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How to Start a Kid-Focused Business

Start-Up Costs for.

Kids' Party Planning
Your startup costs will vary tremendously, depending on where you locate, what your insurance costs will be and what kind of equipment you decide to buy. Let's look at two hypothetical party-planning businesses. The low-end business is homebased with no employees. The sole proprietor already has a computer, online access, a printer/copier/fax machine, a cell phone, a digital camera and office furniture. She used her startup money to buy liability insurance, event-planning software and business cards. She also paid for licenses, taxes and website design, for which she employed a computer science major. She needs $3,520 to launch her business.

The higher-end business is a LLC. It occupies 800 square feet of office space in a large city. Its owner has a full-time planner and a part-time bookkeeper. She upgraded her computer equipment, bought office furniture, and added a phone line and a professionally designed website. She also bought high-priced liability insurance because of her location in the greater Los Angeles area, which has experienced terrorist activity. She invested in business cards, stationery and an ad in the Yellow Pages. Her startup total is $29,183.
Both owners derive their income from pretax net profit. Annually, these businesses will gross $70,000 and $200,000, respectively, after the first year or two.

So how much can you expect to bring home in the first year from a kids' party-planning business? Keep in mind that it will probably take you two to three years to make a healthy profit. Why? Because your most effective advertising will be word-of-mouth, and that takes time.

Industry expert Laurie Saunders estimates that a new kids' party planner with a business similar to the lower-end one in our example might be able to make a first-year salary of about $20,000.

Kids' Gift and Bath Products
Startup costs for this kind of business will depend on what you sell and how you sell and store it, as well as where you locate and how much equipment you buy.

Nicole Donnelly's initial sales of baby leg warmers to friends and acquaintances required only enough money to buy socks to alter, but once she decided to launch her business and get an overseas manufacturer, her costs went up. She needed a minimum order of 500 pairs of leg warmers, at $3 per pair, making her initial product investment $1,500. Her other costs were few, since she started homebased.

Let's again look at preopening costs for two hypothetical gift and bath businesses. The first is a homebased business with no employees. The sole proprietor designs her own product and sells it at fairs, shows and other events, as well as online. She already has a computer, online access, a printer/copier/fax machine, a cell phone, a digital camera and office furniture. She used her startup money to pay for production supplies, product liability insurance, booth construction and site rental, some travel expenses (mostly local) and business cards. She also paid for licenses, taxes and a website that a college student designed. In addition, she applied for a provisional patent for her product. At minimum, she needs $4,180.

The more expensive business is an online corporation, operated from a 1,000-square-foot warehouse. Its owner has a full-time fulfillment employee and a part-time bookkeeper. She upgraded her computer equipment and bought some low-cost office furniture and warehouse equipment. She has a multiline phone system and a retail store on Yahoo! She also invested in business cards. Her startup cost is closer to $26,763.

Both owners derive their income from pretax net profit. Annually, these businesses will gross $90,000 and $250,000, respectively, after the first year or two.

How much can you expect to make in the first year from a kids' gift and bath products business? That depends in large part on how much selling you do. It also depends on how much of your revenue goes back into building your business. It took Nicole Donnelly only a year and a half to make a profit because her Seattle company was growing quickly. But in some cases, it takes longer to make a profit.

Alternatively, if you sell popular products at a booth in a region where you can do shows most of the year, you could make $40,000 the first year.

Kids' Educational Toys and Games
Startup costs are hard to quantify in this type of business. The ranges are huge, depending on what you sell and how you sell it. For example, a homebased business selling only a few different games or toys might cost anywhere from $4,000 to $10,000 to launch, or even more, depending on how much inventory and equipment you buy and whether you have a website.

When Andrea Barthello and her husband, Bill Ritchie, started ThinkFun in 1985, they worked from home. "We literally made stuff in our basement," says Barthello. They needed no office equipment. They did buy wood, wire and some woodworking equipment for assembling prototypes of their brain-teaser puzzles. "We probably spent a couple thousand dollars," Barthello says. They also spent about $3,000 on the services of an expert woodworker and additional funds on other general startup expenses. But theirs was still a small initial startup.

For a sole proprietor who designs her own toys, manufactures them overseas and sells them to retailers, her startup funds-spent on inventory, provision patent and trademark protection, licenses and taxes, product liability insurance and packaging supplies-the startup costs could be $7,400, assuming a friend designs her website and she already owns office equipment.

For a 600-square-foot retail toy and game store, let's assume the business partners have one part-time employee. They used their startup money to rent their store space, equip their store and buy inventory. They also have utilities, insurance, advertising and promotion costs. Since they use their home to run the business, they did not need office equipment, and they have no website yet, although they expect to add one later. Their total startup cost is $44,330.

Both owners derive their income from pretax net profit. Annually, these businesses will gross $60,000 and $200,000, respectively, after the first year or two.

What can you expect to make the first year? Again, income ranges are equally broad in the toy and game industry. Earnings depend on how much you sell, how you sell it, and how much you put back into the business. Barthello estimates that in their first year of business, they sold $50,000 worth of product.

Kids' Plus-Size Clothing
According to MerriBella Fashions owner LeRona Johnson, the typical startup figure for a small brick-and-mortar retail clothing store is more than double what her own startup costs were. "Most people I know spent close to $50,000 starting up," she says. Johnson, however, spent $20,000. What made the difference for her? Four years of careful planning and resulting stellar deals on inventory, equipment and furniture, all of which are major expenses. By keeping her eye out for store closings and furniture cast-offs, she shaved thousands of dollars off her startup costs.

She also prioritized and made sure she got the most bang for her buck. "The most important thing was to make sure we had great inventory. I knew that was the key to everything." Accordingly, she spent half her startup money, or $10,000, on the best fashions she could find. But even though her inventory costs were proportionately high, she still spent thousands less than average. Starting well ahead of her opening, she scoured the inventory of Chicago-area stores that were closing. "I got a lot of stock at very low prices," she says.

The financial investment required to start a homebased custom clothing business is "very minimal," according to industry expert Sarah Doyle. If you locate in commercial space, however, your costs will naturally be higher. Depending on how much equipment and supplies you already own, plan on spending $900 to $12,000 for startup.

How much money can you make selling plus-size clothing? Johnson expects MerriBella Fashions to break even after two years. Currently, most of her revenue gets pumped back into the business. However, within the next year and a half, she expects to achieve gross revenues of $240,000 per year and an annual net income for herself of $50,000. Once she expands, as she plans to do within two years, those figures will go higher. "You have to start small," she explains.

Income from a custom clothing business will depend not only on what you sew, but also on how fast you sew. Doyle estimates that a business owner with considerable sewing experience (who therefore sews fairly rapidly) could make approximately $30,000 the first year. Since, as a general rule, profits are higher on formalwear, you could make even more than that. And if you expand your business and hire help, you could increase your earnings still more.

Kids' Cooking Classes
In this industry as well, startup costs and income ranges vary tremendously. The amount of your overhead is the biggest factor. Others include how many students you teach and how much you charge each student per hour.

Let's list preopening costs for two hypothetical kids' cooking businesses. The first is homebased with no employees. The sole proprietor already has a fully equipped home kitchen. She also has a computer, online access, a printer/copier/fax machine, a cell phone, a digital camera and office furniture. She needs no state culinary licensing and has no website yet. She used her startup money to buy liability insurance, kids' kitchen tools and aprons, pantry supplies and a small amount of advertising. She also paid for general licenses and taxes. Her business cost just $3,080 to start up.

The higher-end business is an LLC. It occupies 900 square feet of retail space in what used to be a small restaurant. Its owner has a full-time teacher and a part-time helper. Although major appliances and plumbing and gas hookups already existed, she bought one new (noncommercial) oven range, kitchen tools and supplies, three kitchen work tables and 12 chairs. She also paid for a phone line, utilities and a professionally designed website. Since she uses her home office, she needed no office equipment, except for a filing cabinet. She did have to pay for liability insurance, state-required culinary licensing and general licenses and taxes. She invested in a brochure and some advertising. Her startup cost is closer to $20,820.

Both owners derive their income from pretax net profit. The homebased business averages three students per class, because four is the largest number that will comfortably fit in her kitchen. The commercially located business averages six students per class. Annually, these businesses will gross $60,000 and $240,000, respectively, after the first year or two.

So how much can you expect to make in the first year from a business offering kids' cooking classes? "Don't expect to make money right away," cautions industry expert Julia Jordan. Keep in mind that it will probably take you two to three years to make a healthy profit. Why? Again, as with most service-related businesses, your most effective advertising will be word-of-mouth, and that takes time.

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