R20000-R50000 to startup a business? How to go about it?

[bjsteyn]

Hi,

I have a chance to grab an agency for the city i live in.
I need R50 000 to get the angency. I will also have the sole agency for my city and receive R67000 worth of stock.

I have tried the product and knows it works. It help me stop smoking within a week. And I have tried everything before.

Two people in my office uses it. That is were i heard about it. Out of the 6 of us at the office that smoke, know 3 of us are using the product.
Two the off the other smokers at the office asked me to send them information about it. If they go on to it then 83% of the smokers in my office
would have moved from smoking cigarettes to the product.

There is also an re-curring customer base once a customer has baught the product. The product has "re-fills".

I can alternatively become an un-official agent for R20000 where i get 20% discount on the stock. But then i loose the chance to grab the sole agency for
my city.

What is the best place/way to aquiring a loan or business partner/investor . I will be working on a business plan over the next week.
I have a friend that owns his own distribution agency and have been in sales for the long time. I can approach him with the business
plan and am sure he will be interested and he has the cash flow in his business to put down the money.

Any suggestions on what i should do and how to go about drawing up "a return on investment plan" and any other suggestion to aquiring the cash.

Thanks
BJ

[Dave A]

E-cigarettes by any chance?

[bjsteyn]

E-cigarettes by any chance?

Hi Dave, how you doing? Long time since i have been on TFSA .

Yes, its electronic cigarettes.

[Dave A]

I suggest you research the competition before you commit. For example, they're available at Clicks.
Also available through a number of online outlets.

I'm not saying there isn't a business opportunity, but it probably isn't as exclusive an opportunity you o.p. suggests you might think it to be.

Do a business plan.
Do solid research.
Don't do it on a hunch or based on the spin from whomever is trying to get you to part with your cash.

I can alternatively become an un-official agent for R20000 where i get 20% discount on the stock. But then i loose the chance to grab the sole agency for my city.

That troubles the heck out of me. I would be deeply suspicious of anyone making offerings along those lines.

Look before you leap, my friend.

[bjsteyn]

Yes, i am planning to do solid research on who the competitors are, how big the market is, how crowded the market is, price and quality comparisons etc.
and draw up an business plan.

I believe the quality of the product and that it works, is what will make it sell. And have a marketing strategy in mind. It sell from R200 to R1000+ depending on the one you take.

What would youre route be if you had to aquire the cash. Would you go the loan route or investor route? And who whould be youre first option for an loan and where would you look for investors. Thanks

[Dave A]

Your options are driven by your overall credit worthiness (how banks and other finance options might see you).

Generally the order of preference for small finance requirements typically is:
Self-financed (ultimately lowest risk option)
Secured loan (with collateral = lowest interest cost)
Unsecured loan (revolving credit, credit card = higher interest cost)
Investor (% of business = loss of autonomy)
Family and friends (normally low interest or ownership cost, but high relationship risk)

Other options are:
Angel investors (% of business - aiming for a high growth potential or very high return, but generally come with experience and advice)
...

The others that come to mind would generally involve much larger sums of money.

Blurock seems quite positive about some of the DTI programs out there. Hopefully he'll chip in with some ideas too.

My final comment for now is that in nearly all instances, there will be some level of expectation that you commit some of your own money too.

[tec0]

I also like the product actually but there is a “monopoly” at the moment. We have a few stores in our aria the sells it for more or less the same price. So based on that I would investigate and see about your profit margin because I have a feeling that your cut is predetermined by them. It is not always a bad thing but rather ask the difficult questions now.

[Blurock]

Pardon me for being negative, but I have serious doubts about the viability of E-cigarettes as a stand alone business. If it works and they stop smoking after a week, where will your recurring sales come from? The chain stores include E-cigarettes in their product mix, so can be more aggressive on pricing. Will you be able to compete?

What will your R50k buy? An exclusive agency or just stock? What does the fine print say? Does that include advertising and promotion? Where will you sell from, online or from fixed premises? Or are you going to sell directly to the chain stores, in which case you'll have to pay a hefty listing fee and rebates etc etc.

Talking to family and friends is good, but can not be considered as market research as these are often people who who do not want to embarrass you by shooting you down.
R50k may not be enough to invest in a sustainable business. Are you looking for a short term opportunity or do you want to create wealth?

[bjsteyn]

Pardon me for being negative, but I have serious doubts about the viability of E-cigarettes as a stand alone business. If it works and they stop smoking after a week, where will your recurring sales come from?

It uses liquad based refills which cost around R100 and last about a month (price varies for flavour) . The one guy at my office has been using it for around two years after he stopped smoking and is still using it. That is where me and the other guy at the office heard about it.

The chain stores include E-cigarettes in their product mix, so can be more aggressive on pricing. Will you be able to compete?

There is no real advertisement on Electronic cigarettes in East London. Will have do some research before i will have more information, which i will be doing this weekend. @Dave A and @Blurock i have sent you link to the suppliers. For obvious reason i don't want to post it here.
@Tec were are you from?

What will your R50k buy? An exclusive agency or just stock? What does the fine print say? Does that include advertising and promotion? Where will you sell from, online or from fixed premises? Or are you going to sell directly to the chain stores, in which case you'll have to pay a hefty listing fee and rebates etc etc.

An agency, youre name will be published on there website as an agent. Receive R67 000 worth as stock. (I presume at sell value). You can make up the stock from any of there product, the just give suggestions. He said they do protect there agents and can only garuntee an area in a city. But when i mention EL he said there will "probably" only be one agent for EL. If i persue this agency, I should try and get that on paper. And from the supplier point of view if you are there sole agent should there be some sort of performance clause.

Talking to family and friends is good, but can not be considered as market research as these are often people who who do not want to embarrass you by shooting you down.

I will create an survey to find out more if people would be willing to pay and what they will be willing to pay for an quality e-cigarette and to stop smoking in EL. Then again I know my way around the web and how to market / sell on line.

R50k may not be enough to invest in a sustainable business. Are you looking for a short term opportunity or do you want to create wealth?

This is an short term business opportunity for me. I want to start my own IT company eventually. I am a programmer for an IT company at the moment.

I have tried many opportunities, and am still to find the one that is going to work. But without failing there can't be success.

Thanks
B.J.

[Blurock]

I like your entrepreneurial spirit, but do your homework first, then get an informed opinion before making the final call.

[adrianh]

I think that buying an agency for something that any fool can bring in simply using his credit card and the internet is a total waste. What will you do if I bring in R200K of e-cigarettes and sell thrm on every street corner in your town

My personal opinion is that you are wasting your money. Find something unique that nobody can easily duplicate. My trains are like that, any fool can imprt American trains cheaply but nobody can make South African trains as accurately as I can.

[bjsteyn]

I think that buying an agency for something that any fool can bring in simply using his credit card and the internet is a total waste. What will you do if I bring in R200K of e-cigarettes and sell thrm on every street corner in your town

I was thinking a more coporate client base, as it isn't cheap, but also not expensive in terms of stopping smoking compaired to smoking, as you will save alot of money compaired to if you continue smoking. You can smoke it in your office while you work. Like i/we do :-)

My personal opinion is that you are wasting your money. Find something unique that nobody can easily duplicate. My trains are like that, any fool can imprt American trains cheaply but nobody can make South African trains as accurately as I can.

Yes, thats true, but my knowledge is in IT and this is just a means to an end, and it is something i will be comfortable in selling as so many people want to stop smoking and the market is big, crowded i don't know, research to do, and I have IT systems i want to write, but am not getting the time with working full day and extra hours at home with my current work. I need my own business going, something to give me an income while I focus on what I really want to do. The one system I have developed and want to improve and know can be a success, I need about 6 months to develop it further.

[tec0]

Pardon me for being negative, but I have serious doubts about the viability of E-cigarettes as a stand alone business. If it works and they stop smoking after a week, where will your recurring sales come from?

Right basted on my own research, and it is by “no means conclusive” but there seems to be repeat business opportunity lurking as some smokers use this product as an alternative as it is more acceptable in public places, offices, and Medical facilities.

As a standalone business it has almost no chance. Being on the supply side is a better bet but the demand is questionable but as it is short term it may still be worth looking into. If you are looking at the supplying side get the books and evaluate who the customers are and if there is a pattern.

If you sport customary behaviour look at the size of the orders are they the same each and every time. This will give you a feel for the market and if there is value or not. Just make sure the books are honest....

I remember health products that used a similar based system to get people to buy the product and invest. BUT turned out to be a can of worms.

Whatever you do just be careful.

[bjsteyn]

I went to look were the product was being imported from, and found that there is one more person importing it. What is stopping that person from selling so called protected "agencies". When importing goods is there any sort of agreement were you can sell?

[adrianh]

Nothing stops anybody from using their credit card and ordering it from anywhere in the world whether you have an agency or not. An agency for a product that is made by many different companies and sold by many different companies and individuals into many markets is simply a waste of time, money and energy.

You must remember that your R50K is a $h1tload of money to you but it is a drop in the ocean for many others. Those others will quite happily throw a couple of grand on the off chance of making some money. Believe me, my brother is like that, a 100k here or there is like 1k to me you you. The point that I am trying to make is that you need to be very careful when you evaluate risk vs reward, don't just think it terms of what you may make, also think in terms of what the money men will do when they see you making money. They can sink you simply by entering the same market as you.