Diary of Opening A New Business

[LibertyForMe]

It is all numbers, price, and service.
You got to have that or you have lost before you start.

Jack, I've seen you say this a bunch - about how the numbers have to work out first, and how the business has to make sense. My question is how can a person evaluate an idea? You have mentioned numerous times to go after the old/boring industries, but how do you take an old or boring industry like office supply or nuts and bolts and make it make sense?

I have been feeling disheartened lately because I feel like both of my business projects suck. My software is really niche and really tough to find potential customers - I call all day long and get nothing. Even if I were to get a sale it would only be $500. Those numbers don't make sense. I feel like my fishing idea could work, but at the same time my value prop is to sell fishing stuff to new people who want to get into the sport by making it easy to understand and providing education. It just doesn't seem like something that I can scale to 10 million in 2 years like you are talking about.

Can you offer any insight? I know you are offering a 'spin' on how the industry you are in was traditionally done - how does a person go about finding the right angle of attack?

 

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[Lakeview]

This thread has been extremely informative. Get an idea based on needs, qualify it (numbers), test it, and act on it. Of course this thread goes into such great detail, but I think these are the key take away items.
Thank you Jack for your posts.

 

[theBiz]

In old industries there are old people, who have been in the biz 30 years plus, they are bored and not thinking competitively anymore, they have the name, they have the stock, etc. What they dont have is the want to get going and make crap happen.

Look in your town I bet there is a company that sells bolts and screws and has a 20k sq foot store. How many of your friends are saying hey I am going into bolts and screws...

You have been saying this for a long time and it really seems logical and true. I met a wealthy guy recently who wholesales plastic bottles, caps,etc to vitamin companies and so fourth... rather than trying to be the guy creating a new vitamin and getting it on the shelf he is finding people already selling vitamins or whatever needs a bottle and just getting inbetween the already existing sales. Competing with his reputation does sound as if it would be very difficult to be honest though as a startup. Rarely you speak about the process of running this successfully though.

So i get an account for one hardware store and i sell them a $2,000 test run first package of nuts and bolts.... How are you getting it there? Do you start local and distribute yourself? Your trucks, freight broker, DHL, Is it even cost efficient on the small orders? How can we compete with "1997 nuts and bolts distributors Inc" on day 1 who carries 10x more product lines than we do? What is the one thing we are going to say to the buyer that is going to make him break and try us? What if they tell you we order everything from one company, so its more convenient than working with you guys separately.

You're done cold calling? So you're not taking on more clients, just upselling existing?

I found this great article which seems to remind me a lot of what you're doing
http://www.entrepreneur.com/article/190460-1

 

[Lakeview]

I was able to meet Jack last week for breakfast. Thought I would share with this group some take aways from our meeting. First of all, Jack is the real deal and reminds me very much of some other great entrepreneurs I have crossed paths with. His mind quickly shifts from understanding the idea to how can it be monetized for the quickest return. If that idea isn't best he quickly determines an alternative route but focuses in on the primary opportunity.

For me, I was all about planning and making sure the i's were dotted and t's crossed. I was spending too much time planning and not acting. Reality is I had convinced myself it was necessary but it was prolonging the ability to get things going. (Guess that comes from my corporate upbringing.) I have so many ideas as to how I could build my business I was not focused on a solid starting point. He helped me understand how I could charge for my services that could generate cash flow quicker so I could hire additional personnel. Hiring additional personnel obviously would help jump start my business quicker.

To recap:

• identify the value proposition
• put numbers to it - number of potential clients in what market areas
• focus on one target area or market area at a time and use that as a test bed
  
• adjust and pivot as you receive feedback and expand into other market areas, THEN add additional products or services
  
• once you have a solid model, expand quickly by reinvesting in the business (in my case, adding inside sales)
• don't dabble in the details without drawing income or you're liable to get discouraged and give up

Thank you Jack for this thread and the opportunity to visit.

Well back to work!

 

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[McCoyH]

I was able to meet Jack last week for breakfast. Thought I would share with this group some take aways from our meeting. First of all, Jack is the real deal and reminds me very much of some other great entrepreneurs I have crossed paths with. His mind quickly shifts from understanding the idea to how can it be monetized for the quickest return. If that idea isn't best he quickly determines an alternative route but focuses in on the primary opportunity.

For me, I was all about planning and making sure the i's were dotted and t's crossed. I was spending too much time planning and not acting. Reality is I had convinced myself it was necessary but it was prolonging the ability to get things going. (Guess that comes from my corporate upbringing.) I have so many ideas as to how I could build my business I was not focused on a solid starting point. He helped me understand how I could charge for my services that could generate cash flow quicker so I could hire additional personnel. Hiring additional personnel obviously would help jump start my business quicker.

To recap:

• identify the value proposition
• put numbers to it - number of potential clients in what market areas
• focus on one target area or market area at a time and use that as a test bed
  
• adjust and pivot as you receive feedback and expand into other market areas, THEN add additional products or services
  
• once you have a solid model, expand quickly by reinvesting in the business (in my case, adding inside sales)
• don't dabble in the details without drawing income or you're liable to get discouraged and give up

Thank you Jack for this thread and the opportunity to visit.

Well back to work!

I wish I didnt live in Iowa. The family and I will take a road trip eventually when I get things flowing automated and hopefully set up a meeting with someone like Jack, Z, Bio, Vig or MJ.... But for now, it's crunch time, I can't rest until I'm where I want to be. At the moment I'm only sleeping every other day as we're about a week from product launch....

 

[ImpactMillions]

Awesome thread. Appreciate the insights Jack!

 

[Oztrepreneur]

Jack, I've seen you say this a bunch - about how the numbers have to work out first, and how the business has to make sense. My question is how can a person evaluate an idea? You have mentioned numerous times to go after the old/boring industries, but how do you take an old or boring industry like office supply or nuts and bolts and make it make sense?

I have been feeling disheartened lately because I feel like both of my business projects suck. My software is really niche and really tough to find potential customers - I call all day long and get nothing. Even if I were to get a sale it would only be $500. Those numbers don't make sense. I feel like my fishing idea could work, but at the same time my value prop is to sell fishing stuff to new people who want to get into the sport by making it easy to understand and providing education. It just doesn't seem like something that I can scale to 10 million in 2 years like you are talking about.

Can you offer any insight? I know you are offering a 'spin' on how the industry you are in was traditionally done - how does a person go about finding the right angle of attack?

Jack, there are a few people asking this same sort of question about how you evaluate the idea in the first place. Most of these boring industries seem well and truly tied up by old players and large existing companies with huge turnover, contracts and logistics frameworks......how does someone evaluate and break in? Any tips or advice?
Would really appreciate the advice from someone who has actually done it. Again, thanks for your time and effort in this thread as I am sure you are very busy running your business.

 

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[LibertyForMe]

Here is another question that is a bit more specific Jack. I realize my previous question was kind of vague.

Say I decide to partner up with some warehouses that supply a boring and old industry. I am using these warehouses as kind of a dropshipping partner, so they fill my product line out and I just get a small cut. I also have them carry my product in their warehouse, so I don't have to worry about shipping stuff myself.

So say I start selling to local businesses, like refrigerator repair guys or something. How do I convince the warehouse that I won't be stealing their customers? Since I am calling in the same geographic area as the warehouse, and calling their customers, wouldn't they be concerned that I would be calling on their customers and taking them? Even though I am primarily selling the warehouse's product lines and giving them a big cut, wouldn't they be worried about me 'stealing' their customers?

 

[JEdwards]

Say I decide to partner up with some warehouses that supply a boring and old industry. I am using these warehouses as kind of a dropshipping partner, so they fill my product line out and I just get a small cut. I also have them carry my product in their warehouse, so I don't have to worry about shipping stuff myself.

So say I start selling to local businesses, like refrigerator repair guys or something. How do I convince the warehouse that I won't be stealing their customers? Since I am calling in the same geographic area as the warehouse, and calling their customers, wouldn't they be concerned that I would be calling on their customers and taking them? Even though I am primarily selling the warehouse's product lines and giving them a big cut, wouldn't they be worried about me 'stealing' their customers?

You are so close yet so far away.

Think it through.. Here's a hint, How can you make them happy that you are calling every one of their customers in their trade area?

 

[jpa0827]

You are so close yet so far away.

Think it through.. Here's a hint, How can you make them happy that you calling every one of their customers in their trade area?

For some reason Jack I can picture you sitting back in your chair laughing while you tease us. But I get it, you probably just want us to learn to think on our own and be creative. (that's my take anyway)

I will be thinking about this one...

 

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[AllenCrawley]

For some reason Jack I can picture you sitting back in your chair laughing while you tease us.

Nailed it!

 

[LibertyForMe]

You are so close yet so far away.

Think it through.. Here's a hint, How can you make them happy that you are calling every one of their customers in their trade area?

Ok, so I've got a couple thoughts.

-You could get their customer list and only call businesses that are not on their list. The drawback to this is that many businesses don't keep customer records very well, and this could really complicate the process. The upside is that they would definitely not care because those potential customers are owned by their competitors.

-Since I would only be taking a small cut of the items that I sell that the warehouse carries, I might actually be cheaper than the warehouse having a sales team. This would essentially make me a commission only salesman, but selling under my own brand instead of theirs. The benefit is that they could realize cost savings and reduce the hassle of having to staff a call center. The downside is that they want to build their own brand and even if I am selling their items, they don't want me to sell it under my name, but their name.

-Make sure that the item/items I am sourcing and they are stocking for me is unique and different from anything they currently have in inventory. This would help assure them that I am not trying to cut into and steal their business. I could also give them a flat fee for each of my items that gets sold, or I could give them a percentage of the sales of my item. This would expand their product offering, and could make them care less about me calling all their customers.

-You could also carefully select the warehouse that you did business with. Instead of choosing the regional leader, you could go into business with a warehouse that doesn't have as much market share, maybe the 5th guy on the totem pole. This guy would not have as much to lose, and would potentially be much more open to a new sales channel. The downside to this is you would have to carefully select the warehouse. You wouldn't want to pick the 5th guy on the totem pole if he is 5th because he sucks and doesn't do business well.

I suppose you could do a couple of these things all together to greatly increase your impact. I would probably go with choosing a warehouse that doesn't have as much market share, stocking unique items and offering the warehouse some money for each of my items that are sold, and I would show them the angle that they could sale a lot of money and stress by not having to deal with a call center trying to acquire new customers. Since I chose a smaller warehouse, they probably wouldn't care if I called their existing customers as much as the regional leader would.

What are your thoughts about these ideas @JackEdwards?

 

[JEdwards]

-Since I would only be taking a small cut of the items that I sell that the warehouse carries, I might actually be cheaper than the warehouse having a sales team. This would essentially make me a commission only salesman, but selling under my own brand instead of theirs. The benefit is that they could realize cost savings and reduce the hassle of having to staff a call center. The downside is that they want to build their own brand and even if I am selling their items, they don't want me to sell it under my name, but their name.

[/USER]?

And the problem is?


Great well thought out response by the way.

 

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[jpa0827]

And the problem is?


Great well thought out response by the way.

So @JackEdwards , @LibertyForMe , based on the above it sounds like the more important part of this type of business model is the fact that one gets to use the distributors products to build their sales business to a very high number of SKU's farily quick, yet without having to manage all of the backend headaches of warehousing them. They opperate on commission and the product line that the sales company is using is basically there to increase profit margins when they sell their particular product, yet it also gets them in the door with something to sell and introduce themselves to potential customers. Overtime the sales company can create more product lines to increase profit margins some more, which is beneficial to the larger distributoras well. They don't care about the brand, because they are basically behind both their brand and the sales companies.

Does that sound about right?

 

[LibertyForMe]

So since I keep a larger percentage of the item that I have branded, it makes sense for my items to be a relatively expensive part, right?

In my refrigerator example, I would want to be selling the refrigerator compressor, for example, and Bob would supply the hose lines and the washers and the $20 filters and things like that.

This is just my thought process...So say I stocked a relatively expensive part, maybe like $500-$1000 per item. Following this logic, wouldn't I get pushback from the local stores because they traditionally use a 'name brand' and well known product? So if it was Heating and Air units, wouldn't a local store want to go with a Trane or some other brand? Or if it was refrig compressors, wouldn't they just use a Whirlpool or something?

I guess that is the trick to making this work; it has to be a fairly expensive item but brand agnostic so people are just shopping on price and service and not really on the specific brand. Like cubicles, or vinyl house siding, or privacy fences or something like that.

Is my thinking right?

 

[jpa0827]

That is my take on it as well @LibertyForMe

I am not sure if this is true or not. But @JackEdwards Does it makes sense to make sure its a larger item that takes up shelf space in warehouses? In the case of Liberty's refrigerator example, I would think because the sales company is using refrigerators as their product they also are providing a benefit to the distributor they partnered with in the sense that the sales company might buy 1,000 refrigerators and fill their entire warehouse, whereas the distributor can only stock 100 at a time and needs room for other products; therefore, you are in effect helping them keep adequate supply and potentially saving them or yourself money due to the size of your bulk purchases.


My thinking might be totally off here. Just trying to think from the distributors point of view.

 

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[LibertyForMe]

Does it makes sense to make sure its a larger item that takes up shelf space in warehouses?

I don't think it matters. I think the rest of your paragraph was very confusing, I didn't really understand the point you were trying to make. As long as he is making money on them and he has a place to stash them, I don't really think he cares how many he warehouses for you, just as long as he has the room.

 

[jpa0827]

I don't think it matters. I think the rest of your paragraph was very confusing, I didn't really understand the point you were trying to make. As long as he is making money on them and he has a place to stash them, I don't really think he cares how many he warehouses for you, just as long as he has the room.

Sorry, @LibertyForMe What i was getting at is if the initial product is large it would be hard(barrier to entry) for a distributor (who has thousands of products to store) to buy/import them in a large quantity for a steep discount, because they need the shelf space; therefore, they can only purchase/import in small amounts which means smaller margin for them.

In comes the sales company who only allocates capital to the larger product (example refrigerator), they would be able to buy/import in larger quantities because they have a place to store the excess supply; therefore, they are creating value for the distributor, by not only helping increase their sales, but also, by supplying them with something they need, but at a better price. Hope that clears up what i was saying.

 

[Oztrepreneur]

And the problem is?


Great well thought out response by the way.

Hmm so to me we have gone from selling a self imported/branded product and setting up as a B2B distributor to essentially becoming a reseller/affiliate for another company/distributor...

Just when I think I get it the whole thing is flipped on its head!!! Well at least im learning!!!

This has been the most valuable thread to me from this whole forum so far. Thanks for all the discussion guys! Sorry @JackEdwards for all the questions but I don't know any successuful entrepreneurs over here in small old Perth!

 

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[jpa0827]

This has been the most valuable thread to me from this whole forum so far. Thanks for all the discussion guys!

Agreed! Seeing even a small glimpse of your thinking process has been very valuable @JackEdwards. Thanks for your contributions and leading us with your hints! I still think after these 3 years you still are enjoying the tease. Hope you sell this thing for BiG $$$$$$$$$.

 

[CommonCents]

Here is another question that is a bit more specific Jack. I realize my previous question was kind of vague.

Say I decide to partner up with some warehouses that supply a boring and old industry. I am using these warehouses as kind of a dropshipping partner, so they fill my product line out and I just get a small cut. I also have them carry my product in their warehouse, so I don't have to worry about shipping stuff myself.

So say I start selling to local businesses, like refrigerator repair guys or something. How do I convince the warehouse that I won't be stealing their customers? Since I am calling in the same geographic area as the warehouse, and calling their customers, wouldn't they be concerned that I would be calling on their customers and taking them? Even though I am primarily selling the warehouse's product lines and giving them a big cut, wouldn't they be worried about me 'stealing' their customers?

The distribution business gives manufacturers/mfg reps/brokers access to its customers to sell more/new products. They have trade shows, they give leads to mfg, they have $$ programs, promotions etc..... Distributors make a margin on your product, they want you to sell more of your product through them and grow their business. The point where there might be some conflict is when one of their customers gets big enough and buys enough of your product to buy direct. But that generally gets dictated from the customer and the distributor might be a little peeved but that's life. If you can sell direct right out of the gate, do it and grab the margin. Otherwise distributors are great ways to grow biz.

 

[SGBoise]

Wow. this is the best thread. I'm reading page 4 of 23. It's great to see the insides of starting a business. This thread has more info than any book out there.

 

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[Arnold321]

Done reading the thread..I don't think it's easy to get more info somewhere else. That's very interesting out there. Thanks for sharing wisdom with us Jack, but i have noticed that your enthusiasm has evaporated a little over the 3 years, i mean on posting here, am i right? I still have some questions for you: How many workers do you currently have? And about your commissions, do you raise the salary for your salesmen over the time? Or they earn what is based on their sales? Sorry if the question already occurred, but there are really loads of info so i might have missed it.

 

[Ardú]

I wanted to thank JackEdwards for posting this. This thread was one of the major reasons I created an account.

 

[JEdwards]

That is my take on it as well @LibertyForMe

I am not sure if this is true or not. But @JackEdwards Does it makes sense to make sure its a larger item that takes up shelf space in warehouses? In the case of Liberty's refrigerator example, I would think because the sales company is using refrigerators as their product they also are providing a benefit to the distributor they partnered with in the sense that the sales company might buy 1,000 refrigerators and fill their entire warehouse, whereas the distributor can only stock 100 at a time and needs room for other products; therefore, you are in effect helping them keep adequate supply and potentially saving them or yourself money due to the size of your bulk purchases.


My thinking might be totally off here. Just trying to think from the distributors point of view.

That's pretty close. The Dist will keep as little as possible though.

 

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[JEdwards]

Done reading the thread..I don't think it's easy to get more info somewhere else. That's very interesting out there. Thanks for sharing wisdom with us Jack, but i have noticed that your enthusiasm has evaporated a little over the 3 years, i mean on posting here, am i right? I still have some questions for you: How many workers do you currently have? And about your commissions, do you raise the salary for your salesmen over the time? Or they earn what is based on their sales? Sorry if the question already occurred, but there are really loads of info so i might have missed it.

No my Enthusiasm has not changed a bit, The problem is after the newness wears off it is just the same ole same ole, Not as much to post, hey I gained 25 new customers this week, is boring.

All my "Salespeople" get paid on whatever there client buys, at this point they have it really easy I think, they have created their book of business and just waiting for orders - reorders and making sure they are happy. Could I fire them and pay someone less yes, but why bother. I never raise salary, they probably average $14 an hour but make 1 to 2 times that in commissions, so if there sales drop they drop.

Every single one of my employees pay is based on performance. If we do bad everyone loses.

 

[DeletedUser2]

While most new entres are looking for the next cool social network, they should be looking for the best old industries.

best quote I have read in a Year maybe 2

guys, this is a brilliant observation. THERE IS A TON of old industries, with TONS of problems, that dont have, a good software solution, a good app, or hell even a good execution play.

now
GO PLAY

Z

 

[vinylawesome]

best quote I have read in a Year maybe 2

guys, this is a brilliant observation. THERE IS A TON of old industries, with TONS of problems, that dont have, a good software solution, a good app, or hell even a good execution play.

now
GO PLAY

Z

This reminds me of something Jeff Bezos once said,

"I very frequently get the question: 'What's going to change in the next 10 years?'

And that is a very interesting question; it's a very common one.

I almost never get the question:

'What's not going to change in the next 10 years?'

And I submit to you that that second question is actually the more important of the two -- because you can build a business strategy around the things that are stable in time. ...

n our retail business, we know that customers want low prices, and I know that's going to be true 10 years from now. They want fast delivery; they want vast selection. It's impossible to imagine a future 10 years from now where a customer comes up and says, 'Jeff I love Amazon; I just wish the prices were a little higher,'

[or] 'I love Amazon; I just wish you'd deliver a little more slowly.' Impossible.

And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it."

 

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[Oztrepreneur]

guys, this is a brilliant observation. THERE IS A TON of old industries, with TONS of problems, that dont have, a good software solution, a good app,

Agreed Zen, but is there opportunity outside of IT, SaaS and Apps? Guess I will need to go and ask!

 

[JEdwards]

Agreed Zen, but is there opportunity outside of IT, SaaS and Apps? Guess I will need to go and ask!

There is opportunity everywhere. Every single thing bought or sold is an opportunity to make money. I bet there is a guy right now somewhere that has made 100 million off of selling chopstick's to restaurants. He is sitting on a beach somewhere, probably eating with a fork and I even bet his friends call him something like Chopstick George.

Did he invent Chopsticks,nope, He just figured that people somewhere needed chopsticks and said to himself I can get people those.