Idea for a mom and pop shop

[glenm]

I am friends/customer of a local shop, that does great service work, they mainly focus on service and not so much on the parts side of the business. It is run by a man and his wife. They have a small showroom and stock some items in house but they have connections and accounts with all the key industry suppliers (most of these connections you would need lots of capital 1mil+ and a brick and mortar just get in with today) This shop has been in business since 1978.

They have a very basic and outdated website and otherwise no online presence to speak of. Most of the other shops in this industry have much better websites and at least a small online store to buy parts from, but what the other shops don't have is the industry connections this gentleman has.

The owner is a great guy who really enjoys working in his business. He doesn't really have the knowledge or interest to dive into getting an online store going. At this time they don't even process credit cards.....Shall I say he's "old school"

My idea is to approach the owner with the plan of building his online presence and eCommerce store. My idea is to basically joint venture with him and his connections. I would build his web store, do all the online marketing, and take care of everything for the online part of it and let him continue to do his thing. I think this is a huge untapped market that can service tons more people than he can service now.

Tell me what you think

How would one structure such a deal?

 

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[JEdwards]

I think it is great and you should pursue it.

Its not that he does not want to get bigger, better, he has just been in the same biz what 34 years.. and is bored to death.

Before I pitched him I would layout exactly what you want to do, create the website and show him.. and then let him decide.

 

[JasonR]

Looking forward to seeing how your approach turns out. I've thought about doing this before (partnering with local retail mom and pops) and building an online store and splitting the profits.

 

[Ikke]

I think I would suggest you get a commission of something like 5% of all the sales you can make for him online. And no investments required for him. That way he either continuous to have the same amount of business or he can possibly move more products but for slightly less.

 

[wade1mil]

I think I would suggest you get a commission of something like 5% of all the sales you can make for him online. And no investments required for him.

Dislike :coco:

 

[Ikke]

Dislike

Care to elaborate?

 

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[wade1mil]

If you built the website, did the online marketing and handled all the online stuff, surely you'd want more than a 5% commission? If you increase their sales by $50k a year, you make $208 a month. Hosting and SSL fees would take up at least half of that. Not worth it for 5%

 

[Mike39]

Care to elaborate?

Sure, take 5% of all sales if he is selling 200k lamborghinis

Take 75% of all online sales, the shop owner won't have to do JS (jack sh!t not java script haha) and will be putting money in the bank each month, besides, the shop owner doesn't sound like a greedy bastard, so you should be!

 

[Mike39]

I think I would suggest you get a commission of something like 5% of all the sales you can make for him online. And no investments required for him. That way he either continuous to have the same amount of business or he can possibly move more products but for slightly less.

:iamwithstupid:

How much product do you think he would be selling, 5% of a annual 100k is a MEASLY 5 grand???? Not including cost of business! What??? :smilielol:

 

[glenm]

Thanks for the input guys! For it to be worth my time I would need a lot more than 5%. My next step is to set up a store with some of his product for a demo.

 

[The-J]

Don't joint venture. Just set up his shop for a fee. Have him ship his own orders: all you do is set up the site and the store interface. Charge him a one-time setup fee and manage the site for him for a monthly fee.

I know you don't wanna do that cuz he's your friend but there are other people who do this sort of thing, too.

 

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[JEdwards]

I think I would suggest you get a commission of something like 5% of all the sales you can make for him online. And no investments required for him. That way he either continuous to have the same amount of business or he can possibly move more products but for slightly less.

Ikke, This is probably going to sound rude.. but, let the grown ups take it from here.

I wouldn't touch it for less than 50% of the profit long term, and I would set it up on a tier level. Level 1. sales up to X you get 80% of the profit, Level 2 Sales up to Y. you get 75% of the profit.. and when i say you.. I mean the OP. not the biz owner.

The guy has his fixed costs covered without you and does not need you. Well except on the dream you are trying to sell him on making more money.

I do not know his margins or what you are going to spend, but whatever you need to make you a living and pay your expenses first should be the first number you nego with him..

Say I think with what I am doing, the fact that I got to eat, the marketing, that is going to run $7,500 a month. That is why you need to make 80% at the beginning. You cannot lose money and make him money.

And 20% of the zero he is making now is still 20% more than he was making last month. Sell him on that.

 

[wade1mil]

I wouldn't touch it for less than 50% of the profit long term, and I would set it up on a tier level. Level 1. sales up to X you get 80% of the profit, Level 2 Sales up to Y. you get 75% of the profit.. and when i say you.. I mean the OP. not the biz owner.

The guy has his fixed costs covered without you and does not need you. Well except on the dream you are trying to sell him on making more money.

I do not know his margins or what you are going to spend, but whatever you need to make you a living and pay your expenses first should be the first number you nego with him..

Say I think with what I am doing, the fact that I got to eat, the marketing, that is going to run $7,500 a month. That is why you need to make 80% at the beginning. You cannot lose money and make him money.

And 20% of the zero he is making now is still 20% more than he was making last month. Sell him on that.

As much as idea threads are frowned upon, I still enjoy hearing thought processes like this. Another good post Jack.

 

[biophase]

Before reading Jack's reply, I was thinking this:

Option 1 - he pays for all expenses created by the website, including marketing (you spend that for him with a budget).

You don't ship or touch any product, handle emails or returns or phone calls. All you do is site admin, not site operations.
You take 25% of profits up to xx amount, 50% after xx amount, 75% after xxx amount.

These are profits (sales - COGS), no utilities, rents, etc... that come from B&M store.

Option 2 - you pay for all expenses incurred by the site (not including cc fees).
You take 50% of total profits

If you do good work, you can build this up to a $500k gross store let's say. $500k gross, profits say are 30% margin, so $150k, you can make $75k.

Option 3 is to get a cut of gross, but asking for 10-15% of gross is hard and you have a conflict of interest in making him profit vs making yourself money.

 

[Ikke]

Ikke, This is probably going to sound rude.. but, let the grown ups take it from here.

Not very. I translate "grown ups" into "experienced" :smxB:

And I agree with everyone who said the 5% is way to low. I hadn't thought it through very much but then again I meant 5% of turnover and not profit.

 

[biophase]

I hadn't thought it through very much but then again I meant 5% of turnover and not profit.

If turnover means gross income or revenue, then we were all talking about the same thing, not profit.

 

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[Mike39]

Not very. I translate "grown ups" into "experienced"

Lol, then jack was dead on for his statement :smxB:

 

[Ikke]

If turnover means gross income or revenue, then we were all talking about the same thing, not profit.

I was trying to refer to Jack. Still I do understand that 5% is very little. And it was silly for me to say 5%. I never realized there are such huge margins in retail. I'll go sit quite in a corner now and watch this thread from the shadows.

Glenm, much of luck with this opportunity. It sounds like it has allot of potential.

 

[glenm]

Here is an update.....

I set up a big commerce cart, stocked it with some product, threw the company name on there etc...

I stopped by the shop on Saturday and spoke with the owner and his wife. They really like what I have. He told me he would really like to get on the internet but said he doesn't have the time to take care of it and if he did it would be half assed and that is the last thing he wants.

He had some ideas and things he would like to see. He wants to talk some more about how we structure the whole deal.

Overall I think he was pretty excited about the opportunity, now I just need to figure out where to go from here....

 

[JasonR]

Nice! Set a meeting with him and get the ball rolling. Speed ++

 

[Milkanic]

I thought doing about this in the past as well. Please keep us updated on this and the agreement you come up with.

 

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[glenm]

Update on this......

Things have fell apart with this deal.

One issue I am having is I need a more high end shopping cart to integrate into the OEM part supplier database. I tried with big commerce and magento go but neither can really do what we need without paying a developer to build a complete custom site.

The big hitch is....

In order for this work right I need more control than the owner is able to give up. Its in our best interest to have him out of the day to day on this side of the business and that wont work right now.