Here is an idea I heard about reading online and decided to do a little investigation into it. The idea is a toy rental service, sort of like Netflix, where people rent a set number of toys for a monthly fee. Before I started any research, I started doing a quick break even analysis. I wanted to figure out how many customers I would need to have at around $30 a month to get about $5k in revenue a month. I figured that was a good starting place. Those numbers worked out to be 166 customers for gross revenue. Ok thats a few customers for sure. So now I started to google to see if I could find some similar companies. Found http://www.luckyducktoybox.com/ and JACKPOT! Looks like a pretty nice website, lets see what the prices are. Great, the basic is $29 for 3 toys a month. Now I’m thinking that $30 assumption was reasonable, but I know to get here I NEED a minimum of 3 toys per customer x 166 customers = 498 toys. Wow, thats a lot of toys.
So I start looking at the average price of a toy. Took the first one they offered 2-in-1 Traveling Guppy, sounds like fun!! Amazon has it for $25, so I’ll figure I can get toys for $15 each cause I’d be looking for a deal and wholesale for sure. At 500 toys x $15 each = $7500 for toys to get to my $5k goal. Well thats not a small amount, guess I’d have to slowly build it up.
At this point, I have an idea of how many customers I would want to get to make $5k a month. This doesn’t include any variable costs like cleaning, postage if you mail them, etc.
Customers: My mind is racing! This is great for any doctors office, dentists office, any office that has kids frequently. This would be a great service. You could do a weekly rate at a higher price include cleaning, and providing new toys in a rotation. What about grand parents? This could be the new age of toys. I know my grandparents would go out every week and pick up something new therefore this would be perfect. I’m thinking about parents who hate to go toy shopping. Kids quickly get bored with toys or grow out of them. This would be a quick turnover of toys every few months making it more efficient as well.
Risks: The cost to deliver. I think a business angle (doctor or dentist office) would be great. They are likely willing to pay weekly for a service. I think postage and the size of toys would hurt the profit margins.
I googled more and found this article http://www.msnbc.msn.com/id/23098673/ Great a success story on MSNBC, now I’m feeling great. Then I start reading about “Pope started with 10 customers, shipping toys out of spare office space in her business. Now she’s got about 200 customers nationwide, including about 40 grandparents, and is preparing to move into a 3,000-square-foot warehouse next door.”
Ok now this seems reasonable, even better! Then I read this: “She has spent $250,000 of the money she’s made from her other business to get the company off the ground. The funds were spent buying toys and hiring employees , subletting the office and storage space.She still pours about $12,000 a month into the company but hopes to begin turning a profit by this fall.”
WHAT??? She is spending $12k a month into the company and put up $250k into it? WTF? I don’t understand how she could have spent this much and is still burning $12k a month. Now i’m thinking at $12k and $30 per customer she needs 400 to breakeven. Ok this has to be a great site, so I go find it. http://mybabyplays.com/
WHAT? A simple wordpress basic theme….um….scroll down till i read…..”So, we are going to “close our doors” until this fall when we plan to re-launch an even bigger and better toy rental company!”
Well thats no suprise now is it? At $12k a month cash burn, I’m not shocked at all. I think this is a good small business idea if done correctly with low start up costs. A few thoughts would be:
* Start it from home
* Get used toys from ebay (yes clean them! that is part of your “value”)
* Start with some local doctors and dentist offices (great health pitch here)
* I would avoid mailing them to start as that will increase costs (deliver them yourself, market within your vicinity)
* Get a website developed that’s fairly simple. Nothing too fancy
* Go visit the offices and get some print outs. Nothing sells better than you in person
* After a toy becomes “old” sell it on ebay and recover costs (or do something better and donate it)
Remember:
- to keep your eye on your start up costs
- keep the monthly cash burn low
- slowly expand
I still think this could be a great business if done correctly and with limited overheads. Just like any other
business, you have to keep the costs and cash burn down to succeed. Hopefully they will re-launch in the fall and have a profitable business.
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