April 2009 Archives

Let's face it, starting up a doll or other business can be horrifically and prohibitively expensive.

Costs add up quickly. The business license and other legalities (including, for example, setting up a corporation) are just the beginning. For  a brick and mortar store, you've got rent to consider, and also fixtures like display cases, counters and props, and little details like carpeting and inventory.. Then there are promotional costs like business cards and other advertising.

Even with just a web business, you've still got ISP costs, advertising costs and also of course the inventory costs. If you can't be your own webmaster, you've got those costs too.

Inventory costs can be huge. You've got to have enough selection to attract business and keep people interested, which means getting in new inventory on a regular basis.

If you don't have enough startup money to stay in business for a few months until you can grow a customer base, you've got trouble.

We were incredibly fortunate when we started up Dolls and Friends. Leo had worked at Microsoft for enough years, and we had enough stock options, to make opening the store possible.  Of course the joke was that "Uncle Bill" had given us the money. We probably opened the store with $50,000 sunk into inventory alone, and that was in 1994. Now, I think it would be even more expensive. Our other big advantage is that Leo could do all the accounting/inventory software and was also the webmaster. Like me, he wore a lot of hats for Dolls and Friends over the years and worked cheap too.

Most people aren't lucky enough to have an "Uncle Bill" or a Leo. I consider myself blessed to have had both, and honestly sympathize with everyone who would like to have their own retail business but just can't figure out a way to make it happen.

Part One: The Business Plan

Over the years I had Dolls and Friends, I saw a lot of other doll stores come and go. I can think of at least 6 other doll businesses that failed locally. By locally, I mean just in western Washington. Nationwide there are far more.

There are many, many reasons why businesses may fail or never get off the ground.

I think one of the major reasons some businesses fail is because the owners do not create a business plan. Granted, business plans are a pain in the butt to create. They take a fair amount of work and time, and more than a little brainpower. They force you to think about what you are trying to accomplish in a logical, rational way. At least, the good ones do. 

For those of you unfamiliar with business plans, they generally required you to identify and analyze your competition, your market, your finances, promotional strategies, best physical locations, and inventory costs, among other things.

Our first landlord required us to do a business plan before we could sign a lease. We grudgingly did it, then put it in a drawer never to be looked at again.   But looking back, I wish we had reviewed that business plan at least yearly and updated it. I think it would have helped us identify new trends and changes we should have made sooner than we usually did. In the long run, it could have helped us see our weaknesses and strengths, and market directions sooner. The doll market changed hugely over our 14 years in business and updating our business plan regularly could have helped us deal with those changes and spend our money more wisely. We would have been forced to deal with Dolls and Friends more seriously as a business and less as a hobby. In the long run, that could have led to an even better reputation and more success.

Ah, well. That is all water under the bridge now. If I ever began another business (highly unlikely at this point!), I would do things differently. It's not too late for those of you who are thinking about starting a business to learn from my mistakes.  If your potential landlord-or financing source-requires a business plan, thank him or her and get it done. Even if it's not required, do one anyway. You and your business will benefit from it. If you're already in business, it might be worth doing or updating your business plan. The only cost is time, and there is much potential worth to be had.