INTRODUCTION
To get any business started successfully takes many ingredients. All requirements fall into one of the following four key categories: 1. Desire, 2. Knowledge, 3. Time, and 4. Available funds. This report deals only with the financial requirements of starting a mail order business. Hopefully it will help the reader to evaluate whether he is financially able to embark upon a business venture that will bring about success. It is generally true that it takes substantially less money to get started in many mail order businesses than in a variety of other businesses.
Many a promoter will want you to belive that it is possible to get started successfully for $50, $100, or even $200. However, it is totally false. It does take more than that. How much more depends on many factors which I will try to define as much as is possible here.
Since the mail order business covers a vast number of services and products I would like to define the contents of this report to deal with the selling of information products. This is where my expertise lies. While the same or similar conditions may apply to any number of other mail order businesses, there may however be some differences to selling information products such as books, etc.
The following makes a number of assumptions. The most important ones are:
1. The operator ( or operators) of the new mail order business is employed or has other means of income.. He will not need to derive any profit from his new business for a period of time.. How long will depend on many factors.
2. This is a home based business which has no employees.
3. The business, at the start - until volume reaches $3,000 to $5,000 per month - will utilize the drop shipping services of a wholesale company.
4. Basic office equipment such as desk, file cabinet, computer, etc… are on hand.
A WORD OF CAUTION AT THE START AND RESOURCES AVAILABLE TO YOU
This is an exciting business and it can be extremely profitable once it reaches a certain momentum. However, like almost all businesses it is a very cost sensitive business.
As you are getting started in planning and setting up your new business think and act with caution when it pertains to any expenditures. This is one of the most difficult things to do since you are probably very enthusiastic and want to do everything today. So you need to learn HOW TO CONTROL YOUR ENTHUSIASM or it is going to cost you lost of extra money.
In this state of enthusiasm we tend to think that there is nothing we can do wrong and since we will be making lots of money in a few months lets get all necessary and often unnecessary supplies and equipment. It would be much better to wait until profits of the business make it possible to acquire what is needed. In the meantime you can make do with less. To be able to do so is a most important quality for the owner of a small to do so is a most important quality for the owner of a small business.
If you are a parent think of your new business as a child. There will be a never ending sequence of surprises. And as the business grows so will its demands, and yes its expenses.
START-UP EXPENSES — INITIAL STAGE
The below listed expenses will be incurred in the very early stages of setting up your business. This is at a time when you probably are not sure as yet what you will be selling. You will be writing to different companies for information to come up with the right product selection. Once you have decided what it is you will be selling you have to line up reliable suppliers, This is also a good time to buy a few books to help you with your mail order education. Although most expenses incurred in this phase are relatively small they will add up quickly.
These prices are estimates. Prices will vary according to your location.
- Stationery and envelopes………………………………………..50.00
- P.O. Box rental………………………………….60.00 per year
- Miscellaneous office supplies……………………..30.00
- Postage…………………………………………50.00
- Educational……………………………………45.00
- TOTAL…………………………………………235.00
START-UP EXPENSES — SECONDARY STAGE
You have now reached the point at which you have decided upon one or more reliable suppliers for the product you wish to market. You may also be ready to have some promotional material printed. In addition you may be placing one or two classified ads for testing purposes.
Once again, please remember that these prices are estimates only.
- Dealership or distributorship (1 or more)……………………………………………80.00
- Small supply of brochures or catalogs………………………………………..50.00
- Printing of sales letter, order form, Return envelopes, etc………………………………………………90.00
- 1 test ad, classified (national magazine)……………………………………100.00
- Business or traders license………………………………………..30.00
- Postage……………………………………..25.00
- TOTAL………………………………………375.00
Until now you have only had expenses for your new business. You have not derived any revenue yet. In the next and final stage of starting your business you may have some revenues. Stage one and two may take from approximately 3 to 6 months.
START-UP EXPENSES — THIRD STAGE
You have now reached a stage were you will expand your advertising, or alternately you may go the direct marketing route and rent a mailing list. The comparison of expenses and revenue results of a direct marketing effort versus classified advertising need to be carefully evaluated. Since expenses for a direct marketing effort are generally higher than for a small advertising campaign, the below listed expenses focus on an advertising campaign,
Estimates provided for illustrative purpsoes only.
- Advertising — 3 classified ads………………………………………………………………280.00
- Postage for several hundred inquiries derived from adverting effort…………………………………………….75.00
- Miscellaneous office supplies………………………………………………………..30.00
- TOTAL…………………………………………………………385.00
SUMMARY
The combined expenses as listed above total just under $1000. They are based on broad estimates and may vary somewhat by area of the country and individual circumstances. The figures are reflecting a minimum amount. Some individuals may be able to cut expenses further. Since this planning period takes several months the expenses as shown above can be allocated over a period of 4-6 months.
The above figures represent a conservative start. For those who want to get started more aggressively expenses would be higher. While many of the basic start-up costs would be the same the expenses that would increase would primarily deal with additional advertising, printing and postage expenses. By how much would largely be an individual decision.
Since most new businesses fail because of lack of funds, it would be advisable for an individual who does not have the necessary funds to get started to wait until he does. In addition to the basic start-up expenses an individual should also consider that most businesses will loose money for several months and sometimes much longer than that. Unfortunately no matter how well you plan, circumstances often change and we must make allowances for those eventualities.
Copyright 2004 by DeAnna Spencer
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