Thoughts?

abrumms · November 2007

Ok... So I once heard a successful entrepreneur say that his industry is a 5 billion dollar industry (I think it was custom window coverings) and that his goal was to corner only 1/1000th of market. I`ve always considered this an extremely interesting concept. That aside I`d like to know what you folks think about this idea. I`ve been making my dog`s "trendy" beds for as long as I can remember. Whenever someone comes into our house they always ask where we bought the beds and I explain that I made them. They`re nothing more than giant pillows but the trick is that I use high end "designer", trendy and "hip" upholstery fabrics that I purchase on clearance or upon it being discontinued (bucko savings here). The upholstery fabric can be scotch guarded so that it doesnt stain, and you can remove the filling and simply throw the cover in the wash and it comes out looking practically new. I must admit that my sewing skills are pretty basic and my zippers tend to be somewhat "Macguyvered" into the bed... but they work. So here are my questions: What do you think about this concept?Should I continue to make the beds myself (obviously after taking some lessons on how to correctly sew the beds) or should I find a "contractor"?Where do I find such a person if I need one?What do you think about the brandname "ChewieDog" (One of my basset`s name is Chewie)Thanks in advance!Aaron

johnqh · November 2007

I like the idea. I think there is a market.
However, the challenge is how much you can charge for it vs how much time you spend on it. It is a mathmatical questions about profit.
For example (I made the numbers up since I have no idea what the real numbers are), if the material costs $20 and you can sell it for $40, but it takes 1 hour to make, you are only making $20/hour, without even considering the time to market the product. Even though you are making money, I won`t say the business is profitable because your oppotunity cost is higher than the income (you can get a job somewhere else which pays you much more than $20/hour).
On the other hand, if the material is $20 and it still takes you one hour to make, but you can sell it for $70, you will make $50/hour. Now, that will be much more interesting.
This is when business plan becomes valuable. When I say "business plan", I am talking about concrete calculations on how to make the business profit, not something with big numbers to fool investors. Be honest and concrete in your calculations and projections.
Of course, if you outsource the manufacturering, you can make a profit even with low margins. That involves a whole new set of calculations.
My suggestion is, make it yourself in small quantities and start selling. Use eBay or local faires. Price high first and then gradually lower the price until you find the range when people start buyings. Then you have some real numbers to use in your calculation.

CookieMonster · November 2007

Excellent advice given so far. The concept of reaching only 1% of the market is an interesting concept and you have to start somewhere. You can`t get to 2% unless you go through 1% first. As a long term idea, I`m not sure the idea of cornerning 1% of a market has any validity - I am not sure there is a valid percentage. While market share is an important measure of success, it`s just not as important as profitability. ( Which is the ultimate measure, financially speaking. ) You also have to address other factors such as quality of life and so forth. You know... what`s important to you? I think if you really love making dog beds and can find a way to do so at a good profit ... as JohnQH advised ... then by all means ... go for it. However if the best you can do is $20/hour - and keep in mind that you bear all the risk - then you might want to refactor your plan until you can get to $50/hour profit. But again... what`s important to you?

johnqh · November 2007

I am going to expand on Craig`s post even more.
When people say "I have my own business", sometimes it only means "I own my own job". If you are doing the manufacturing (or service) yourself, you are really "self-employed". Yes, you have a profit, but that`s before you consider your own time.
When you have employees and have someone else`s work make money for you, that`s when you have a real business. However, soon you realize that you have to pay labor cost and there is probably little left.
Your oppotunity cost is the salary you can make by getting a job. There is no point of having a "self-employed" job if your income is less than the oppotunity cost. When you are self-employed, it is still a job because your income depends on how much time you put into it. You will find it is much less satisfactory than you expected.
However, if you have a real business, as long as you are in positive margin and have some savings to last you a while (and it helps if you are not married and have no kids), I would say go for it, because once the business is in motion, you will find new oppotunities - new ideas, new products, new customers. That`s the freedom we enjoy.

smallbizcoach · November 2007

Remember that everyone isn`t your client. There are people who can afford what you do, some that can`t, and some that you are too inexpensive for (they have expensive taste). Find the market that you want to go after, the demographics you wish to hit and then go after it.
In your mind (and on a piece of paper) write down all the characteristics that you would like your ideal client to have. Once you have that all done, then find out all about them. Where do they hang out? What magazines do they read? What types of things do they like? What clubs and activities are they involved in? How much extra income do they have to spend on stuff like this?
Best of luck!
Aaron

SecurityProfessional · November 2007

When you have employees and have someone else`s work make money for you, that`s when you have a real business. However, soon you realize that you have to pay labor cost and there is probably little left.

I think that the basic point being made by johnqh is a valid one. There is a big difference between just creating a job for yourself and creating an enterprise that grows to take on a life of its own.

There are millions of self-employed individuals who consider themselves to be "in business for themselves". Yet, when you consider the capital invested and hours worked, all these people have done is created themselves a mediocre paying job. There is absolutely nothing wrong with this - many people are much happier working for themselves in this manner and find that self-employment suits their lifestyle much better than a corporate job would.

I not sure that it is fair to say that these people don`t have a "real business", but somehow a distinction needs to be made between this type of self-employment and a self-sustaining enterprise that can succeed with or without the personal involvement of the business owner. The latter type of enterprise usually scales up well, is attractive to lenders and investors, and can readily be sold; while the self-employment type of enterprise usually has limited potential for growth, and has little or no value once the owner is out of the picture.

SecurityProfessional11/17/2007 5:14 AM

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