Online Business startups? experiences

dbov22 · 9 Feb 2011 at 12:06

anyone recently started an online business?

, I have an interest in starting a business for a niche market. The last time I tried setting up a music instrument shop i was stumped by this:

bank wanted to know which stock i'd have in my shop on the opening day, at what price and what mark up....

suppliers wouldn't provide any of this information until I had opened my premises.

You see the problem here, catch 22, I couldn't open shop until had prices, couldn't get prices until i had a shop...

I'm very serious about this so looking to go down online route, but wondering if anyone has advice/experience in contacting suppliers and how they did it, letters, emails, phonecalls etc?

Thanks and hopefully this thread may help others...?

[TW]Fox · 9 Feb 2011 at 12:09

Ring the supplier and ask for a quotation for the supply of X items. You don't need to have a shop already unless you are looking for credit terms from the supplier.

You can't even begin to decide if a business is worth starting if you dont even know how much you need to pay for your stock.

britboy4321 · 9 Feb 2011 at 12:09

Find a competitor, copy his stock levels and prices.

Presume the the mark up at 25 to 30%

The bank is just seeing if you have a blimin' clue ..

[TW]Fox · 9 Feb 2011 at 12:19

britboy4321 said:
Find a competitor, copy his stock levels and prices.

How do you get exact stock levels from a competitor?

Presume the the mark up at 25 to 30%

Based on what?

Why not do a proper business plan with proper pricing? The bank wants to know if your business is sustainable, guessing is a road to either failure or rejection.

This sort of thing really isn't hard. You can get proper, hard figures for your fixed costs, you can do some market research to provide an educated estimate for your sales levels, you can get pricing from suppliers, you can work out selling prices from competitors and then you can work out the contribution towards fixed costs for each product you sell, which will let you work out the break even point and give you an indication of whether the business is viable or not.

If you can't manage this then it probably isnt for you.

britboy4321 · 9 Feb 2011 at 12:27

[TW]Fox;18427009 said:
Based on what?

.

Virtually all mark-ups are 25-30% - and the bank won't bother checking ..

[TW]Fox · 9 Feb 2011 at 12:29

britboy4321 said:
Virtually all mark-ups are 25-30%

No, they really are not. Profit margin verys hugely depending on what you are selling, who you are selling it and the quantity you are shifting!

Unless you think the profit margin to the shop on a Playstation is the same as the profit margin on a Sofa at DFS..

britboy4321 · 9 Feb 2011 at 12:29

[TW]Fox;18427087 said:
No, they really are not. Profit margin verys hugely depending on what you are selling, who you are selling it and the quantity you are shifting!

OK fair enough. I formally retract my post.

[TW]Fox · 9 Feb 2011 at 12:30

Unexpected reply was unexpected, fair enough

Scrutinize · 9 Feb 2011 at 12:36

dbov22 said:
anyone recently started an online business?, I have an interest in starting a business for a niche market. The last time I tried setting up a music instrument shop i was stumped by this:

bank wanted to know which stock i'd have in my shop on the opening day, at what price and what mark up....

suppliers wouldn't provide any of this information until I had opened my premises.

You see the problem here, catch 22, I couldn't open shop until had prices, couldn't get prices until i had a shop...

I'm very serious about this so looking to go down online route, but wondering if anyone has advice/experience in contacting suppliers and how they did it, letters, emails, phonecalls etc?

Thanks and hopefully this thread may help others...?

Were you / are trying to start an online only music instrument shop as most suppliers will only deal with a retail shop to protect the high street music store and stop ebay only traders etc?

Seriously though, if you have no idea of your market, product costs and volumes to even draft a rough business plan and it sounds like you gave up at that initial hurdle then I can't see starting a business is for you.

Takes serious hard work to do and as minimum you should have been meeting with the suppliers to gain confidence in them and them in you, discuss prices and account terms etc.

Stage 1 for you should be to get out and meet the suppliers of what ever you want to be trading in and agree prices that make your business viable on a level playing field with any competition as a minimum and will cover overhead, taxes, insurances, bank fees etc etc and return a sustainable profit.

dbov22 · 9 Feb 2011 at 12:38

The bank manager at Barclays speciffically asked to get a list of every price of every item on my 'opening day', bearing in mind this was a couple of years ago when banks were throwing money at people just for asking.
EVERY supplier I called and spoke to personally would not discuss prices/discount at all until "i have my shop open and my name above the door"...seriously.

One company from the US (independant small company with highly desireable items) sent me their list - I would buy the items at 40% of the RRP and had to buy 2 types of item x and 3 types of item y to get the discount.

I was planning to open a physical shop, you are probably correct in saying i fell at first hurdle, I did re-contact suppliers but got same answers, I was also younger than I am now and probably didn't have as much confidence, count this thread as picking myself up from the first hurdle and getting further advice, have you people all got your own businesses? online business etc? (that is not meant to sound cheeky)

Scrutinize · 9 Feb 2011 at 12:46

dbov22 said:
The bank manager at Barclays speciffically asked to get a list of every price of every item on my 'opening day', bearing in mind this was a couple of years ago when banks were throwing money at people just for asking.
EVERY supplier I called and spoke to personally would not discuss prices/discount at all until "i have my shop open and my name above the door"...seriously.

One company from the US (independant small company with highly desireable items) sent me their list - I would buy the items at 40% of the RRP and had to buy 2 types of item x and 3 types of item y to get the discount.

Sounds reasonable for the bank. Seriously you should know what they asked and have 100% grasp on your inventory, stock control and costs.

For the USA prices, had you considered costs of import duty etc on your profit margins.

Example, if you are talking about instruments from people like Fender, Gibson, PRS etc they will give you prices but it is hard work and they only like to deal with retail store partners.

If you on about cheap brands then you only have to look at ebay to see if you can compete.

Would be helpful if you share more about what you are doing or trying to sell so we can actually help you rather than second guessing?

Advice for one type of business may be totally wrong for another.

dbov22 · 9 Feb 2011 at 12:55

Thanks, I also remember a major problem, I went to Business Link who weren't too helpful, I also went to a mortgage broker to explore business mortgages etc, he booked the appt with the Bank Manager, probably far too premature.... it all wen't wrong from the start no doubt.

Scrutinize · 9 Feb 2011 at 13:01

dbov22 said:
Thanks, I also remember a major problem, I went to Business Link who weren't too helpful, I also went to a mortgage broker to explore business mortgages etc, he booked the appt with the Bank Manager, probably far too premature.... it all wen't wrong from the start no doubt.

Least you haven't given up

.

Would be helpful if you can give a better idea of what you are going to be doing though.

Business link will be hit and miss as they are only as good as the officer you see.

Have you given any idea to marketing or are you thinking ebay? This is a hard area for online only.

dbov22 · 9 Feb 2011 at 17:29

the only reason I don't want to specifically go into what i want to sell is because there's people on here who'd have it set up by next week and may see it as a good idea... say it's brass instruments - selling mouthpieces and valve oil, i have ideas of how to market it, initially it would be word of mouth and maybe some adverts in specialist magazines... i want it to be online only so that i'm not paying for staff or huge amounts of storage etc, might have to pay for seo. initially though it's getting the illusive 'prices' so I can work out myself the profits likely to be made etc..

dbov22 · 9 Feb 2011 at 17:29

yes I realise word of mouth isn't massive marketing but I have A LOT of contacts in this area who would spread the word

stinamoo · 9 Feb 2011 at 18:36

*deleted*

Jambo · 9 Feb 2011 at 18:55

I run an online business and am also a distributor. (not in musical instruments though)

dbov22 said:
bank wanted to know which stock i'd have in my shop on the opening day, at what price and what mark up....

Why did they want to know that? Are you applying for a loan?

It definitely sounds to me like the suppliers won't supply online only businesses. So you have to think of a way to convince them, primarily to convince them you are not an eBay/Amazon type trader and that you will represent them well with a high quality website and will not be an aggressive discounter. This probably still won't be enough for some but even if you can start really niche with one supplier it is a good way to prove yourself and will then give you more credibility with other suppliers later.

dbov22 · 10 Feb 2011 at 08:27

good advice so far, I'm glad these forums don't turn into the typical "let's just **** this guy off" responses! Thanks....

There is only one other website that solely deals in what I want to sell, the website will be great quality so that's a good tip to offer and yeah, mentioning that I will not be massively discounting items is another good tip.

With your emails... did you find more success from personal addresses or a business address? The suppliers for these items are totally limited, the main manufacturers distribute their items through maximum 2 companies (from my research) so maybe more of a personal feel...

It's mad isn't it, I want to sell their items and they wont help me at all!

I'll keep trying!

Dan

Bulldog14 · 10 Feb 2011 at 11:44

Keep in mind that what you see as a catch 22 situation, is more than likely a specific exclusion policy. The situation you described indicates that you had 0 initial funds and were setting up a business model based on 100% credit. If you had money to buy the instruments initially then you would have already had price lists/stock figures/mark-up info and would have been able to provide the bank with the needed information.

Lets be honest you wanted to setup a webshop that has 0 stock and just act as a conduit from supplier to end-user. From a banks standpoint these are the most riskiest endeavours and they fail by the bunches. I could well understand the banks reasoning in wanting some solid facts and figures that at the very least indicate you have a serious plan and the business has a chance of surviving for more than 6 months.

Banks (and suppliers for that matter) are not interested in supporting every Tom, Dick, and Harry's dreams of riches that they cooked up over a few pints at the pub. Come at a bank with not a cent in your hand and nothing but a pipe dream and expect to get shot down. No catch 22 at all. Just some basic business sense at work here.

eatcustard · 10 Feb 2011 at 11:55

Bulldog14 said:
Banks (and suppliers for that matter) are not interested in supporting every Tom, Dick, and Harry's dreams of riches that they cooked up over a few pints at the pub. Come at a bank with not a cent in your hand and a nothing but a pipe dream and expect to get shot down. No catch 22 at all. Just some basic business sense at work here.

This