why invest in an expensive retail storefront with a lengthy lease when you can have all the benefits and few of the risks of a retail business with fast and easy formats, like an online store, direct sales or kiosks? The sales potential is there, minus the hefty upfront cost. In as little as a weekend, you can be ready to retail.
The Cost of Doing Business
Just how much cash does it take to open a retail business the smart and easy way? It takes money to make money, as the old saying goes, but fortunately, these types of retail businesses don't take a lot. Be prepared for these standard fees:
eBay store: eBay makes money by charging fees to list items, ranging from 25 cents to $4.80, depending on the starting value of the auction. If the item sells, eBay takes an additional 5.25 percent of
the selling price for items up to $25. Items sold for more than $25 have an additional 2.75 percent commission charged for the value between $25.01 and $1,000, and 1.5 percent on top of that if the value is over $1,000.
Amazon store: Amazon charges a 6 percent to 15 percent commission, depending on the type of product, plus a 99 cent transaction fee, and a closing fee that ranges from 65 cents for music to $1.23 for books, or 45 cents plus 5 cents per pound for larger items such as electronics or sports equipment. However, Pro Merchants don't pay transaction fees. Direct sales: You collect payments from customers and use that money to pay the wholesale cost of the company's merchandise, keeping the difference for yourself. Cart or kiosk: As an independent retailer, you pay the wholesale price of the merchandise and set your own prices on the products. You must also lease the kiosk from the mall at which you sell.
Where to Start?
Before you begin your business, you'll need to square away these details. Unlike traditional retail stores, smart and easy retail businesses can be set up quickly, with little risk and few resources required. Here's the lowdown on what you'll need to get started:
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Online store: Inventory, regular access to a computer, and shipping supplies, which you can get for free if you use U.S. Priority mail Direct sales: The initial investment, which can be as little as $100, and a phone Cart or kiosk: A monthly lease, which can cost anywhere between $800 and $2,000, as well as your inventory and a cash register Marcia Layton Turner writes regularly about small-business issues and is author of the award-winning book The Unofficial Guide to Starting a Small Business.