New business dilemma

[paulpsz008]

I've got a bit of a dilemma so am looking for any advice/comments.

I'm currently employed in a middle management role, in a small company.

I've come up with a new supplier who I believe supplies good quality, well priced, products, which are complimentary to our existing range.
I've taken this to the senior management but they are not interested because its small fry. I'd estimate 10k-40k turnover at approx 10-25% GP

Therefore I'm considering,
Creating a new brand & internet shop, based on these products, arranging an answering service for when I'm working, and putting together a marketing drive in my spare time. Which I'm estimating will cost 1-2k per year to run.

Should I do it?

[boomerkk]

Go for it, don't see much downside, and a hell lot of upside....esp. going fwd from here (in these current dark times, when we're at the bottom, the only way to go is up)

[paulpsz008]

Thanks for that, I'm not mad then?

My exposure would be pretty low, I'm acting a distributor really, so it does seem a bit of a no-brainer?

Anyone comment on my estimated costs? It would only need to be a basic internet shop but I suspect a lot of my market are scared of ebay. I'm guessing the costs really.

[Stu R]

In a nutshell, it depends on a lot more than the info you've given. Obviously with any new business there's a risk involved, how well you research the product and it's demand, the market, your customer, and the figures involved will minimise this risk, as well as a plethora of other aspects.

Your numbers are fairly vague, at one end of the scale it seems like it's got good potential, at the other end of the scale, 10% of a 10k GP When you've your 1-2k PA overheads to take into account...

But, as has rightly been pointed out, if you can flourish during the tough times, you'll stand to do a lot better in the good times, just don't be too optomistic with your figures, as too many new businesses tend to be and get a shock.

Shameless plug but if you're after some assistance with setting up, running or marketing feel free to drop me a line via my profile for a chat. S'what I do.

[StevieBee]

You need also to be careful that "your" business does not encroach in your job. You work the plans and think it wont be a problem but I guarantee it will, at some stage, cross over and this could put your principal income generator at risk.

The other pointer is not to spend the income the part-time business generates. Keep it all in the business. The reason is that you may come to a point where your venture becomes sufficiently successful for you to ditch the job. If you have gotten used to an additional income, it will be difficult to make the leap.

It may be though that you are just looking for a splash of extra cash and that's fine but make sure you are happy with that in your mind.

All that aside, based upon the info you've provided, it seems a good little opportunity.

Good luck

[paulpsz008]

Thanks again, this is exactly the sort of comments I was hoping for.

The potential crossover is my biggest worry, potentially I'm talking to the same clients for both business' and even if I can understand the division the clients may not.

Not sure if the business scales, it's a pretty niche sector which I'm an "expert" in, so think I have found additional products which will appeal (guesstimate the market in the UK for these new products at 100-200k PA).

So it'll probably never be my sole income but yes the intention is to keep any profit for investment in this or future ventures.

[paulpsz008]

coyft said:

At the top end of your sales estimate (40k) at an average GP of 15%, you'd make £6K GP. Take off your marketing, transaction and overhead costs and it doesn't leave a lot. If your customers are going to pay by credit card, then you'll have merchant service costs of about £1.6k (4% of sales), marketing costs of £1.2k (your estimate), overhead costs of say £1k, chuck in another £1k for the stuff you've forgotten about and that leaves you with a nett profit of £1,200.
Hardly worth the effort, unless there is lot's of potential. I'm not surprised senior management were not interested.....

Fair point, I don't expect it to be much effort.
Not that I'm lazy, it's just what I'd be taking on.
Marketing & Website will need a fair bit of work but I expect the ordering delivery process will be pretty low work level, basically I'm dropshipping but in a Niche industry.

[srebbe64]

A rule of thumb:

What is you:

1) Double your set-up costs;
2) Double the lead time from set up to securing customers;
3) Halve your projected sales;

If it still makes some sense after the above then it could have legs.

[paulpsz008]

Ok, point read & understood. You've certainly made me think.

There's a few numbers in their I need to do more work on before I put much in, but you haven't totally put me off yet?
Thanks,

Off to do some more research...



....Then some more research.

[Jasper Gilder]

Interesting.. A golden rule for working inside a business - don't ask permission, do it and ask forgiveness!

Looks like your middle management are a bit too risk averse ( or idle). If your plan works you win and can leave or sell the business to your employer in return for equity. If it fails you've lost nothing, other than setup cost and a bit of time.

If you don't do it - will you ever forgive yourself???

[srebbe64]

Jasper Gilder said:

Looks like your middle management are a bit too risk averse ( or idle).

It's not that, they said it's too 'small fry' and looking at the numbers they're probably right!

[Ayrton4ever]

Sounds to me that you are overlooking a major risk: that your current job management find out that you have set up another business competing for the same customers-conflict of interest. Which they will definitely find out if you have common customers. So would you be comfortable just running with your business?

[paulpsz008]

Ayrton4ever said:

Sounds to me that you are overlooking a major risk: that your current job management find out that you have set up another business competing for the same customers-conflict of interest. Which they will definitely find out if you have common customers. So would you be comfortable just running with your business?

That's the biggest problem.
The cost vs profit vs effort equation is less important really as I could get it going with only a small commiment and most of the costs would kick in a bit further down the line as I improved S&M.

If you were my boss, and found out, what would you do?
As I said, I've offered the idea to him but he doesn't like it.

PS. I think its an even better idea for my existing employer to run,
They could charge more due to their reputation.
The marketing would be virtually free (adding parts to existing marketing programmes).

[nsa]

srebbe64 said:

A rule of thumb:

What is you:

1) Double your set-up costs;
2) Double the lead time from set up to securing customers;
3) Halve your projected sales;

If it still makes some sense after the above then it could have legs.

I think you've posted this advice before. Am currently following it in my setup and it's very useful. Thanks.

[Eric Mc]

Don't forget to factor in the tax implications.

[Healey73]

paulpsz008 said:

Ayrton4ever said:

Sounds to me that you are overlooking a major risk: that your current job management find out that you have set up another business competing for the same customers-conflict of interest. Which they will definitely find out if you have common customers. So would you be comfortable just running with your business?

If you were my boss, and found out, what would you do?
As I said, I've offered the idea to him but he doesn't like it.

Too be honest I would probably run it by your boss along the lines of 'on reflection you were right about 'my project x' not be able to supply the required ROI but I was thinking about having a go myself for some extra beer tokens at weekends etc, what do you think?'

At least there would be no nasty surprises if they find out later. Just IMO of course.

[Windsorphil]

Why don't you get your wife/son/brother in law/dog to do this?

Your biggest risk in not telling your employer is a customer letting something slip to a colleague - people will assume that you've raided their database, stolen contacts and your feet won't tuch the ground as you leave the premises.

[superlightr]

paulpsz008 said:

Ayrton4ever said:

Sounds to me that you are overlooking a major risk: that your current job management find out that you have set up another business competing for the same customers-conflict of interest. Which they will definitely find out if you have common customers. So would you be comfortable just running with your business?

That's the biggest problem.
The cost vs profit vs effort equation is less important really as I could get it going with only a small commiment and most of the costs would kick in a bit further down the line as I improved S&M.

If you were my boss, and found out, what would you do?
As I said, I've offered the idea to him but he doesn't like it.

PS. I think its an even better idea for my existing employer to run,
They could charge more due to their reputation.
The marketing would be virtually free (adding parts to existing marketing programmes).

I would fire you.

Competing business,

Suggest to them that you run this part of it in your own time under their name and have 60% of the profits.

I would still say no, as its conflicting and too much hassle for the £

[paulpsz008]

Fair enough.

I'd probably fire me too. Tho' I'd not considered a few of those ideas, so maybe their is a win win.

I'm going to meet with a friend who is a web designer to discuss how much the webshop would cost to set-up & run.