Forums: Discussions for entrepreneurs and small business.

Hey guys,

I have a business idea that I am getting serious about. I know there are many experienced business owners on this board and I wanted to post my idea so that I can get some opinions about the potential (or lack of) this idea has.

First some personal information about me: I`m going to school full time any will have heavy class loads in the future which will allow little time for me to devote to my business. (maybe 20 hours a week) However, I have more than enough startup capital ($18,000) and I believe my startup costs will be low so there should be no financial hassles to deal with. My main concern is if this idea will produce a profitable business that won`t consume all my time.

Ok here is my idea: An online chocolate store that draws a customer base from the local area. I have noticed that online candy is much more expensive than the stuff you see at the checkout aisles. I believe this is because people are willing to pay much more for a candy that has some specialness to it. Maybe it`s specially shaped or has an exotic taste. Prices for 150 grams of chocolate or a box of pieces range from $3-$40 online.

I want to sell stuff at the lower to mid end of that price range. At this price level I expect to retail my products for around 3 times my cost. I`ll show some examples:

http://www.metrocandy.com/NONPARIELS-WHITE-CHOCOLATE

This candy is about $6 per lb. or $3 per 1/2 lb (which is about 225 grams or 4 hershey bars, the increment I think I`ll sell most of my candy in) I think I could sell this candy for $6-9 per 1/2 lb.


http://www.metrocandy.com/MELTING-WAFERS-WHITE-CHOCOLATE-50L B-CASE

This candy is about $1 per 1/2 lb and I think I could sell it for $6.


http://www.metrocandy.com/CORDIAL-CHERRIES

About $4.25/0.5 lbs and I think I could sell it for $10


http://www.metrocandy.com/COCONUT-MARSHMALLOW-SQUARES-MILK

$3/0.5 lbs and I think it could sell for $10-15


Why do I think I can achieve those retail prices? Because candy on other websites is similarly priced. Also I think by adding some flare to the packaging the candy will look like it`s worth more to the customer.



I plan to market my candy locally by making small sample packs with pieces of several of my candies. Each pack will cost a lot in products/packaging, probably $2-$5. To distribute them I`ll stay around a high traffic area preferably near some upper-middle class eating areas. This is where I think I can find my best target demographic: middle or upper middle class folks who "enjoy" food a lot. I believe these are the guys who will be willing to spend money on candies that appeal to them. Assuming a 10% hit rate it will cost about $20-50 to get a customer. However, I believe that I`ll have a high retention rate because people who develop tastes for my products will want to keep buying (hopefully they won`t wander off to a different candy website though). I imagine that in a few months I`ll have around 50-200 occasional customers who places orders infrequently, and maybe 10 regulars who buy stuff every week or every month. Since most customers will be local I think I can get away with sending packages via the slowest method and they will still arrive in a day or two.

So that is my idea for a profitable business that won`t demand too much time from me. It will be my first business venture though, and I`m very nervous about overlooking some detail that will cripple the idea and leave me stuck with hundreds of dollars of candy in my garage. Any comments or criticisms you guys have would be greatly appreciated!

Thanks in advance

AD1985,

I love the fact that you are passionate but yet cautious. Too many people get excited about an idea and jump into the business without first doing their homework. Just the fact that you are thinking through issues and posting in this forum is probably a good sign towards your business` success, in my opinion.

With that being said, let me see if I can offer some advice. It seems as though you are pursuing a focused differentiation strategy. In English, this means that you will be concentrating on a narrow buyer segment ("middle or upper middle class folks who "enjoy" food a lot") and outcompeting your rivals by offering customized attributes that meet your niche market`s tastes and requirements/expectations better than your rivals products.

Assuming this description of your strategy is true, then perceived value to your potential customers is of utmost importance. You have touched on this issue above with your comment regarding "adding some flare to the packaging the candy will look like it`s worth more to the customer"   and "specially shaped or has an exotic taste". Whether actually delivered or not, the perceived value of your candy will be extremely important to your strategy.

The good news is that selling intangible perceived value can be both fun and relatively cheap. Your chocolate is likely the same as most others chocolate, therefore, you will likely need to concentrating on selling the feeling or experience of your products. This can be done with guerilla marketing techniques similar to your product sample idea. Without analyzing the financial assumptions you have made, your business, to me, seems like it will live or die based on whether or not you can convince potential customers that, despite tasting similar to other brands, your brand is different/better/cool/etc.

So, in a nutshell, I believe what I am trying to say is that you will probably want to spend ample time on developing a brand and a differentiation strategy to separate yourself from the pack. You ideally want people to 1) recognize your brand name and logo, 2) choose your brand over others despite the higher/equal price and 3) spread the word about your brand to others (viral marketing). Most likely, given your time and monetary considerations, you will want to pursue a variety of guerilla marketing techniques at the beginning to get things rolling.

I would be happy to provide you some further information on some resources (sites, books, etc) that may help you out. Also, I run a part-time (for now) consulting business providing entrepreneur advisory services if you are ever interested in professional help in developing a website, marketing plan, etc.

Wishing you the best,

JJ

 

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J.J. Thomas, JD/MBA

Entrevisor - Entrepreneur Advisory Services

www.Entrevisor.com

Entrevisor@Gmail.com

Hi JJ,

Thank you for the detailed post, it was most helpful. Can I have your email?

Thanks again

Ashan

Ashan,

You can reach me at Entrevisor@Gmail.com. I look forward to hearing from you.

J.J.

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J.J. Thomas, JD/MBA

Entrevisor - Entrepreneur Advisory Services

www.Entrevisor.com

Entrevisor@Gmail.com

Brilliant advice from Entrevisor.

Read "Blue Ocean Strategy" and create a strategy canvass to fully develop your brand and differentiate yourself from the current market. Doing this will put you in deeper thought on all aspects of your future business.

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EventBrander.com | Custom Printed T-Shirts, Promotional Products, Lowest Prices Guaranteed

"Guerilla Marketing" by Zig Ziglar is an oldie but goodie when it comes to getting aggressive about marketing/introducing your product/service.

My dad always taught me to PPP--Promote, Promote, Promote. Never forgot that!


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Ultimately the thing that sells is word of mouth. Try spending more time on building the branding. You should have some free tasting parties for your school mates when you launch your business online.

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Seo Consultant | Rattan | Business Accounting Software | Autism Singapore | Industrial For Rent | Business Park

Your idea is good and nice thoughts from you i learn more from you and your selling  chocolate in free time it is also good thought.

________________

Tom.

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two very good points mentioned: 1) brand differentiation and 2) viral (word of mouth) marketing

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