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30 days to Becoming an Entrepreneur: Planning for ancillary sales

Ancillary sales can be a huge money-maker. It certainly has been for the airline industry. You know that luggage fee that has changed the way we all pack? That’s an ancillary sale. Ancillary sales basically are fees, services, and products that are complementary to your main product or service. Other examples are snacks at gas stations, bubble wrap/moving boxes at storage units, and software/anti-virus protection when buying a Dell computer. Sometimes, your ancillary revenue can surpass your main revenue.

When your first starting out, it can be easiest to just focus on your main products. Ideally you’d have all your offerings available right away – but sometimes that’s not always feasible. At The Woof Room, we didn’t have much for ancillary sales until we had been in business almost a year. We were too busy focusing on getting the business up and running to deal with the additional cost and time involved with selling other things. Eventually, we did add some products (frontline, biodegradable poop bags, dog toothbrushes) as well as light grooming (bath, ear cleaning, nail grinding, teeth brushing). We’ve had these things in place for about 6-10 months and they currently make up 5-10% percent of our monthly income.

Since selling ancillary products often require an outlay of cash, you’ll want to make sure that what you buy has a long shelf-life and will likely sell. For example, Frontline is a moderately expensive item. Because we didn’t know if it would sell, we only order a few of them to test the waters. We quickly sold all of them within a couple weeks and now regularly stock them.

Lastly, be mindful when picking and pricing your products. We actually did a survey of all our customers to see what they would like to see us sell/offer. This was very helpful because we were able to get feedback from our customers about what they’d buy. We picked our products based off their feedback and the likelihood of them selling. Additionally, we priced them to be lower than what a client would pay elsewhere – while still providing us with a decent profit (20-50% on most items).

Next, 30 days to Becoming an Entrepreneur:Navigating the world of business partnership

Photo Credit: Amanda

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30 days to Becoming an Entrepreneur: Daily deal site – is it worth it?

Are daily deal sites a boon or burden to businesses? There are many articles, blogs, etc that talk about how daily deal sites are bad for small businesses. I think they aren’t a great fit for every type of business – but for some businesses, they are an excellent way to bring in new customers.

What are daily deal sites? Daily deal sites (Groupon, LivingSocial, Crowdcut, etc) are email advertising campaigns sent out daily to massive listservs of individuals that have opted to receive deals. Businesses agree to offer something at a discounted rate as the daily deal. The deal site also takes a cut of the sales. For example, today on Groupon in my area you can buy a $20 gift certificate to a local restaurant for $9. People love buying these because everyone loves a deal.

What are the pros and cons? The pros are that you get access to an enormous amount of people that have never heard of your business. Some deal sites have lists of hundreds of thousands of people. You don’t pay anything to have a deal unless someone buys something. So, if no one buys your deal you just got a lot of free advertising. You also get an influx of cash which is always helpful for a new business. The cons are that you are getting very little for your deal. Not only are you required to offer something at 50% + off – but you also have to give a percentage to the deal site. The percentage you get to keep varies based on the deal and your business – but it usually varies between 50% – 75%. If you are a giant like Amazon you probably get 90% or more – but small businesses usually get stuck with only 50 – 60%. That means in the example above of the restaurant, they are only getting $5-$6 for each deal sold. So they are basically selling $20 gift certificates for $5 or $6. Another con is some customers will only come for the deal – and never come back, which defeats the purpose of doing the deal (bringing in long-term customers). Lastly, daily deals are a lot of work. Not only do you often get a huge influx of calls, visits, etc during the deal promotion – but some businesses get unmanageable rushes of customers that they are not prepared to handle.

Should you do a daily deal? It depends. I personally don’t see how it’s worth it to restaurants and other businesses that people go to very infrequently. For The Woof Room, it was very worth it because the nature of dog daycare is that people bring their dogs regularly. Some people bring them daily, others weekly. So, even if only 20% of people that buy a daily deal become regular customers we’ll easily make the money back we lost. Also important to consider, is the cost of actually providing the deal. Don’t lose money on it! Factor in all costs associated with providing your service or deal. It doesn’t make sense to give someone $15 worth of food when they are only paying you $5.

Anyone have any experience doing a deal site? What were your thoughts on it?

Next, 30 days to Becoming an Entrepreneur: Doing a daily deal – negotiation and preparation

Photo Credit: Mark Smiciklas

Technical issues

This weekend we moved into our new house…yay! We scheduled to have internet set-up on Thursday so that it would in place and ready to go when we moved in on Friday. Unfortunately, it didn’t quite work out that way. When I finally sat down yesterday to put up Day 2 of the 30 Days to Becoming an Entrepreneur series the internet wasn’t working. Two hours of phone calls to technical support later, and it still wasn’t working.

A technician came out this morning and spent three hours here trying to make it work. It’s been going in and out all day, but since I saw it was working I’m quick hopping on to put up Day 2 and Day 3 in the 30 Days to Becoming an Entrepreneur series. Sorry about the delay!

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