Help me decide whether to inherit an online store?
October 22, 2014 9:45 AM   Subscribe

I have an opportunity to take over an established online baby/kid's product store with a very nice website. For free.

The current owner has decided to take more foster kids - what a cool lady - and doesn't have the time anymore. I need only purchase stock. I can handle the financial investment, but I'm worried about the time commitment. And the fact that I've never done anything like this before. I have a full time job and a four-year-old. Husband works long hours. So, like most families we're stretched kind of thin. On the other hand, it's an awesome opportunity and we could use the money; we're working towards a cross-country move and buying a house.

I'm not worried about:
- Sales. The current owner says the typical earnings (profit) is between $1k - $2k a month. - There is already a customer base.
- Choosing products and finding suppliers. The infrastructure is already there.
- My ability to maintain the website.

I am worried about:
- Customer pick-ups. Majority of the business is local people picking stuff up. They were doing this in an affluent suburb. We don't live there, although my sister does. We don't want people coming to our house anyways, so I'm not sure how to do this. I would have to set that up to happen only once per week, more than that is just not possible. I could involve my sister, but I'm not sure if she would be comfortable with that either. If I can't figure out how to set up pickups, I might as well forget the whole thing. This is the biggest worry I have.

- Time. I think most would be spent on customer pick-ups and on shipping, the latter of which should happen 2x per week.

- Promoting the store. I'm not super good at that stuff. I don't know a lot of people. I would have to depend on the store's (good) reputation and maybe do some trade shows.

Advice, please? I'm tenacious and I'm reasonably sure I can do this without disastrous results, but I don't want to make a foolish decision and get in way over my head.
posted by kitcat to Work & Money (20 answers total) 4 users marked this as a favorite
Could you do local drop off instead? A farm by me does that with their produce -- you order online and they deliver to your door/a parking lot you pick.
posted by spunweb at 9:50 AM on October 22, 2014 [1 favorite]

How much money is $1K a month for you? I would definitely, definitely not do this for so little. That little profit means that anything that goes wrong basically eats your profit for the month, you have no room for changes (e.g. a site redesign with someone who knows what they're doing would be basically out of the question, financially), and it will be a huge amount of your time. There are a lot easier/safer ways to get more money if you really need it.
posted by brainmouse at 9:50 AM on October 22, 2014 [3 favorites]

Do you know the nuts and bolts of the website and how work with html, php, css, etc? If not, you will eventually be paying someone to.

It sounds like you're short on time as is. Adding an endeavor you don't know how to manage seems like a recipe for failure.
posted by humboldt32 at 10:02 AM on October 22, 2014

Response by poster: Yes, could people please help brainstorm what could go wrong so I can do some risk analysis? The website was professionally done and is pretty slick, not worried there. Plus, I'm a web developer. I'm more worried about people not liking me/ not thinking I'm 'cool'. I think people like to buy from cool people, not sure...
posted by kitcat at 10:03 AM on October 22, 2014

In your position, I think the pickups would be my biggest worry. If you're drastically cutting back on pickup availability, you may lose a lot of those steady customers and that $1500 a month, and some of the goodwill that you would be depending on to reach new customers. That probably depends on how liberal the pickup policy is right now - if you're going from two days a week to one, maybe less of a big deal than if pickup was previously available every day.
posted by Stacey at 10:09 AM on October 22, 2014 [1 favorite]

I would also worry about the time commitment. Your child is only four once.
posted by aniola at 10:11 AM on October 22, 2014 [1 favorite]

Some things to think about:

Financial - You mention the owner "says" what the typical profit is per month. Have you seen the books? You should get a detailed financial review of the business before making any decisions.

Familiarity - It sounds like you may not have familiarity with this business sector. Usually it's best to gain familiarity with less risk/responsibility - by being a part-time employee for a business-owner in a particular sector, for example - instead of jumping into being the owner right away.

Time Value - How much time/month is the owner currently spending on the business? How much time do you expect to spend per month? If the owner spends X hrs per month, I would anticipate spending more at least at the outset to get yourself up to speed and familiar with the business.

Remember to take into account all the time costs from small to large - researching trade shows, traveling to trade shows, making new contacts, planning deliveries, driving for deliveries, getting gas for deliveries, keeping up with car maintenance for deliveries, sending emails to vendors, corresponding with upset customers, troubleshooting sales problems, maintaining website, etc.

If you're already working a 40 hr work week, plus have familial obligations, let's say you would aim to spend about 20 hr/week on the business. If that is the case, on a month with $1000 profit, you'd be earning $12.50/hr. On a good month, you'd still be only earning about $25/hr.

Is that a good value of your time? I'd suggest it's not - you could likely earn the same amount doing a low-key part time job - with less responsibility, risk, and financial burden.
posted by Uncle Glendinning at 10:14 AM on October 22, 2014 [2 favorites]

Owners of businesses this small are notorious for not factoring in the value of their time when figuring "profit." To me, it's only making $1-2K a month if you're paying yourself at least something per hour and then you still make that amount. If not, you've bought yourself a job, and not particularly well-paying a job given the risks you're taking. I would only consider it if you see serious growth potential.

That said, here's two things to keep in mind:

- website maintenance. Web security and PCI compliance is a moving target, especially if you're using anything other than PayPal or offline payments (i.e. pay at the pickup point). If you're using a merchant bank account and accepting cards directly, there is an expense involved in keeping that working, as well as some business risks.

- A required customer pickup point is a weird thing in an "online" business, as is having mostly local customers. Seems like a dealbreaker if you don't live near the current point and/or don't want people coming to your house. I'd look at the economics of offering free shipping (provided I could see moving the prices up to compensate in the foreseeable future), as I see no way that providing this service transfers or scales easily, except to open a bricks and mortar store, which I most assuredly would NOT do for a business this size. I see more of these little cute specialty shops fall by the wayside every year as a chamber of commerce member than any other category.

Also, you sorta buried the lede -- cross-country move? What happens to this local business when that happens?
posted by randomkeystrike at 10:23 AM on October 22, 2014 [3 favorites]

Response by poster: Also, you sorta buried the lede -- cross-country move?

You're right. I'd have to pass it on, possibly to my sister at that point. The region we're moving to doesn't have nearly as much disposable income. I haven't considered this a problem, more like a 'hey, let's share the wealth and let someone else make some money' thing, as this woman is doing by passing it on.
posted by kitcat at 10:31 AM on October 22, 2014 [1 favorite]

typical earnings (profit) is between $1k - $2k a month

If you're personally doing all the work involved in running this business, that's not really profit. It's more like you're buying a job, which you can compare (as people have said) to an equivalent second job with similar hours and pay, and less up front cost and responsibility, in order to decide whether you want it.

If you could find a way to pay someone else to handle the day to day and the deliveries, then it's much more like a business; you could make financial projections on that basis, and see whether there's still enough profit in it to justify spending your own spare time on marketing and strategy, with the intention of growing the business. But it sounds like you don't really know how to do that or necessarily have the enthusiasm.
posted by emilyw at 10:41 AM on October 22, 2014 [1 favorite]

Can you afford to pay for the stock if it all goes flat & you don't make a cent? Could you sell the stock on ebay & recoup some of the money?

That would really be my only concern. The worst that happens is the business fades away & you are left with stock. You have minimal out of pocket expenses for the more intangible harder to sell if things go wrong parts of the business (website & goodwill etc) and at least get something physical for your money. If she's only charging you cost price you really don't have a lot to loose.

I've run a mail order business selling rare/collectible secondhand books. There really isn't that much behind the scenes stuff. Packing items is boring but easy and answering enquires & keeping the books for tax etc, in my case sourcing stock was a pain, but you have the suppliers in place already. I'd arrange to drop off the stuff to peoples houses if you are concerned about them coming to your place, the fuel for that would be an added expense as would the time.

You really don't have that much to loose if you can afford the cost without taking on any debts I'd give it a shot. I'd try & grow the online side of things if you are thinking of moving as it would be a good business to take with you. Keep meticulous books, would be my key advice, print out monthly reports & study them, make sure you are making enough of a profit to make it worth your while. I'd also try to get hold of the sellers records if possible, if nothing else site traffic to get some idea if she is being completely honest. Not necessarily from malice but as others have said small business owners underestimate just how much they put into a business.
posted by wwax at 10:41 AM on October 22, 2014

I'm not worried about:
- Sales. The current owner says the typical earnings (profit) is between $1k - $2k a month. - There is already a customer base.
- Choosing products and finding suppliers. The infrastructure is already there.
- My ability to maintain the website.

These are all things you should be worried about.

- Sales: it sounds like your customer base is almost entirely local. What if a competitor pops up? What if Amazon lowers prices to where you can't compete? What if you get one loud disgruntled customer who convinces a lot of your base to jump ship? What if your Google search ranking drops? What if you get a disgruntled customer who sues you and you have to worry about legal fees and/or a settlement?

- Choosing products/suppliers: What if your main supplier goes out of business? What if your best selling products get recalled? What if your prices jump considerably?

- Website maintenance: as some people said before, web security and related are constantly changing. Server maintenance/back end. Payment handling (even if you are using PayPal -- services and APIs get deprecated and you need to handle that; something breaks on the back end and you need to handle that).

- The move: this company is a very low margin, very risky thing that could lose someone a lot of money and will almost certainly lose someone a lot of opportunity cost. These things often do lose money, even after long periods of making money. It's not really a "share the wealth" thing, it's a "pass on the risk" thing. If you gave this to your sister, and something went wrong 3 months later and she lost a ton of money, what would that do to her life? What would that do to your relationship with her?

These were all just really quick off the top of my head things. There are so, so many things that can go wrong, and $1,500 per month is just so, so little for the time and the risk.
posted by brainmouse at 10:47 AM on October 22, 2014

Full time job plus a four year old is a lot of time spoken for.

If you're an energetic sort of person who deals pretty well with stress, you could go for it. Great learning experience.

If you tend to fray at the edges when you have a lot on your plate, maybe you should take a pass.

If you're wavering, talk to your sister first. Sounds like she's important in this story either now or later. If she shares the biz from the get go that might reduce your stress level some, and it will make any later transition easier.
posted by mattu at 10:51 AM on October 22, 2014

You're right. I'd have to pass it on, possibly to my sister at that point. The region we're moving to doesn't have nearly as much disposable income. I haven't considered this a problem, more like a 'hey, let's share the wealth and let someone else make some money' thing, as this woman is doing by passing it on.

You might want to consider that she's doing no such thing and is just trying to unload a business that isn't worth the effort to run.
posted by empath at 10:52 AM on October 22, 2014 [4 favorites]

One way to deal with the pickup/delivery problem is to ship your inventory to Amazon and have them do the fulfillment for you. That way you don't have to pay attention to when sales occur or where your customers live. It's called Multi-Channel Fulfillment and details are here. You can also sell your stock on Amazon (either fulfilling it yourself or having them do the work); presuming you're buying it wholesale that could be profitable.
posted by carmicha at 10:53 AM on October 22, 2014

Response by poster: Just found out owner used a friend's non-baby product store for pick-ups. I can use it too. Sister is happy to pick up my stock once per week for delivery to store on a weekday. I can do one weekend delivery. On the plus side, my daughter sees her cousins more often due to this. Thanks and sorry for being so needy. This is the last I'll add.

I sure don't turn up my nose at 1K per month...even $500 a month. I don't think it's as easy as some are saying to earn extra income. A part time job would have me out of the house, where I can bring my daughter along for a lot of tasks and it would excite her, teach her some have-ideas-and-carry-them-out skills. But many, many valid points brought up. Thank you so much! I'm still undecided though, so if you have more to add please keep it coming.
posted by kitcat at 11:01 AM on October 22, 2014 [1 favorite]

I guess I'm less risk averse than most people, as I say go for it! If the stock is not super voluminous but a reasonable amount, I'd definitely give it a try.

- The infrastructure is in place so if you don't lift a finger to promote, it sounds like a self sustaining entity. All you need to do is deliver orders to the store for pickup, and order inventory as needed. Both of these can be easily automated/outsourced in a pinch.
- You have the previous owner there to answer questions which can be invaluable, and potentially even help for a week or two.
- It sounds like it could truck along at a present low growth rate for some time and if you wanted to grow it as the child gets older and you have more time - then you can. Things you can do is: expand your product line, find new suppliers, learn marketing, play with adwords. Some or all of those you may even enjoy.
- After having experience with an online store, you may find/source a niche that is even better suited for you, it may open the door for future businesses.

If this is something you've always wanted to do, and can afford the stock - I say take the chance, you will always wonder what if, if you don't.
posted by tatiana131 at 11:40 AM on October 22, 2014 [2 favorites]

Touching on the promotional aspect: talk to the current owner. Ask what she's doing that works, and what she's done that hasn't. No need to sink time into figuring these things out if you can build on what she already knows.
posted by okayokayigive at 11:54 AM on October 22, 2014

It is a bit of a time suck, although that gets better over time as you learn the routines and get more efficient at it. Seems like it would be a pretty solid part time job. If you're interested in having a part time job, and interested in learning e-commerce in general, then this seems like a good way to get into it. A lot easier than starting from scratch at any rate. And who knows -- maybe you can expand it far beyond what the original owner ever did.
posted by spilon at 2:34 PM on October 22, 2014

1000 profit less ~400 in tax, net 600. Without potential for growth, may not be worth it. (Tax: 280 income tax, 120 self employment tax)
posted by jpe at 4:42 PM on October 22, 2014

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