Does My Business Sound Good or Too Risky?

Discussion in 'Growing and Managing a Business' started by Ocean Archer, Jun 20, 2012.

  1. Ocean Archer

    Ocean Archer
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    I want to open a specialty baby products store like a buybuy baby, only smaller. I got a ridiculously good deal for a 20,133sf (1870 square meters) space in a big box shopping center (the only unit left). The anchor is 120,000sf, and most of the other units are 10,000 to 30,000sf. It's much larger than the 4,000sf I originally planned, but the cost of rent will be the same, and it's in a better location than anything else available in the 3,500-5,000sf range. Rent will essentially be $110k per year (1/4 the price compared to 3 years ago). Our city has a population of ~100k people. There's only one other specialty baby products store, but it's a small 500sf store on the other side of town. Our city also has 1 Target and 1 Wal-Mart, which of course carries baby products as well. While there will be some overlap in inventory between those stores and mine, 80% or more of our inventory is not available in Target or Wal-Mart.

    I have a $500k line of credit at 6.125% interest and ~$300k in cash. That's not enough to fill of 20ksf with inventory, so I'll probably use half of it as an indoor playground, and only put merchandise in the other half until the business grows. I just hope fixtures, signage, flooring, insurance doesn't add up to be more than $100k. Even with $700k in inventory, I'm worried the place will look too empty. :confused:

    What do you guys think?
     
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  2. greenone

    greenone
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    Is there a reason the only other baby product store is only 500sf?

    Know your market, is your city population looking for baby products, how many families out of the 100k have babies, did you do business research?

    I've done what you're thinking of doing, I did it in a mall too. How much traffic does that mall get? How many are parents, etc.

    Open a Dollar store. No matter what part of the country you live in, dollar stores are cashing in on cheap, easy to get products
     
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  3. patrick0001

    patrick0001
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    Any business begin with renovation, rental and inventory is a risky business. Before start earning money, the company is in debt. Negative cash in hand, the company operation may affected e.g. salary not on time, problem to get new inventory, utility fee.

    Profit from break-even is difficult
    Profit from negative is more difficult
     
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  4. sigma

    sigma
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    Your plan seems good after reading the information. However, you need to consider is the cost and your break-even and how attractive your product (in term of brand, price, quality or?) to beat other competitor. No need to worry about the place is too empty, i sure that you will only feel the space is not enough by just display more unit of baby chair
     
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  5. harryt

    harryt
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    I will mention some questions I will ask a client. What is the cash flow going to be like? What is the profile of the foot-traffic going past the store? What percentage do you think will be interested? What % of these do you think will come into the store? What % of these will actually buy? How pemuch will they spend? Can you find out how much the average customer may spend, what they will buy and how often.

    You have enough resources behind you for a venture of this type. That will not be your problem.

    Is it possibly to to a personal survey and ask some of these questions to potential customers? Asking a ctual customers is often the best. Design a simple survey, and go out and ask 30-50 people.
     
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  6. Ocean Archer

    Ocean Archer
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    Thanks for the responses. A little more than 2,000 babies are born per year in our city's hospital. I have no idea what percentage of those families or friends of those families would shop in our store.

    The foot traffic is not great. The place is in a large shopping center, not indoor mall. The stores and parking areas are so large, people tend to drive right to their destination stores. I was only able to interview 53 people in 2 hours. 7 didn't want to be bothered. I pretended to be a student taking a market survey to prevent getting "polite answers" from people. All 46 interviewed were local. 38 women, 8 men. None of them had babies or toddlers. 30 women and 1 man said they would browse through the store if they walked by it. 19 women expressed a lot of interest and said they'd very likely buy something and tell their friends with babies about it. The rest were uncertain.

    I'm not sure how useful those numbers mean because I'm marketing to a very small segment of the population, but I wasn't able to interview my target customers. Maybe I should try local daycares?
     
  7. sigma

    sigma
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    I not sure how details is your survey but according the information as per above mentioned, the demand is there. However, it back to the previous question, how attractive your product, what is your selling point so that people will buy your product but not your competitor's product
     
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  8. Krisz Rokk

    Krisz Rokk
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    Do you have a business plan? If not, I would highly recommend one before starting.
    You gave us a lot of info about the budget. Location is crucial. So is the target audience you want to attract.
    What's your USP? <== just the higher number of SKUs? Why should customers buy from you / your store? What's so unique about you / your store / your products+service?
    Check other cities and see where there are similar stores to the one you want to open. Get them on the phone or pay the owner a visit. You don't have to do all the mistakes they have done - I'm sure there's plenty of stuff to learn from them upfront. You might even consider a Strategic Alliance....
     
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  9. LucidWebMarketng

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    OMG, that is big. I'd say too big for a baby specialty store. Almost any kind of store really.

    If your town is 100k population, I'd estimate two babies born every day. Somehow, I don't think that's enough of a market. Especially since there is a similar store in town and the Walmart and Target. You say later it's about triple that. Fair enough. It might be enough. But if you filled the whole store, I think you'll still be stuck with lots of inventory for a long time and thus costing you.

    Use the space for something else. Someone mentioned a dollar store. Seems like a good idea.

    Other ideas:

    Use the space for a playground. There should be enough young kids in town and probably not much else to do for them. We have one in my town called Cosmic Adventures. Used to take the kids there all the time and had a blast. I remember one time trying to estimate the size and how much it cost. I came up with about 6000 sf likely at $10 per sf.

    Mini putt. Could be glow in the dark. Laser tag.

    Sub-lease part of the space to others. You may make a profit in this alone and still have your own space for what you want to sell. It could even be short term such as for homemade crafts, good idea around Christmas time. If each had a 12 x 12 space, there could be 100 different merchants selling their crafts.

    Convert the space into small offices, meeting rooms. Lots of home-based businesses need this sort of thing. Other bigger businesses don't have large enough meeting rooms.
     
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  10. JBMedia

    JBMedia
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    There's a lot of things you'll want to consider. It seems like you've already done some research on location and size, which is a huge thing in relating to store-shop retail type of businesses. As long as what you say, the fact that it's in a good location, is true then that's a good starting point. Also, the only competition you really have is one other specialty baby product store on the other side of the city. This is also a plus. Don't consider Walmart and Target competition until you start to reel in some serious profit margins through this business. Don't completely keep them out of sight, but don't focus on them either. Focus on the other specialty store as your main competition at this point.

    Personally, it sounds like you've done a good amount of research on this particular business. Would it be profitable in the long run? More than likely it would, however seeing how I don't know your cities demographics and other related statistics I couldn't ensure you with an answer.

    Regardless of that point, I would like to mention that the most successful people in the world are where they're at by taking risks. Is this a risk? Yes, it most definitely is. Have you prepared yourself for this risk if it falls through? I sure hope so, which it seems you've been taken a lot of steps in this direction.

    I would personally say go for it. You have a solid niche foundation and it seems to be something you like as well. If the risk turns out to be too great and you lose on this business opportunity make sure you don't fret over it. Don't beat yourself up over it. Find out the things you did wrong and take them as a lesson learned not to repeat those same mistakes again.

    From the sounds of it so far, I feel you can make it work. Keep in mind customer relations will be or should be your main focus here above everything else. Be fair and keep your customers coming back to you.

    I wish you the best of luck in this business endeavor.
     
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  11. rosewell13

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    fast cash advance

    Its a very good business and every business based on risk ,without risk you can't take decisions.It will be very beneficially for you.
     
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  12. DeniseTaylor

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    It sounds like you're getting a great deal. But why? Is it because the community isn't supporting the local merchants well enough?

    Also, what are the demographics for your area? If you live in South Florida, where 80% of the population are retirees, you will likely have a problem.

    Just some things to look at.
     
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