chicken and egg problem!

Discussion in 'Growing and Managing a Business' started by Hadi K, Nov 2, 2015.

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Do you really think this is a big issue?

  1. Yes

    1 vote(s)
    50.0%
  2. No

    1 vote(s)
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  3. Your overthinking it

    1 vote(s)
    50.0%
  4. You need to do more research

    0 vote(s)
    0.0%
Multiple votes are allowed.
  1. Hadi K

    Hadi K
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    Hi everyone!

    This is my first post and your forum and Im glad to be part of your community! My new business idea is a problem and no matter how much I think about it I can't figure out a way around here :(. So here I am posting my problem on the WWW and hoping to get some advice!!

    Intro:
    I have tried a few business ideas before and all have failed, and looking back, testing my ideas prior to execution would have saved me a lots of time and effort. Having said that, I am currently evaluating a new business idea that does is not innovative and is semi predictable, but wanted to know if there is any sort of testing or validation I can do prior to fully committing.

    My new venture:
    I am entering the business of wholesaling vanities (washroom cabinets) to kitchen/bath boutiques in North American. See attached a sample of a vanity. My partner has owned a boutique for almost 10 years now and is basically the exact same kind of person I will be selling to. As a result, he knows exactly what the boutiques want and exactly what the end users want. We also know what price the wholesaler is willing to sell it for and what price the end user is willing to pay for it.

    The chicken and the egg!
    Here is the problem, based on my partner's experience, wholesalers will only order from you if you have stock readily available in Toronto. In order for me to have stock readily available here in Toronto I have to invest ~$50,000 upfront to get my product here in my warehouse. Without having stock here in Toronto no one will order the product. See the chicken and the egg!? I can't 100% validate my idea without first stocking the product. Note that $50,000 is the absolute minimum I can order, it is just one container and it will have 3 models in 2 sizes. So, I will only have 4-5 pieces of each model and size, its absolutely nothing when you consider that competitors could be bringing a dozen containers a month. Lastly, even if no one likes the product I can easily recover my own investment very quickly by selling it at cost to wholesalers. Low financial risk, but what about time/effort/energy?

    The above is just a brief summary, if there is anything that is expalined poorly please as me, I really really dont know where else to turn :) I would appreciate your opinion/thoughts.

    Why the obsession with validating your idea?

    I am constantly reading business books, and the last one "The Lean Startup" has really got me thinking day and night!
     

    Attached Files:

  2. Joseph.Shivell

    Joseph.Shivell
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    You refer to this as a "chicken and egg" problem, when there are already chickens here, and they've laid millions of eggs. Vanities have been sold here for several decades, so it is obviously a viable business. You do, however, have a problem. You say that $50,000 is the minimum you can order, but it will only give you 4-5 units for each model and size, which, as you mentioned, is much too low of a quantity - that's barely enough for one order for one store. Can you only order the minimum? To make this a viable business, you'll have to be able to order much more than that.
     
  3. BA

    BA
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    Seems like there could be major cash flow problems with this idea. I am not sure on how you are getting the $50,000 but if you get a couple big orders you aren't going to be able to fulfill the orders unless you immediately have more available funds to purchase more products.

    By the way. I haven't read The Lean Startup but I have heard several reviews from some really smart people saying what a great book it is. I am sure you got some great information out of it!!
     

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