Range of questions from a budding business

Sakinah

Hi there,
I'm trying to start a business selling a certain type of baby product that I manufacture.

As expected, I'm hitting obstacles, and need some help if you can provide it.

I cannot find anyone to give me Products Liability Insurance. I've gone through several brokers, none have turned up a result. I understand there probably isn't a 'templated' insurance package for this type of product, but others have this product on the market (I have my USP) so they must be getting insurance somewhere. One of the brokers advised I might need to go to the UK that most Irish insurers won't touch baby goods as the liability is too high and courts usually side with the child and parents. I'm not prepared to do the business without this in case, God forbid, a child got hurt.

Supposing I get over this, I have a question around sales. Currently I'm in IT and know nothing about Sales. I want to get this product into retail shops , what is the best way to approach shops - is it to walk in off the street (cold calling effectively) or to ring up and try to make an appointment. If the latter, how much info should you give away (you don't want to give them all the info over the phone I assume in case they shut you down right there). Anyone experienced at this can give me advice? I'm deliberately avoiding distributors so I can split that margin between myself and the retailer otherwise it's not profitable enough for me. (Trying to keep the retailers gross margin at 26%, does that sound attractive to a retailer?)

Lastly, supposing a stand with this product cost a retailer about 2,500e ex VAT, am I:
a) completely mad thinking they would accept immediate payment terms?
b) better to offer a smaller stand with a smaller outlay with a smaller gross margin for immediate payment terms?
c) better to offer 2/3 months credit terms for this amount of outlay?

Basically I'm unsure whether the margin or the cash outlay is ultimately more important to a retailer?

Any advice/help/ constructive criticism is welcome

Thanks

Peterdalkey

I do not wish to appear negative, but you do not appear to be in a position to service this market. Retailers generally buy a host of products from a number of different wholesalers and are unlikely to buy a single line from any vendor let alone on a cash sales basis. They generally also want to be able to return non or very low volume selling lines. How would you deal with distribution all over the country?

If you have a unique product, you might seek to protect your intellectual property by way of a patent and then licence it to a recognised baby products manufacturer active in your general market segment.

As to insurance, that would largely depend on the type of product, ingredients or construction. I expect you would be looking at a policy that would have a minimum premium of at least E 10,000 for say a topical product and more if it is ingested. The big players have blanket cover spread over many products at a very low unit cost.

I am sure others will post here with more suggestions and experience in this area.


Best of luck

Peter

Sakinah

Hi PeterDalkey thanks for replying

Peterdalkey wrote: »

I do not wish to appear negative, but you do not appear to be in a position to service this market. Retailers generally buy a host of products from a number of different wholesalers and are unlikely to buy a single line from any vendor let alone on a cash sales basis. They generally also want to be able to return non or very low volume selling lines. How would you deal with distribution all over the country?

Better to have the flaws pointed out so I can plan for them!

Perhaps you are right, I don't know enough about how retailers act tbh. My father was a retail manager for 20 years and he didn't point this out, though he was in the food industry. The other thing is that my target are the small/medium privately owned children's stores not big chains etc. I'm not planning a big empire....at the moment my target is to get 2 stocked stands sold per month. Once the stand is fully stocked, restocking it will be straightforward enough with postage. The stock is only a small size. And I think I can do that inside the same province for the first year. I will have to refactor the numbers though in case you are right. I have identified some distributors anyhoo. I think I'm just going to have to bite the bullet and ask some stores to see if you are right.

Peterdalkey wrote: »

As to insurance, that would largely depend on the type of product, ingredients or construction. I expect you would be looking at a policy that would have a minimum premium of at least E 10,000 for say a topical product and more if it is ingested. The big players have blanket cover spread over many products at a very low unit cost.

I think you could be on the money (literally) with this one which is what I was afraid of ...in which case it would be game over.:(

Sakinah

What did you think of the 26% margin for retailers btw? Too low?

Peterdalkey

You are right to do as much research and talking to the market before spending any money. Just make sure you do a lot rather than a little. Talking to 10 store owners should give you a decent idea of the market. Ring or better visit near 10 in the morning when the shop is open but not busy!,


Cheers

Peter

Sakinah

Thanks for the tip!

Sakinah

So I went to Enterprise Ireland today, they were quite helpful and very positive about the product. They also advised me what grants I might be able to get which was good. And they are going to try to organise a sales mentor for me aswell as find some good suppliers too.

There are two items I am looking to source, which I was considering buying in from abroad, but since there are plenty of business people on here, I'm going to throw this out there and see what happens:

Packaging: I'm looking for a company to quote me initially for product packaging. It needs to be a hanging card background - I have samples of the types I'm looking for. And do you contribute to the design (I can outsource the actual print design separately if needs be.) PM me if you're in this industry. I did have a look at many Irish packaging websites and saw nothing online that provides something similar, but I think this could be fairly easy for an experienced packaging manufacturer.

Web Design: I have a budget - and I require a quote for an eCommerce website. Does anyone want to quote me for that? PM me if interested in discussing with sample websites already produced.

Peterdalkey

The packaging bit is easy... See http://www.boards.ie/vbulletin/showthread.php?p=81708901

And for an eCommerce site, try this one. http://www.boards.ie/vbulletin/showthread.php?t=2056820315

Well done today, good work!

Cheers

Peter

Sakinah

Hey, thanks

I had already seen Dollard online, they don't seem to have what I need on their website. But might ring them anyway.

Thanks a mil for the website provider recommendation - it looks great actually!

Peterdalkey

Sakinah wrote: »

Hey, thanks

I had already seen Dollard online, they don't seem to have what I need on their website. But might ring them anyway.

Thanks a mil for the website provider recommendation - it looks great actually!

If you PM me a pic of what you want, I will give you a couple of definite suppliers. Chris will also be able to help you I reckon.

By the way. Bernard at www.printworld.ie does printed and cutout prototype board packaging!


Cheers

Peter

JMR

Peterdalkey wrote: »

If you PM me a pic of what you want, I will give you a couple of definite suppliers. Chris will also be able to help you I reckon.

By the way. Bernard at www.printworld.ie does printed and cutout prototype board packaging!


Cheers

Peter

Great to see this, sound advice from a seasoned businessman to a new startup. Fair play for taking the time

Sakinah

Well today I got some brief advice from a barrister.

He said that without the product liability insurance, I'd definitely have to be a limited liability company, and that the company would take the hit if someone got injured with my product. I said I'd heard company directors can also be personally sued, and he said that it was quite rare.

Does anyone know any more about this? Any experience being personally sued as a company director for issues relating to product? I'm trying to figure out if it really is rare.

He also said that if the company got sued, the company would be wound up and assets liquidated to pay the debt. Anybody know what happens if the company does not have enough assets to pay compensation? Hope no one minds me asking, I'm finding it therapeutic to keep a kind of 'start up diary' on here

DubTony

I can't help you with the product liability insurance as I've only ever been in retail. With regard to the margin you're considering. I think it's too low, and as Peter said, sale or return will be important. Add to that, most retailers aren't interested in a new product unless its heavily backed by advertising, unless its something that people just won't be able to do without.

The stand size you're suggesting seems huge (by value) for a small carded product. I'd say it should not be any bigger than the units you see in convenience stores with scissors, hairbrushes, nail files, sticky tape etc. These are typically about 18 inches to 2 feet wide, and about 4 feet high.
You're offering will be extremely unattractive without good credit terms and a sale or return option. You could offer firm sale terms but even with an increased margin, I'm not sure you'll find many retailers willing to take the chance.
Credit terms need to be at least 30 days. In fact 30 days from end of month is better. Even better again is 30 days from the first refill. So effectively you'd be offering at least 60 days.

If I remember correctly here's how Capital Products offer their goods. These are the guys who supply many shops with the products I mentioned above.
The first order, and the stand are delivered. The stand is packed by the van sales man. He prints a delivery docket for the goods and leaves. When he comes back a month later, he counts the products on the stand and generates an invoice based on the goods sold (well, at least the goods that are gone). The retailer then has 30 days to pay that invoice. So the credit is at least 60 days but is only for products sold. The retailer only ever pays for the stock after he sells it. These guys typically offer a 33% margin on retail. The only real cost for the retailer is through stolen stock, some time spent tidying the stand and refilling faster moving lines held in stock. In fairness this is the holy grail for retailers and very few suppliers offer these terms. But you can see how it might help to get your foot in the door.

Is your product suitable to convenience stores and supermarkets? If it is, you might consider approaching companies like BWG (Spar, Mace) and Musgrave (SuperValu, Centra). They guarantee payment through the central billing system, albeit for a higher margin, so your risk is as good as eliminated, and they will trial the product in certain stores before rolling out fully. Simply contact the appropriate buyers.

Axwell

If you are looking for quotes for a website then stick a brief up in the design forum

http://www.boards.ie/vbulletin/showthread.php?t=2055802922

Sakinah

DubTony wrote: »

I can't help you with the product liability insurance as I've only ever been in retail. With regard to the margin you're considering. I think it's too low, and as Peter said, sale or return will be important. Add to that, most retailers aren't interested in a new product unless its heavily backed by advertising, unless its something that people just won't be able to do without.

The stand size you're suggesting seems huge (by value) for a small carded product. I'd say it should not be any bigger than the units you see in convenience stores with scissors, hairbrushes, nail files, sticky tape etc. These are typically about 18 inches to 2 feet wide, and about 4 feet high.
You're offering will be extremely unattractive without good credit terms and a sale or return option. You could offer firm sale terms but even with an increased margin, I'm not sure you'll find many retailers willing to take the chance.
Credit terms need to be at least 30 days. In fact 30 days from end of month is better. Even better again is 30 days from the first refill. So effectively you'd be offering at least 60 days.

If I remember correctly here's how Capital Products offer their goods. These are the guys who supply many shops with the products I mentioned above.
The first order, and the stand are delivered. The stand is packed by the van sales man. He prints a delivery docket for the goods and leaves. When he comes back a month later, he counts the products on the stand and generates an invoice based on the goods sold (well, at least the goods that are gone). The retailer then has 30 days to pay that invoice. So the credit is at least 60 days but is only for products sold. The retailer only ever pays for the stock after he sells it. These guys typically offer a 33% margin on retail. The only real cost for the retailer is through stolen stock, some time spent tidying the stand and refilling faster moving lines held in stock. In fairness this is the holy grail for retailers and very few suppliers offer these terms. But you can see how it might help to get your foot in the door.

Is your product suitable to convenience stores and supermarkets? If it is, you might consider approaching companies like BWG (Spar, Mace) and Musgrave (SuperValu, Centra). They guarantee payment through the central billing system, albeit for a higher margin, so your risk is as good as eliminated, and they will trial the product in certain stores before rolling out fully. Simply contact the appropriate buyers.

Firstly, I REALLY appreciate the time you took to write this reply, it's been immensely helpful and great to get that retailers insight.So cheers for that I don't seem to have the 'thanks' ability on posts yet....

The product will not be heavily backed by advertising, although there'll be some, but tbh I've seen lots of stands with knick knacky things in shops, (think personalised kids bedroom stickers, etc) , those kind of products are not advertised but shops still take them? My product isn't a 'knick knack' and is a usable functional item albeit it is the aesthetics that will hopefully sell it, but I'm just comparing them because they all have one thing in common - they are an impulse buy. Everyone I've shown my flavour of the product to has immediately asked me -"Where did you get that?" and that's the truth, not some hopeful blind optimism.

The measurement of the stand you gave is approximately right, the RRP of each item is 9.99inc VAT which is why the value is high. I do agree and was a bit worried that it may be too much to ask for - and I'm glad to get that confirmed by you.

I'll mull over those credit terms you gave me - I have to balance attractive credit terms with good cashflow for my business - but would retailers consider "introductory offers" of longer credit periods like 90 days for the first 3 payments say and then say shorter credit periods? (I'm wondering how we can both be satisfied and I want to give the retailer a chance to get comfortable and happy with the sales of the product and have confidence that the product is a seller).

The 'pay per sale' pricing strategy you mention is very much in their favour - it seems like a huge effort for me to do their stock take for them - and then perhaps bills them for only small numbers - I was hoping they could pay (probably with a long credit period) for the first stocked stand (a gift shop owner advised me they had done this with personalised pens stand) and then they just ordered what refills they want from there on in??


Which would be more likely to tempt a retailer (we'll assume credit terms are like 90 days but not pay per sale) a smaller stand with a lower margin per item or a larger stand with a bigger margin per item?

I don't really think the product is suitable for the stores you have mentioned - its a little too specialised, although maybe I should let those companies make that decision. Never rule out anyone as your customer right?

Sakinah

Axwell wrote: »

If you are looking for quotes for a website then stick a brief up in the design forum

http://www.boards.ie/vbulletin/showthread.php?t=2055802922

Yes thanks -sorry should have read the sticky first ....:o

DubTony

I suppose the percentage you offer would also depend on how quickly the product moves. If, as a retailer, I have to call you to get more stock in a hurry, I'm generally willing to accept a lower margin. But if the product is spending any more time than a typical payment cycle on my rack, I need a higher margin to cover the cost of holding stock.
For me it never mattered how big the stand was, space allowing of course, but how quickly the product moved. If its a fast mover I want as much as is reasonable to ensure I don't run out between deliveries, and a lower margin is acceptable. If it's a slow mover I need a higher margin irrespective of the size of the stand but I won't want to stock too much. I don't want a stand looking half full most of the time, so you've a fine balancing act to perform.
There's also the consideration of how often an individual buys the product. Is it a consumable or a once off purchase item? A bricks and mortar retailer with a regular customer base will see a non consumable as a one off (maybe twice or three times) purchase for him, as demand will diminish over time. So the size of the stand is only relevant for a short period of time. Large chains, large shopping centre and online retailers obviously have a different and much larger customer base so the product has a longer "shelf-life".