LarryStore

Rethinking incorporation

As my wife and I met with our accountant to finish our personal income taxes, he argued forcefully that S Corporation was overkill for a one person web-based business, and that I should unravel the corporation, swallow the money that I spent on filing fees, and reconstitute the business as an LLC.

As demoralizing as undoing some of my work  seems, I was getting apprehensive about the sheer amount of paperwork involved in running an S Corporation, all of which I'd initially have to do myself.  So tomorrow morning, I'll be making a few calls to the State of Georgia to figure out where to start.

At that point I'll have to figure out where to start with the LLC process.

What's in a name? Human powered transport ...

I triggered some vigorous laughter from an English fellow who now lives in East Atlanta a few days ago.  The laughter was good natured, but it was definitely at my expense, and possibly deserved. 

I was trying to figure out how inflatable watercraft fit into my other interests, so that as marketable product in which I'm interested becomes available, I can snarf it up.  I knew there must be some common thread between a simple inflatable raft or kayak, and a number of other things I do (cycle, run, walk).  It wasn't just the exercise aspect, because I do those things for utility also.

Then it occured to me.  I'm interested in boats with paddles or oars because they are human powered conveyances.  When I told my friend this, he burst out laughing, and in a thick northern English accent (he's from Birmingham) said something to the effect of "Why don't you just call it a raft?  That's what it is!".

Well, yes and no.  It is a raft, but it also fits neatly within my interest in all manner of craft powered by human effort.  Canoeing was my favorite activity when I was a child in the Boy Scouts.  Later, while in high school, me and a few friends of mine would go fishing on a nearby lake, renting an old aluminum rowboat.  Fishing bored me, but I loved paddling that boat.  Then there was cycling., my major means of exercise and transportation for many years.  If I could sell bicycles online at a profit, I'd definitely add a line of bicycles to my store.  I'll probably still sell cycling accessories.

I thought about expanding the niche I'm considering by describing it as "non-motorized conveyances".  Then I could include sailboards, surfboards, sailboats (or even prairie schooners!) and hang gliders in the mix.  But I don't sail, hang glide,  sailboard, or surf,  so for the time being I'm going to confine my test marketing  to a narrower niche.

I'm still planning on a March 1st debut.  Be sure and drop by here, and see how I'm doing.

"I don't have to outrun that bear, I just have to outrun you" ... product pricing

As I get closer to my online store going live, and think about pricing,  I'm reminded of the old joke:

Two guys are walking through the woods when they're approached by an evidently angry bear.  The bear starts toward them.  One of the guys asks "What are we going to do?".  The other points to a clearing, and says "Run that way!!!".  The first guy says "We can't outrun that bear!".  The second guy says "I don't have to outrun the bear, I just have to outrun you!!!!".

As I evaluate product, and do searches on the web to see what each product is selling for, it becomes obvious that for any given item someone is bound to have it advertised for less than the wholesale price.  Sometimes a transparent gimmick is being used ("$19.95, $54.00 Shipping and Handling").  But more often the vendor is genuinely selling the product for less than I can reasonably get it wholesale.  By "reasonably" I mean without ordering 10,000 units of something that I have no place to store, and insufficient funds to purchase in that volume without incurring a huge debt.

I've studied and perused the problem for quite some time.  There are some products which make the problem intractable.  Let's take the example of a popular toy, for instance.  I have no idea what the latest craze among pre-schoolers might be, but let's just call it "Tickle Me Elmo".  If I can even find a wholesaler willing to sell me Elmo dolls, Walmart and Toys R Us become,  in terms of  the joke I posted, twin bears.  There's no way I can outrun either of them.  They are purchasing in such enormous volume that they can lean on suppliers to provide them with Elmos  at razor thin margins.

So my only hope is to operate in a niche either ignored or underserved by the really huge players.  I'll never beat them on price, and given their resources they can often beat me in shipping speed and customer service, despite the prevalent notion that small businesses provide better service.

Eliminating the Walmarts of the world, the price competition for commodity items among small players is fierce, too.  Think of any item.  Let's go with an item in a category which many small aspiring retailers find attractive:  Books.  I'm sitting three feet from my bookshelf now, so I'm  randomly selecting a book.  It's Tofu Cookery by Louise Hagler.  Doing a search on Amazon, where many small scale booksellers market their product, a search yields 26 new copies, starting at $10.94 (with Amazon themselves offering a rebate special which would bring the cost down to $7.44).  The highest price listed is $45.50 (with a $4 shipping and handling fee).  It looks like I actually paid 21.95 for the book.  In all likelihood,  the seller offering it for $10.94 will lose money on the sale, and the one offering it for $45.50 will never make a sale.

So what does this mean for me, in a practical sense?  It means I have to choose a product which isn't flooded with competitors, offer it at a price which makes me money, but isn't so high that sales suffer, and differentiate myself in some manner (better service, building trust, better marketing).

Since I'm developing this whole process in public, I'll be sure to let you know how it goes.

Inflatable Kayaks and Generic Commerce

Well, my initial foray into e-commerce is beginning to take some recognizable shape.  At this point I have no idea whether the shape I'm beginning to discern resembles the final shape, but I have a good enough outline to keep me moving forward.

When I decided to take this plunge into what is, for me, unknown territory, I hit the books (and websites) to study how small-scale e-commerce actually works. 

One thing which became immediately obvious is that a small operator absolutely has to identify and operate in a niche market.  No matter how "hot" a particular market is, most of the obvious and popular products are saturated with vendors, and no small website is going to be able to compete in price (or selection for that matter) with Newegg.com, or Amazon, or Walmart.

This eliminates a number of popular categories of goods, unless those products can be narrowly focused at under-served niche markets.  Consumer electronics is pretty much eliminated (too many players with huge warehouses or fulfillment centers, and overwhelming economy of scale).  Designer fashion is out, also, at least in terms of the big name brands.

Luckily I'm interested in so many things, that I can work this conumdrum in reverse.  Rather than falling in love with a product and trying to sell it, I can look over available product which meets criteria I've set, and test market it.  If it flops, I move onto the next product, niche, or category.

At the moment inflatable watercraft is my test product.  I have a fascination with two rivers and a bunch of creeks here, so the product itself holds some interest for me.  There are wholesalers willing to work with small retailers, so the supply is available.  And, perhaps most importantly, a few of the wholesalers are willing to "drop ship" so I don't have to keep inventory during the test phase.  If it flops, I just move onto the next product.

All this may sound like crassly generic commercialism, and to some extent it is.   My first choice of a product would've been the sort of small scale solar energy system I wrote about  in a earlier post.  Unfortunately I haven't found a good product in that category with wholesalers willing to work with small retailers.  And, of course, you can't sell something you can't get.

My plan at this point is to have http://LarryStore.com ready to roll by the first week in March, and to do a test campaign using Google Adwords.  I'll write about that process on this blog.

The Best Things in Life are Free (... but my business expenses are not)

Since I've tentatively decided on a product to test market (inflatable watercraft), I'm past due for just setting a deadline and moving forward before the fixed and incidental expenses I'm already incurring start getting out of hand.   I'm not self-delusional about how soon my cash flow is likely to become positive, but if my store doesn't go live, that happy moment  is not likely to ever arrive. 

My inclination was to set the deadline for February 20th and just go for it, but there are a few items which depend on processing done by other people (some final merchant account business and arrangements with wholesalers).  Consequently I've set a March 1st date, worked up a list of the prerequisites to doing my test marketing, and started hammering through the list.

... and by the way, I get a big kick out of finding appropriately licensed images for use on this blog.  The photo here is from Wikipedia, and was released into the public domain by Alex Turner.  I thought it was appropriate for a business which is making the plunge into inflatable boats.

Making up for it in volume ...

There's an old joke which I first heard at a manufacturing firm where I worked in the early 1970s:  "We lose five cents per manufactured unit, but we make up for it in volume".

I would like to avoid the fate of that mythical manufacturer in the joke, so I'm trying to figure out how to sell for a sufficient price to make a profit, and how to effectively test market product and refine my advertising.

One difficulty I have is that I'm initially working with "drop ship" wholesalers.  The wholesaler stores the product and fulfills the orders I receive.  The advantage of this is that I avoid the time, expense, and hassle of storing inventory and processing orders.  The downside, of course, is that single item drop ship has a lower profit margin.  What I have to figure out is how close I can cut my margin without losing money, in order to make sales.

Within a couple of weeks I'll be ready to start a limited test sales campaign using google adwords.  I'll post my observations here.

The fellow in the photograph accompanying this article, by the way, is Isambard Kingdom Brunel, the great 19th Century British civil engineer.   He worked on the Thames Tunnel, supervised the construction of many railroad lines and bridges, and developed the modern propeller driven ship.  I was looking over my collection of public domain images for an appropriate illustration, and thought that this photo of Brunel is a symbol of commerce and entrepreneurship.    That, and I think his hat is really awesome.

 

The Donald Trump of inflatable seacraft

Well, I've been scouring over the product offered by wholesalers for over a month now.  The standard wisdom is that one should never market a product one loves.  It leads to self delusion and failure.

On the other hand, I've always been a bit of a contrarian.  And I'm in love with human powered conveyances of all kind (bicycles, dinghies, et al).  As a child in the Boy Scouts canoeing was my favorite activity (this was before I'd ever heard the word "kayak").

I may live to regret it, but I've decided to become the Donald Trump of inflatable boats, rafts, kayaks, etc.  I may even dye my hair red, style it to look like a bad toupee, subscribe to some crazy conspiracy theory, and start a reality TV show.  Just kidding of course.  I'd much prefer being the Warren Buffett of human powered conveyances.  Buffett isn't crazy.

I've always wanted to explore our badly damaged rivers and creeks here (the Chattahoochee River , the South River, Entrenchment, Nickajack, and Proctor Creeks).  For the past year I've been shopping for a good affordable inflatable kayak or raft which I could strap to my folding bike, and transport to the mouth of Nickajack Creek at the Chattahoochee. 

When I started evaluating products for my online retailing business, I discovered that inflatable watercraft is a high availability item.  That doesn't mean it will actually sell, or that the margins are such that I can make a profit selling it.  But at least there are a number of wholesalers available to me.

So "ahoy, mates".

Online Retailing Diary -- Doing things in the wrong order

I've spent part of the morning taking stock of  my progress setting up my online retailing business, and evaluating what I've done right, and what I've done wrong thus far.

If I had to identify the biggest mistake I've made, it's purchasing online store hosting before I've done enough market research to decide what I'm actually going to sell.  It wasn't a catastrophic mistake, but it's resulting in the waste of, at minimum,  $150.00.  I'm paying a monthly fee for a service which I am not yet using.

It's also questionable whether I should have spent the time incorporating and acquiring state and federal tax ids and a county business license before I've identified my exact niche and products.  That decision is a bit more ambigous, since I do need the tax ids and licenses to get price lists from bona fide wholesalers, but my time up front would probably have been much better spent narrowing down my product choices.

On a happier note, I fully expected to spend a certain amount of time muddling around, since this is a major career change for me.   This wasn't the first mistake I've made, and I can assure you it won't be the last.  My intent, though, is to avoid making the same mistakes repeatedly.

 

 

The online retailing startup diary continues ...

I haven't written a new entry in my online retailing start-up  diary  in the past couple of weeks because the administrative details I've faced have been increasingly mundane and boring.  I can be a pretty clever writer, but it would be a real challenge to make the ordering of checks, or correcting Cobb County's misspelling of my business name on my license interesting or funny.

Well, actually, the license misspelling could be made funny if I wanted to resort to bureaucracy-bashing.  But typos are not that uncommon, so as long as they fix it, it's a minor detail.

I still have an enormous amount of work to do before I actually make my online retailing site go live.  The biggest tasks are settling on product, and getting the website developed.

I've somewhat streamlined both those things by keeping it relatively simple.

First, I've decided to initially simplify my choice of wholesalers by only dealing with companies which will "drop ship".  This means that the wholesaler warehouses the product and fulfills the order on my behalf.  Needless to say there is a cost in profit margin involved in this, in addition to adding some complexity with respect to shipping and return policies.  But it relieves me of two major tasks and expenses (storage and shipping) during my start-up phase.

Later I'll decide if I want to expand my choice of product by working out arrangements other than drop ship.  But for now, this will serve my purpose, and get me up and running more quickly.  Before I even consider doing bulk purchases,  I'd have to figure out everything from shipping cost, to storage cost, to order fulfillment method.

As for the website development and design, I'm starting with an off-the-shelf Yahoo! Store.  There are still many design and configuration decisions to make, but at least the starting point is someone elses work, not my own.  I have more than enough tasks and decisions to keep me busy.

 

Making solar energy affordable and accessable

It's generally a very bad idea to develop a fixation on marketing a particular product before doing market research to see if there are potential customers.  But I know what I'd really like to sell. 

There are an increasing number of small scale solar collectors on the market.  Harbor Freight markets a popular kit, and even Home Depot and Costco have entered the market.  The way those kits work is that a solar panel is attached to a deep cycle battery.  After the battery is charged, an inverter is hooked to the battery to convert the DC power to AC, and you utilize the power in whatever manner you choose.

I'd like to find a relatively high efficiency kit with good durability which can be sold in the $200 range.  I'm in the process of contacting wholesalers now.  While I don't want to get my hopes up too much, that's a product I could get behind enthusiatically.  It isn't a perfect product (batteries wear out and have to be replaced, cloud cover can make them inefficient, and to provide electricity for the average American household one would have to have an unrealistic number of these kits).  But it's a good way to introduce people to the advantages of solar energy.

So I'm continuing to work on it.