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How to (not) Start a Candle Company
Author: Chris Anderson
The following is about my experience with starting a Candle Company (www.zionsvillecandlecompany.com) from SCRATCH, a few of the pitfalls we had, and how we finally settled into a model that works for us. Please hold in mind that we had reasonable success with all the different models, and that to each his own. So hold in mind, just because we abandoned a certain business model, this may actually be the model that works for you, and vice versa, the model that we currently like may not be up your alley at all! Ok, here we go
Two years ago, my wife and I decided to sell our fundraising business. No easy decision, since wed been in fundraising for almost 14 years. At one point, we had 45 employees and were doing almost $1.5 million per year in sales. If youve ever purchased a discount card from a local high school or band (the discount cards featuring businesses that offer discounts) then you may be familiar with what Im talking about.
We were incredibly burned-out. We worked with thousands of schools over the years and just didnt have our hearts in it anymore. I had tried for years to grow the business to the next level. I tried hiring managers, recruiters, consultants, seo experts, etc etc etc.
All we managed to get were huge bills and little or no increase in sales or profits. We even invested $35,000 in a phone system and hired a professional telemarketing manager to build a call-center. Ouch.
Anyway, while researching possible products to add to our fundraising line, I stumbled across the idea of candles (as a fundraiser). Well, actually, I came across a new type of candle wax that was catching-on in popularity: Soy Bean Wax!
Keep in mind this is coming from a guy who had never bought a candle before (although my wife has bought a ton of them,) but we got so excited about the idea of promoting soy candles that we literally made the decision to sell our fundraising company to devote all our time to Zionsville Candle Company
Three Business Models in One Year.
Model One: Retail Brick and Mortar
We knew nothing about retail, but. (and I even developed a 30page business plan!)
We started with a retail model, and set-up in a small cottage building in the Village of historic Zionsville, Indiana- its basically an antique/craft area in an upscale suburb of Indianapolis. Before opening, however, we had to design all our products, formulas, packaging, etc. Actually there was a list a mile-long. We spent months and months on formulas, researching vendors, designing the packaging, sales literature, pricing, and a million other things. We set our target opening date for Dec. 1, 2005. We managed to open on time and had a worthy month. We hit about $5,000 in sales, not inferior for a first month, and not inferior for being situated on a silent street near a mildly-busy retail area.
Coming off a worthy first month, we were on a HIGH!! I mean, even with staff, rent, etc, we managed to make a small profit for December, and had a blast in the process. A steady stream of traffic, a quaint building in Winter Wonderland. Cool.
Then Christmas ended.
And we headed into January.
And we knew virtually nothing about retail.
Can you say Went from $5,000 in sales to under $500 in sales?
Ouch. This isnt fun anymore. We got our clocks cleaned in January.
And February
And March.
I learned (the hard way,) that if you combine a inferior retail location with a mis-matched marketing plan with a quasi-seasonal product, youre pretty-much doomed from the start.
Model Two: Wholesale
O.k., my wife and I are definitely lemon into lemonade people, so we got-up, brushed-off our knees, and tried again.
I know. Lets try wholesale. We can build a ton of retail partners to assist us build the business. After-all, we have a lot of experience with direct sales (from our fund-raising days.) I said.
And away we went. Two full-time sales people, one production employee and me and my wife. Pretty fast success. We found that getting the clients (with our sales experience) WAS NOT THE HARD PART. So all is well? (Not quite.) 150 retail partners later, we literally COULD NOT KEEP-UP WITH THE DEMAND. Yeah, I got what I asked for. Not exactly.
In only a six months we: out-grew our current retail/production building, out-grew our second retail/production facility, and almost went broke from growing too fast. After doing wholesale for six months, we realized that were not the high-volume, labor management types and thus decided (to again,) switch models.
I sure miss getting those RETAIL dollars for our candles, I said to my wife. This wholesale is a bear. Some weeks, we had to pour several THOUSAND candles. By Hand. Until Midnight. Good problem to have. Not exactly.
You see, with wholesale volume comes wholesale margins. Not to say it cant be done. But the way we were doing it was not working. I do know why. Combine low margins with high overhead and poor management (my wife and I have never claimed to be slave-drivers, and you have another recipe for disaster. As mentioned way up above, this could work for the right type of business owner. Just be prepared to micro-manage your staff, secure sufficient capital to grow, and service your retail partners to the best of your ability, and you will probably come out all right!
Model Three: Internet E-Commerce
Ok, this wholesale is killing us. I started to get REALLY frustrated. Having been involved with about 8 different companies over the years, I can tell you that systems are everything. However, you also need worthy people. And question any entrepreneur about staff, and most will tell you that worthy individuals are hard to find. In fact, part of the luck to getting a business off the ground is being savvy enough to systemize your business and then, to be lucky enough to find a competent, hard-working, committed staff. Well, Id been involved with another company years ago where I just COULDNT find the right staff, and I finally gave-up (it was a very large hair-salon franchise, the chop-shop type (I will not mention the name of it.) Anyway, sometimes you get lucky and sometimes you dont. But again, my wife and I arent the quitting type, so we both decided to switch gears again.
I know, lets try an online store- you know, e-commerce, I said to her. At this point, she was as tired as I was, but God bless her, she has faith, so she said o.k. After-all, anything had to be better than pouring candles until mid-night every other day.
Now I had attended a really awesome S.E.O. / Internet Marketing convention the year before to assist with the fundraising business. Wed been burnt by many web development / s.e.o. companies over the years, so I decided to learn more about it to assist hold a watch on the firms we hired. So this time, we decided to redo our own site, optimize it, and start building a retail client base (and also custom-candle base.) We launched the e-commerce store by November 15th of 2006, and (I think,) finally found our niche. In fact, we decided to completely stop marketing our wholesale products. We still service our current customers and work with select wholesale clients, but are careful to hold the load manageable.
Back to the e-commerce store. We started selling online and almost doubled our sales over our first December. We hit about $10,000 through online retail and custom orders (on top of our wholesale business.) Keep in mind, although we spent a substantial amount on Google ad-words and marketing, our production for our retail orders decreased by about 50%. We went from pouring 100 to 200 candles for a wholesale order to pour 3 to 5 candles for a retail order. No payment terms (net 30 etc,) no inferior debt. Only online credit card purchases and lots of marketing. Plus our staff really enjoys working with our retail customers. We love the compliments we get. Im not knocking our wholesale customers, but its different. We feel that to most of our wholesale customers, were vendors. Its different. Ill give you an example. I drove all the way across the state to call on one of our largest gift store customers (youd recognize the name- theyre huge,) and I walked in, eager to say hi to the purchasing agent. I thought shed be happy to see me and would be appreciative that I was willing to come to her store to assist her with her Christmas order.
I walk in, say Hi _______, and she looks up and says, I dont have time to talk to you, just go take the order.
Well, Im not desperate, and I decided I didnt want to work with her anymore. Just my choice. If I was desperate, Id put up with it, but Im not, so no soup for you.
Well, back to this paper. We feel weve finally hit our mark. We work with like-minded wholesale clients who appreciate hand-poured gourmet candles, we LOVE working with individuals who purchase our candles online, and we enjoy working with clients who are looking for unique corporate gifts or private-label candles.
No-more wholesale accounts that try to beat-us-up, no more brick and mortar retail where we (or our staff) have to sit behind a register for 8 hours during unhurried times. And best of all, through our experience with building our e-commerce store, we decided to start a marketing / s.e.o. company (Queen Bee Marketing www.queenbeemarketing.com) so we can assist others develop marketing and internet sites that actually bear fruit.
Article Source: http://www.articlesbase.com/small-business-articles/how-to-not-start-a-candle-company-89166.html
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