Back To Basics - Business in Old Industries

[codo3500]

Hey guys,

I've been around the forum a while now, and generally my projects are weird and wonderful. They're the kind of ideas that get people over-excited, and seem like a blast to work on, like our last project (all of which is in the INSIDERS Section, if you're not in there, get in there!). Well, unfortunately this style of project has an inherit high-risk of failure. This became obvious during my 1-on-1 call with the legendary @JackEdwards last week.

My business partner is @bane, and we're ready to finally hit the Fastlane!

Our Idea
Our idea is simple. We found an old industry, basically, just tradespeople in a particular category, most of which buy all of their day-to-day items from their local trade store. We're now planning to bypass retail, and sell direct to these businesses at a discounted rate. We're also aiming to take the best features of our major competitors, and combine them into one product. We'll make over $200 profit with every one sold from what we can tell, but it will all depend on volume .etc.

Our Execution
After tracking down suppliers, and finding out we can easily get our hands on this product (just not confirmed on quality yet, but we'll get to that), we decided we had to talk to some businesses, while trying to find out the following information:

• How many do they buy per month
• What do they pay
• The exact type they use most often
  
• Where they buy from
• Payment terms, warranty, anything else we could get out of them.

Hitting The Phones
We started calling on Monday, and we've called 23 people in this industry so far. Our original plan was to just target small towns, but we found that we can actually sell to guys in major cities, so it's a much bigger market than we realized!

I've got plenty of experience with cold-calling, Bane got his first chance to hit the phones though, and totally killed it. Our script started off like this:
"Hey mate, my name is Jared, I'd love a minute of your time just to ask you a few questions, *I'm not trying to sell you anything*, have you got a minute?" Then firing away.

Just some notes for anyone doing this. You say "I'm not trying to sell you anything" because they are waiting for a reason to hang-up if you are. This cuts through that.

You also need to quickly establish that this is NOT a customer call, they will get excited that it's a new customer, then when you take that away from them, they'll just want to get off the phone as they've been let down.

Overall, the majority were happy to talk to us. I ended up getting creative at the end and have a guy that would have bought 10 off us immediately. As soon as we have stock, he'll buy. We had 2 other calls go the same, they'll probably buy immediately, plenty of others are very likely to convert as soon as we have the item in stock.

The Next Steps
After such a successful start, we have no doubt we can sell this product. So now the issue is making sure we have great quality. I've dealt with China before, and it can be hard to get decent quality.

Does anyone have any tips for this? We need a very high quality, and for them to honor any warranty they give. We'll be asking for references in English speaking countries so we can follow them up, and double check the quality, we'll also do independent testing, but can anyone think of any other tips for ensuring we have great quality?

Anyway, thanks for reading guys! A very special thank you to Jack, he's made this all possible. Our focus was definitely in the wrong direction, there are far easier ways to make a million dollars than to invent the next Facebook, we had just never thought about it the right way.

We confidently concluded that the dudes are not loyal to the trade store or the current brands, they will switch to us for the right price even if it means having to hold some in stock (since we won't have a physical store for them)

 

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[Mike.B]

Just curious as to how do you plan on handling the logistics. Are you having the manufacturer ship direct, using a distributor, or repackaging and shipping from your location?

 

[codo3500]

Just curious as to how do you plan on handling the logistics. Are you having the manufacturer ship direct, using a distributor, or repackaging and shipping from your location?

Still working out the exact logistics, but we'll definitely be warehousing here. We'll be building a brand, so slipping in our own user manuals .etc is a must (plus the Chinese ones always suck). We'll be using couriers straight from our warehouse from the look of it, but are looking at our options as far as distributors here.

 

[Bigguns50]

Just some notes for anyone doing this. You say "I'm not trying to sell you anything" because they are waiting for a reason to hang-up if you are. This cuts through that.

ou also need to quickly establish that this is NOT a customer call, they will get excited that it's a new customer, then when you take that away from them, they'll just want to get off the phone as they've been let down.

Thanks for these. I'll be making more cold calls today so this will help me not suck as bad

 

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[jpa0827]

Hey guys,

Well, unfortunately this style of project has an inherit high-risk of failure. This became obvious during my 1-on-1 call with the legendary @JackEdwards last week.

Why such a high risk?

Are you doing anything specific to mitgate some of the risk?

I ask, because I am in the process of contacting various supply houses to get an idea of some products they buy and sell regularly. Ultimately to start a business similar to what Jack has been very open about on his thread and my 1-on-1 call with him.

 

[codo3500]

Why such a high risk?

Are you doing anything specific to mitgate some of the risk?

I ask, because I am in the process of contacting various supply houses to get an idea of some products they buy and sell regularly. Ultimately to start a business similar to what Jack has been very open about on his thread and my 1-on-1 call with him.

Hey mate, thanks for your reply. I was specifically talking about the old kinds of businesses I was chasing (fun ones) having the highest risk of failure.

This is based on a few bits of maths. With tech companies becoming 'cool', there are loads of guys trying to make the next Facebook. Not many can succeed. There are NO young entrepreneurs trying to disrupt old industries. How many guys on the forum do you think are trying to start a new business selling nuts and bolts to mechanics? None!

Why not though? Because it's not glamorous. But they use them every day, and always will - if you can get it to them cheaper, and save them $X,000 a year, you'll have a customer for life if serviced correctly.

The other thing is - you don't have to worry about 'traffic' like you do with online. Whip out the yellow pages; dial the phone, and you're in front of the perfect person for your product. Want to know the best part? They're ALREADY BUYING IT.

This is why Jacks method is logical. And the response we've had on the phones so far is overwhelmingly solid. Now it's time to get a quality product, and start making real money!

 

[jpa0827]

Ahh thanks for the clarification. I thought you were saying this new business was risky. I understand now.

Good luck to you both!

 

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[jazb]

Where are u from? im from the uk

I plan on doing the same thing. Just need a couple of expensive items with good margins (doesnt everyone). the main goal is to build the number of clients. then hit them with a new product line from time to time. Then you scale to multiple warehouses and a massive office.

 

[bane]

Where are u from? im from the uk

Hey mate! We are from Australia!

Good luck with your plan

 

[jpa0827]

Our idea is simple. We found an old industry, basically, just tradespeople in a particular category, most of which buy all of their day-to-day items from their local trade store. We're now planning to bypass retail, and sell direct to these businesses at a discounted rate. We're also aiming to take the best features of our major competitors, and combine them into one product. We'll make over $200 profit with every one sold from what we can tell, but it will all depend on volume .etc.

I may be miss understanding, you said you are planning to bypass retail which is confusing to me. Am I correct in saying that you are planning to cut out the local wholesale supply houses? For example, instead of a plumber going to ABC plumbing supplies (where contractors have accounts) in their neighborhood, they are going to buy direct from you and you will ship to them with a better price?

Or did you mean you are planning to sell to contractors direct and through distributors, but you have no intention of getting your products into the local retail hardware stores?

 

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[bane]

Am I correct in saying that you are planning to cut out the local wholesale supply houses? For example, instead of a plumber going to ABC plumbing supplies (where contractors have accounts) in their neighborhood, they are going to buy direct from you and you will ship to them with a better price?

Correct!
The current chain for the tradesmen is:
Manufacturer > Wholesaler > Distributor/Retailer (Local ABC Plumbing Supplies) > Tradesmen (> End Consumer)

We will be:
Manufacturer > Wholesaler > (Shipping Directly to Tradesmen (> End Consumer/Friendly Citizen)

Or did you mean you are planning to sell to contractors direct and through distributors, but you have no intention of getting your products into the local retail hardware stores?

At this stage we have no short term intent of approaching Retailers. That's definitely a future prospect.
We've just cold called and determined the market with the Tradesmen themselves first. There's enough "meat" there first AND a lack of competition (since we are not competing for "shelf space" with Big Brands at the Retailer.)

I may be miss understanding, you said you are planning to bypass retail which is confusing to me

Sucks that we are confusing. In light of the above, should've we rephrased what we said?

Cheers mate

 

[jpa0827]

I think it was pretty clear. The only part that threw me off was when you said retail, because i typically think of tradesmen buying at wholesale supply shops, but your explanation laid it out very clearly.

It was just a mixup of terminology. Good luck! Sounds like you are off to a great start.

 

[bane]

Update

We made some more successful cold calls and are satisfied with demand. So we've moved onto analysing the supply side and getting the product here.

Obstacle 1 - Meeting Australian Standards
We've quickly realised that finding a Chinese Manufacturer that will meet Aussie Standards for this product could be very difficult for this product. After both of us spending a day doing our initial research we've come up with the following questions we are going to research answers for:

1. Is it absolutely mandatory that the product meets Australian Standards?
2. Will the tradesmen install the product if it doesn't?
3. Would a Home Insurance policy still cover the homeowner if something bad happened with the unit?
   
4. How hard will it be for a Chinese Manufacturer to adjust their manufacturing process to meet our Standards? (Or is this even possible with our current order volume/capital?)
   
5. Is there another way/strategy to get the product into Australia that meets the standards more easily? E.g. importing from an existing brand in USA or UK
   1. But is still at a low enough cost...
6. Could we get a sample of the product and get it tested here to see if it actually does meet Australian Standards? (Maybe it does?)

Actions to Take

1. We've sent out emails to many of the Chinese Manufacturers (and have more to go) to help with the above Q's.
2. Continue our research into Aussie laws
   
3. Research other strategies to get the units in
   1. Because we are happy to take a margin cut to begin with while we setup our own Australian Standard Compliant Manufacturer

[Optional] Question For You

1. Do you think we should look into a different problem/need (and thus product) that has less complex Australian Standard rules and safety concerns (& overall barriers)?
   1. This was actually our first attempt at finding a problem, I fear with this product, we may be biting off more than we can chew since we have almost zero experience in this field, product/industry, importing products of this nature/size and "non tech business" types.

Cheers

 

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[bane]

Update

Over the Easter break we:

• sent out a whole heap emails to manufacturers on Alibaba trying to get our problems solved
  
• made a custom order request on Alibaba
• Reached out to several Chinese Importing Brokers & contacts (thanks to you awesome dudes who read this thread and were happy to help us out with contacts! Thank you)
• We got some emails back (mainly saying they will talk to their engineers) - We are still waiting for more!

Crucial Info
Yesterday was the first business day back from Easter so I made a call to our State Government's Regulatory office regarding our niched product. I found out what needs to happen for us to legally sell this product here in Australia.

The unit must be Approved & Certified by one of the following bodies: he then rattled off some phone numbers.

I rang those guys up and they all gave me roughly the same answers about my desired product:

• It will need 2 to 3 certifications done before it is saleable
• The product must be tested first then the test results sent to us for certification
• Testing Cost = $10,000 to $12,000
• Certification 1 Cost = $7,500 (and they will have to go to the Chinese Factory)
• Certification 2 Cost = $3,000
• Not to mention the recurring annual fees + a bunch of other stuff that far from turns me on

Conclusion

1. We won't proceed down the path of us getting a product certified (the product margins & associated risk is not worth it for us at this stage)
2. Now: We will seek a Chinese Factory that has certification for their product
3. Or: If we can get the permission and authorisation of someone with a certificate, then we are legally allowed to sell that product

So that's where we are up to now:

1. Asking suppliers if they have any certifications
2. Trying to "reverse engineer" Chinese suppliers from products that are already coming in
3. Pricing more brokers to see if they can help us source a certified supplier

Overall, it was an interesting find and I am now just glad I know exactly the next series of steps.

Cheers

 

[Bigguns50]

Job well done so far !

I like the 'reverse engineering' work. It will be interesting when you find a manufacturer and if they will sell to you. I would think they will unless they have a buyer that they make a lot of money from.

Thanks for sharing this.

 

[jakejarmel]

Home insurance covering a Chinese manufactured object. Maybe but idk. I knew somebody that sold Chinese generators but no warranties could be offered because they're Chinese manufactured.

 

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[codo3500]

Home insurance covering a Chinese manufactured object. Maybe but idk. I knew somebody that sold Chinese generators but no warranties could be offered because they're Chinese manufactured.

What we've learned regarding this is, that it needs to be Australian Standards Compliant for this type of thing. Essentially, you have to pay for a compliance officer to fly out to China and inspect their factory, along with heaps of other tests. So you will be fully covered regardless of it being made it China, it will just cost you a small fortune.

 

[Oztrepreneur]

Our idea is simple. We found an old industry, basically, just tradespeople in a particular category, most of which buy all of their day-to-day items from their local trade store. We're now planning to bypass retail, and sell direct to these businesses at a discounted rate.

Sounds interesting. Out of curiosity is it a capital product (one off) or a product they would buy regularly? I pursued a somewhat simialr idea, but looked at supplying consumables and specifically engine coolant to mechanics. I found it was near impossible to compete with existing trade suppliers such as cov's etc ( I am Australian too btw) as they already operate on tiny margins.

Still I think there is opportunity to break in to these sorts of fields. There is an interesting thread on this forum (fairly recent) about getting into the supplier game and competing in distribution etc that may be worth a read, although I am sure you have already.

Also with regards to your problems with Aus Standards etc, I think this can be a positive for you also...a nice barrier to entry for others!

Best of luck, hope it all works out well.

 

[brandonrush]

Home insurance covering a Chinese manufactured object. Maybe but idk. I knew somebody that sold Chinese generators but no warranties could be offered because they're Chinese manufactured.

This is a non-issue. Most components in your house come from China. Look at your light fixtures, faucets, toilets, door hardware, light switches, wiring, flooring, etc. Until you start getting in to higher end fixtures, a majority will come from overseas. This is what keeps the cost low. There is a shit ton more China in your house than you might imagine. Origin of the product will not void any type of home insurance, but they still all need to be up to code and standards for your region.

 

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[codo3500]

Sounds interesting. Out of curiosity is it a capital product (one off) or a product they would buy regularly? I pursued a somewhat simialr idea, but looked at supplying consumables and specifically engine coolant to mechanics. I found it was near impossible to compete with existing trade suppliers such as cov's etc ( I am Australian too btw) as they already operate on tiny margins.

Still I think there is opportunity to break in to these sorts of fields. There is an interesting thread on this forum (fairly recent) about getting into the supplier game and competing in distribution etc that may be worth a read, although I am sure you have already.

Also with regards to your problems with Aus Standards etc, I think this can be a positive for you also...a nice barrier to entry for others!

Best of luck, hope it all works out well.

Very similar to this in some regards, just higher end. We found that if the price is right, and you cold call them, it's a very positive response in a lot of cases. It's something they would buy regularly, so any client we land would be a client for years to come if serviced correctly. We just need to get past this standards issue!

 

[brandonrush]

What we've learned regarding this is, that it needs to be Australian Standards Compliant for this type of thing. Essentially, you have to pay for a compliance officer to fly out to China and inspect their factory, along with heaps of other tests. So you will be fully covered regardless of it being made it China, it will just cost you a small fortune.

Great thread! I've got a few questions about your model. Lets use your example of plumbers. I would imagine plumbers would use a one stop shop for all of their products like a local supply house. Lets say you are offering a new PVC cement and primer. You talk the local plumbers to choose your product, but if your local supply house isn't carrying it(you said you would not be using retailers yet), wouldn't it just be easier for the plumber to get a *slightly* more expensive product from the local supply store for convenience? How many products are you offering and how will you be letting the plumbers know what products you offer? A mailer or website?

Good luck! Can't wait to see your progress.

 

[Oztrepreneur]

We just need to get past this standards issue!

Very promising Codo. I don't think the standards thing will be a big problem for you. If you have a validated market then the compliance portion should just be viewed as a speedbump in the process of bringing the market what they want imo. Downside is minimised as you already have people committed and interested.

I will be interested to hear your progress. As a side note can you give any detail on how you chose your target market, was it an opportunity you idea extracted or something you just happened upon etc? (and please don't tell us what your market is!!)

 

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[codo3500]

Very promising Codo. I don't think the standards thing will be a big problem for you. If you have a validated market then the compliance portion should just be viewed as a speedbump in the process of bringing the market what they want imo. Downside is minimised as you already have people committed and interested.

I will be interested to hear your progress. As a side note can you give any detail on how you chose your target market, was it an opportunity you idea extracted or something you just happened upon etc? (and please don't tell us what your market is!!)

There were a few factors. Basically after my call with Jack, I went browsing on Alibaba, and the idea just came to me. My best friend is in the niche, so we instantly had someone we could fire away at with questions to understand it better.

 

[codo3500]

Great thread! I've got a few questions about your model. Lets use your example of plumbers. I would imagine plumbers would use a one stop shop for all of their products like a local supply house. Lets say you are offering a new PVC cement and primer. You talk the local plumbers to choose your product, but if your local supply house isn't carrying it(you said you would not be using retailers yet), wouldn't it just be easier for the plumber to get a *slightly* more expensive product from the local supply store for convenience? How many products are you offering and how will you be letting the plumbers know what products you offer? A mailer or website?

Good luck! Can't wait to see your progress.

Reaching them 100% via telephone, then would push them to a website, or take phone orders. Electricians, Plumbers, Mechanics and most trades are very stuck in their ways, but they're also struggling to make a dollar. If you can save them money, make them money, or give them an edge on the competition, you're in with a shot.

 

[Bigguns50]

Electricians, Plumbers, Mechanics and most trades are very stuck in their ways

I will add Painters to that list as I'm doing some work for an investor and cold calling painters. No interest.

they're also struggling to make a dollar

I decided I will contact the small family, or one-man painter companies I see advertise in Craigslist...thought...they're struggling even more to make a dollar.

Great thread...keep us posted !

 

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[Oztrepreneur]

Any updates guys?

 

[jazb]

Understand with tradesman that they are constantly on the go, meaning it could be difficult to push for an order if they are at someone elses house. Need to consider when they would be at home. many angles to consider here

 

[theBiz]

@codo3500 good luck man, as long as you can validate the idea prior to paying those initial costs, you're always way ahead of 99.9% of other people that go in business for themselves. I know a guy who imports and sells chimney sleeves this exact way, b2b cold calling. His product is not so much that its cheaper... it faster to install which means less hours on job... so thats something to think about as well. 1 hour installation vs 4 i personally would pay more for the 1 hour install even if i knew it was cheaper to make. Eventually got into lead gen with it (who knew lead gen market there) and now sells the product to the guys he sells the leads to... ( the installers)... What? Yeah, crazy.....now selling this product to retailers which still does not interfere with his direct sales to tradesman somehow.... oh those leads are generated via phone too.... nothing online at all, none of it. He is making BIG money and has been for a long time. Pretty sure he has a patent though so he is really in the ideal situation. A business with barriers to entry selling a product with a patent, in an old school business saving guys time and money....if you cant make money with that then i dont know.

 

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[tafy]

theres also another angle to look at...

Software for old industries

I even have an example for anyone looking far a saas business

Hotel Laundry Service businesses

Oldish industry where a company picks up hotel linens and washes them and delivers back after few days, they use software but i believe its still pc based... they need web solution. I have to fax or email them the numbers of sheets I send then they type it into their software.... they need customer web portal right.

theres loads of old industries using old pc based software

 

[bane]

Hello friends!

Before I get back to your posts I'll just do the update first.

Update

• We found out it will cost somewhere around 20 to 30k (aussie) to get this product australian compliant for legal sale here
• @codo3500 & I thought: ah man dayum!!!! Well that idea is pretty much out the window, let's move onto the next idea. Let's pursue that Brazzers with an Aussie twist idea (think shrimp on a Barbie doll)
• Then we had a chat with Jack Edwards and he enlightened us with his great experience so that we could reach our own decision
• The compliance cost is a great Barrier to Entry for us to have
• Furthermore, we shouldn't think getting investment is that hard
• Plus it's normal for a business to get investment + if we are validated, what's the problem?
• Bottom line: don't pussy out; get the money; start the business! Don't worry about trying to find even lower hanging fruit, you will always be searching for "the perfect" business - just nut this one out til you can go no further!
• We thought about it and it made sense haha! Since we had limited experience, we didn't really see it that way
• So now we are going to "nut out" the entire plan and pursue it with the intention of gaining investment
• We'll see how it goes and where it takes us
• We're in the process of getting our plan of attack together
• Then it will be a matter of executing it and iterating/improving/pivoting where necessary

General Plan of Attack at This Stage

We created the flowchart/plan in http://popplet.com/
It's a pretty good tool and is free for the use that we need.

Step 1:
• With Competitors: Read product sheets to gain product knowledge
• With Competitors: Ask their distribution methods
• Do a geographically study (niche related) to target calls

Step 2 Make 100 cold calls (connected) with the following 4 goals, listed in descending order of priority:

1. • Confirm the single or only two products to stock
2. • Confirm if they've ever heard of an importer like us before (competitor check)
3. • Confirm Pricing of models we are competing against – i.e. what price do we have to beat?
4. • Get further validation/pre-sales etc

Step 3: Have Exact Model Needed

Step 4: Get Exact specifications needed from Australian Compliance Bodies

Step 5: Build Import Website (to demonstrate legitimacy when contacting suppliers/brokers) good ol codo's expertise!

Step 7:
• Find our own certified suppliers
• [Possibly] Get a broker to do the same
• Talk to suppliers directly to see if they can meet standards

Step 8: Get Quotes

Step 9:
• Calculate Financial viability on Supply Side
• ==> if fails: move on to new venture
• ==> if succeeds go to Step 10

Step 10 Make >500 cold calls in order to determine definitely that:
• Customer side financials stack up
• Complete Validation + Pre Orders

Step 11 and onwards:
• If everything stacks up and makes sense then pursue investment
• Create business etc

So that's the rough plan as of now. Codo and I are still working through it then we'll execute it.