entrepreneurship - A Love Story & Guide Part 1

Introduction: //www.wallstreetoasis.com/blog/entrepreneurship-a-love-story-guide

There are different ways of making money online. Sell a product, provide a service, or sell advertising are a few ways. At one point I was co-owner of a news site and forum with 50k+ users. Truthfully most months we barely made enough money to cover server costs. Since then, I’ve focused on selling tangible products. This article will help you identify what product(s) to sell and how to source it.

I’ve naturally gravitated towards aftermarket technology products. The distribution channels are informal making it easier to negotiate. By building your business around a niche there will be less red tape, competition and higher margins.

Identifying the market and product you’re going to resell requires brainstorming. Make a list of all the websites, forums, and blogs you visit. For each website determine who their demographic is. This can be done by reading the websites news/blog posts, participating in the forum and analyzing existing ads on the website.

WSO Demographic

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The above skeleton is basic. For it to be useful, it would need to be built upon. Age, region, salary is good information too, but usually not obtainable and is not necessary. The point of this exercise is to determine a demographic to sell to. Understanding your demographic is crucial. Product specific statistics usually aren't available. Therefore you will be depending on your intuition when choosing a product to resell.

We know who we’re going to sell to, but what are we going to sell? Pens, suits, or cell phones? No, no, and no. The market for these products is already established. Unless you have a competitive advantage such as a friend owning the factory making inventory accessible at near cost you will be unsuccessful in competing with big box stores. It isn’t impossible to start a business selling these products, but it would be capital intensive and require a strong marketing push.

Once we’ve determined what we want to sell, we need to find a reliable source. www.alibaba.com has a lot of distributors, and just about every product can be found on there. Keep in mind, most sellers are people just going to market and buying what you need after you order it. With that being said, there are some real distributors on Alibaba. I used Alibaba as an example because it's somewhat reputable. Search online for suppliers too. I've noticed in the past 2 years distributors are building their own websites.

I found my first supplier on a forum console industry focused. They were US based and had many complaints from Canadian customers. The shipping times were slow, orders kept getting held in customs and dinged with excessive duty fees. After speaking with the owner for a week, we opened a Canadian shipping centre...in my bedroom. While I only billed a measly $5 per package, our agreement gave me access to product at cost. All of a sudden I had access to inventory for less than what other installers and shops did. I needed to capitalize on this, and did. I emailed and cold called every shop in Canada. After becoming comfortable with sales, I began meeting clients in person. My mom would drive me and wait in the car until I was finished. I had just turned 13 years old.

When reselling a new product that my current suppliers don’t stock I purchase from 3-5 different suppliers. If a supplier takes more than a couple days to ship, I know they’re going to market to buy it. Avoid suppliers like this and deal with actual distributors. Companies that stock inventory will be able to offer better prices, stock other products, and provide better information. Don’t be discouraged if out of the 3-5 suppliers you purchase a sample from only 60% ship the product. It’s a reminder of how important building a strong relationship is with an honest distributor is.

Moving the communication from Alibaba to an instant messenger (MSN, Skype) is an easy way to build the relationship and work towards better pricing. It may seem like every business you talk to is owned by a woman. This is untrue, regardless of how they represent themselves. From experience, their english is better than the owners which are typically men.

After receiving the samples it is time for due diligence. Think hard about the industry you're going to enter. I learned an expensive lesson when the first iPhone was released. They were locked to AT&T and only available in the US. A SIM card add-on was released allowing the iPhone to be used on any network. I sold thousands. I was so confident in the product, I ignored that unlocking phones was historically done through a free software solution. Never stock an abundance of inventory. If I had followed that, I would have dodged a several thousand dollar loss.

We need to grasp what we can sell the product for. MSRP is not relevant online. EBay is a great place to determine what the product is selling for. Don’t be discouraged if the price is too low. Just because it is available on EBay does not mean you cannot sell it for more through your own e-commerce site. The majority of EBay resellers selling just above cost are located in China. People are willing to pay a premium in order for their product to be shipped from within their own country because the shipping process will take less time and there is an expectation of superior customer service. I would then Google the product name and search for other retailers. Find out who your competition is by asking the following questions:

1) What price do they sell the product for?
2) How are they marketing their website?
3) Where do they ship from?
4) How do they accept payment?
5) What are their return policies?

Your answers should be similar to the examples below.

1) MSRP is $59.95, competitor sells for $49.95, and cost is $35 before shipping/duty.

2) Search Engine Optimization (SEO), Facebook and Twitter are the default any business should do. Don't be intimidated by social media marketing as it can be easily executed.

3) This is a defining factor. Shipping costs are always increasing. If your main competitor is in another country, you can easily capture market share by offering reduced wait times and less expensive, or free shipping options.

4) If your competitors only accept PayPal or credit card, they're missing potential sales. Capitalize on this. As a store owner, you never want to decline an order because you cannot process their funds. At a minimum, accept PayPal, Google Checkout, Visa and Mastercard.

5) If their policies aren't customer friendly, do the opposite. Emphasise customer satisfaction and service. In exchange, you'll be able to charge closer to MSRP capture some of their market.

Use the answers to the above questions to determine if you can compete. Remember, the only expenses you've incurred so far is for the samples and your time. You do not have to follow the steps I've listed exactly. I've outlined my personal approach. If you find the product first build a demographic around it. Ultimately, it is about sourcing a product and competent supplier. In the next article I will discuss marketing your business outside of Facebook and Twitter.

A few members brought up a valid point of, why would I want to pursue a career in accounting, banking, consulting if I've had so much success through my own businesses. I would agree with you if I lived forever. I would be building the next Porsche. Being an entrepreneur is not always sustainable. If a product becomes obsolete unexpectedly thousands of dollars can be lost in inventory. Since none of us live forever, I'm open to working corporately. Who knows, maybe I'll start my own firm eventually.

- independent