How do you turn around a business?

in General Discussion edited January 2014
This topic has been discussed before, but I'd like to discuss it in further detail. A previous poster (designer) asked how to start a small business. I am a former designer as well. However my goal to is not a design business, but a toy store. Yeah really!

In this new economy, many businesses can start up as a home business. However, this is not the case for me. Retail is an old industry. I need a store front. With it comes a huge over-head that home businesses don't have.

So how do you turn around a start up business? I've asked this question many times. Even a professional business consultant couldn't give me a satisfactory answer. "Research" was his answer. You're a start up. Time and money is not on your side. You're in a finanial black hole already. So how is it done?

My business will sell high end collectibles. Most collectors buy more than one and are repeat business. I'll leave the cheap stuff/mass market stuff to Walmart. My customer base are 18 to 45. Educated with money to spend. Not moms and their kids.

I'm located in Toronto, Canada. Town of 3 million. Very cosmopolitan/multicultural. There are a few local competitors. Even a designer toy store. Some are web only or side businesses with no "showcase" storefront.

I'm modelling my business after this store. There will not be a webstore. The product has to been seen and touched.



  • Reply 1 of 11
    Oops it won't link. Just key it in and go to "about us" section

    <I fixed the link - audiopollution>
  • Reply 2 of 11
    sunilramansunilraman Posts: 8,133member
    first, you have to answer a few questions ;-)

    1. how much money do you have to invest?

    2. how much money do you hope to have to invest?

    3. what is your time horizon on breaking even and turning profitable?

    4. what is your exit strategy should your business not succeed?

    5. what is your market research strategy?

    6. what is your product development strategy?**

    7. competitive analysis: who are your major competitors now? who are your major competitors likely to be within the next 5 years?

    8. you've identified some target markets. that's cool. umm.. this no.8 is not a question, but saying, cool...

    **sounds like cool toys...! but what would your product pipeline and product portfolio be like?


    9. the 'bricks and mortar part': what location(s) are you considering?

    10. have you investigated lease options and terms? lease exit strategy?

    see you shouldnt have wasted money on a business consultant and just posted here


    11. branding: what sets your store apart from the others? what is your unique selling point? what sort of image and tone do you want to convey through your product and retail experience?

    12. how would you maximise no.11 above to encourage product purchases?

    umm like so this should all go into something called a Business Plan which is important to manage things like cash flow, profit and loss, marketing strategy, etc, etc etc... you will also need a decent Business Plan in some cases to apply for permits, leases, bank loans, and other foofarah...

    13. are you planning to go it completely alone or are you considering partnerships? how would your partnership agreement work?
  • Reply 3 of 11

    You are getting into a very specialized business with a very niche clientele.

    I would say your first step is to visit all your competitors, beyond those in Toronto, and see what makes them all tick. And by that I mean going for up to a two-hour drive away from the core, as such a niche market will travel to find/browse such stores (in my experience). A good analogy would be how antique collectors shop, they don't go to a single retail location either.

    This will give you ideas about how much capital you may need to tie up in stock in the store, and the traffic that such stores see.

    Take the best from each one, and see if you can conceive a model of what you think an ideal storefront would be like. Also, visiting your competitors will give you an idea of what is hot and what is not on an ongoing basis.

    Hope some of this makes sense.
  • Reply 4 of 11
    Something like 60% of businesses fail in the first year.

    Closer to 90% fail in the first three years.

    Most due to cash flow problems, independent of 'smart niche' or 'good product'.

    Plan on zero revenue for 18 months as a worst-case-hypothesis.

    If you can survive without clients for that long, you've got the warchest to handle hiccoughs.

    Realists might suggest a 6 month drought of client revenue as a fallback measure (since if you can't get your marketing working in that time it's a bad sign anyway), but given the fickle nature of the economy it is quite possible that the 'dry' months might not be consecutive in number, but they will still be cumulative in terms of expenses.

    Budget a cushion to get through the inevitable low months and you'll survive longer than those whose optimistic predictions depend on an unrealistic margin and market conditions out of your control.

    The Toy market changes incredibly fast. This year's hot product can get old and stale within months. Supply and distribution are key issues, but you're also facing some bigger players who will usually be able to undercut your costs.
  • Reply 5 of 11
    splinemodelsplinemodel Posts: 7,311member
    This is a tough idea. There is a lot of competition in this segment, and you're going to have uninspiring returns unless you do something that's totally mindblowing. With the current emphasis on video games, a traditional toy store is a difficult sell.

    For example: You can have a keg in the back of the store, free to patrons of your store. If you keep people in there, they are more likely to buy.

    Lastly, if you're going to stock primarily high-end items, I would recommend using RFID tags for inventory. They cost more than bar codes ($1 a piece), but if you're stocking high end items, you don't pass on much percentage to the customer. Trust me, it's much easier to track items using a gate antenna than with a bar code scanner.
  • Reply 6 of 11
    amorphamorph Posts: 7,112member

    Originally posted by curiousuburb

    Something like 60% of businesses fail in the first year.

    Closer to 90% fail in the first three years.

    Most due to cash flow problems, independent of 'smart niche' or 'good product'.

    Plan on zero revenue for 18 months as a worst-case-hypothesis.

    But do not forget to budget a wage for yourself. Incredibly, this is one of the main killers of small businesses.

    Also, it might be worth investing in a good inventory tracking and analysis system (see this Apple profile for one example), so you can see cold hard numbers about how well certain products sell, how quickly they turn over, etc. Toys are fickle, so you want to be sure that you lose anything that you can't move.

    Pay attention to the front window! There's a toy store local to me with the same basic idea, and I've wandered in there more than once just because they had some brand-new and hilarious thing prominently featured in the window.

    Good luck!
  • Reply 7 of 11

    Originally posted by Kung Fu Guy

    I'm modelling my business after this store. There will not be a webstore. The product has to been seen and touched.

    Since you're in Toronto, you've likely noticed that Silver Snail on Queen St. has started to stock small amounts of Medicom, Michael Lau, and other assorted HK or Japanese toy lines. Also, there are a few small niche shops further west on Queen, such as Magic Pony, which have a much wider selection.

    I'm not sure where exactly you are thinking of opening a retail location, but pushing against the inertia that Silver Snail carries in the 'comic book geek' demographic will be hard. It would be like trying to open up next to Kid Robot in New York.
  • Reply 8 of 11
    How to turn around a business:

    Take one small business in bad times

    Add one Steve Jobs.

    Cover and bake for 3 years.

    Remove from oven, and while still hot, serve iMac to market.

    With leftovers, simply reheat for another 2 years.

    Remove from oven, and while still hot, serve iPod to anyone who didn't get some of the first dish.

    Viola, you can turn around any business.

    All you need is one Steve Jobs.
  • Reply 9 of 11
    If it's a NASCAR related business, you always turn left.
  • Reply 10 of 11
    Hey I'm asking the questions! Just kidding. I don't have all the answers but I'll try my best to answer.

    1. $30 to 40K

    2. Same as above.

    3. 12 to 18 months. One shopkeeper told me it took 4 years. Not acceptable. I'm not going to eat Kraft dinner for 4 years.

    4. Exit strategy? Blow out clearance sale. Not sure what you mean

    5. I'm on several interent forums local and international. So I'm in contact with potential customers. I'm getting a feel for their wants and needs. I'm also a collector as well. So I'm using my personal experience to gage the market.

    I've also talked to several shopkeepers. Some were helpful, some not so. The best advice I got was I could read all the text books you want. But the only way to run a business is to do it. Another told me his store is a destination store. No one does does any advertising. Maybe christmas advertising or annual toy show. But that's it. There's the phonebook too.

    I've visited all the toy stores in an hour radius of my home. I've checked them all out. I've tried to figure out their business model. They succeed despite what I see as drawbacks:

    Poor location - Run down part of town, little foot traffic. Warehouse turned into business use with no elevators on weekends.

    Bad organization - Toys up the wazoo with no room to walk! Too much merchandise and not enough thought on design. I'm selling cool toys. It has to look cool as well. My start up is going to be modest at first. Design/aesthetics will have to come second.

    Bad attitudes - Bunch of kids with an attitude. Staff are very young and immature. A shopkeeper told me make the customer your friend. They need you as much as I need them. These kids aren't the friendly type.

    High prices - This store has sky high prices in a chi-chi tourist spot near the lakeshore. Great locale during the summer. Blistering cold during the winter. Tourists don't buy toys or do they?

    6. Cool toys. Similar to xl shop. With emphasis on figures. Military, movie figures, celebrities, urban street figures, japanese imports, etc...

    7. My competitors are small independantly own small business. Mom and pop. There are no chain stores. Toysr Us and Walmart are not direct competitors as they carry mainstream mass market cheap toys. We may cross paths, but I'm not going to carry Spiderman. I've observed the big boys for many years and noticed patterns in their pratices. Walmart is cheap cheap cheap. Nothing cool or of quality. Toys r us is troubled and just changed owners. They carry fewer toys, more baby stuff.

    Next 5 years? I don't see things changing much

    9. It's going to be modest at first. I've considered mall kiosks. Ideal small space. But I don't like mall hours or their practices. I'm doing this alone so it won't work. Ideally a small store front at street level. I've seen jewellery dealers with long narrow store fronts. I'm leaning towards an underground concourse that connects much of the downtown office towers. It a long concourse. There are shops and businesses. They close at 6 and weekends. Great during cold winters.

    10. No. I didn't pay for the consultant, he was my teacher. I guess I paid for his course. Did I get my moneys worth?

    11. For a start up I won't have much money for branding. That's for established businesses with loads of cash. My selling point will be a wicked showcase window. See the pics at the xl shop. Image and tone? Coolness! My competitors are perfunctory retailers. They have no image or branding.

    12. Collector are a breed apart. They are mostly impulse buyers. Gotta have it all types. Collectors will be my bread and buttter. This is a niche market, so there chance for growth. My part is to educate the casual colletors, walk ins and the mainstream masses. Branding is less of a concern right now. I have to make the collector my friend so they'll be repeat customers.

    13. I'm doing this alone. Right now I'm not commited to this venture yet. I'm working full time as a craftperson for a photo lab. I've worked in a toy store before, but not in managgement. I've also looked at Point of Sales software as my cash terminal/inventory database. Of course using a mac. Is this overkill for a start up business? I've never seen a mac used as a cash terminal other than mac retailers.

    I guess I'm waiting for someone to point me in a direction or path. I've looked around for a business mentor, but I' don't know anyone with a business. My contacts aren't going to share their trade secrets or financials.
  • Reply 11 of 11
    sunilramansunilraman Posts: 8,133member
    good stuff. yeah, that's what i mean by exit strategy. for some less-reputable businesses their exit strategy would be "escape to a non-extradition treaty carribean island with investor's cash"

    it looks like the business course covered the basics.

    you sound like you've got the drive and instinct on where others aren't doing it right and where you can shine.

    dude, i am only 26, this is as far as i can assist.

    i think yes, an experienced mentor(s) you trust/feel comfortable could be helpful to help you with the getting it off the ground part.

    does your country or state have any small business grant programmes where you get access to grants, a network of people, mentors, etc...? in australia there are the BusinessEducationCenters and a 1 year basic living allowance grant if you go through a 6-week course and pass a business plan test, and access to a panel or at least one mentor dude...
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