How to Start a Kid-Focused Business
Grow Your Business, Not Your Inbox
Do you fondly remember your favorite childhood toys? Do you have happy memories of long games of Monopoly or Risk? Do you find younger kids' perspectives interesting and often funny? When you see older kids horsing around, do you sometimes get the urge to join in?
If you answered yes to these questions, chances are you enjoy children and the way they play. Chances are also good that you'd enjoy being a part of that play time. You can achieve that by starting a kids-related business. As you'll discover in this article, now is a great time to do it.
First things first, however. No matter what your background, skills or interests might be, a solid understanding of the kids' industry is crucial before you decide where your own special niche might lie. Read on to find out whether a business catering to kids might be for you.
Kids' Industry Overview
There's no shortage of potential customers in this industry: According to the Federal Interagency Forum on Child and Family Statistics, more than 73 million children under age 18 live in America, and this number is growing every year. Birth rates in the late '80s and '90s were the highest recorded since the end of the famed baby boom in 1964. By 2020, the number of children is projected to reach 80 million and to account for approximately 24 percent of the U.S. population.
The size of the kids' population is good news. So is the fact that parents and grandparents are spending more money than ever on children. Most compelling of all, however, is the surge in kids' own purchasing power.
Because of changes in the social and family roles of children, recent decades have seen sharp increases not only in kids' direct spending but also in their influence on household spending. In the 1960s, an era when kids were largely expected to be "seen and not heard," children influenced an estimated $5 billion of their parents' purchases. Kids now influence upwards of $500 billion in household spending, including food, toiletries, and a host of other items (even the family car!) outside the traditional realm of kids' products.
So how much do kids spend on products for their own use? According to research conducted by American Demographics magazine, 4-to-12-year-olds spend more than $40 billion, while teenagers (ages 12 to 19) spend $155 billion of their own money.
There's no question children have more money of their own than ever before-and businesses know it. Children today are the subjects of an unprecedented marketing blitz, not only on TV, but also in school. According to the American Psychological Association, Madison Avenue spends more than $12 billion a year on marketing to children. Child psychologists estimate that the average child sees 40,000 advertisements each year, and that the average 3-year-old can identify 100 brand logos.
What does this mean to you? Children are savvier consumers than ever before. They know what products and toys are out there. To make sure your business will stand out in this marketplace, you have to be sure you're providing something that kids want-and that means doing lots of research. Let's start with the following overview of the five kinds of kids' businesses profiled in this book and the trends shaping each of their industries. In the next chapter, you'll find more details about how to carve out a specialized niche in one of these businesses.
Trends in Kids' Businesses
Each of the following kids' businesses-party planning, gift and bath products, educational toys and games, plus-size clothing and cooking classes-is covered in-depth in separate chapters in Kids'-Focused Businesses Startup Guide. For now, here's a quick industry analysis for each.
Kids' Party Planning
This is a booming industry, especially in the teen party sector, where coming-of-age parties are increasingly popular. In addition to the traditional birthday and graduation events, bar and bat mitzvahs and sweet 16 parties signal a trend toward increased celebration of kids' milestones. Given the significant Hispanic population, quinceñera (age 15) parties in particular can be expected to rise in popularity.
Although no numbers exist for this market, experts predict that the industry will continue to grow, as parents provide not only a greater number of parties but also more expensive ones for their children.
Kids' Gift and Bath Products
The sheer breadth of this category, which encompasses everything from books and music to fragrances, makes it a promising market.
Just to take one tiny subset of the market as an example, parents spend more than $80 million annually on baby soaps in food, drug and discount stores (and that's not even including Wal-mart), according to market research company Information Resources.
Consider, too, another small segment of the market: baby gifts. According to the U.S. Census Bureau, American births are holding steady at approximately 4 million per year. Multiply that 4 million by the number of gifts given per baby, and you get promising potential in baby gifts alone.
Since spending on and by children typically increases every year, kids' gift and bath products should be a strong market for the foreseeable future.
Kids' Educational Toys and Games
The Toy Industry Association estimates that the traditional toy industry (which doesn't include electronics such as video games and handheld electronic games) is worth an estimated $22 billion in annual sales, with nearly half those sales being generated during the holidays (see "Toy Story" on page 1.4 for a breakdown of popular toy categories). Educational games like Cranium have enjoyed huge mass appeal. In the eight years since its inception, this board game, together with its sibling titles, has sold more than 15 million games in 10 languages and 30 countries. Educational toys like the LeapFrog learning laptops have also been popular. Industry observers believe that educational toys' mass-market appeal will only continue to grow, as parents continue to search for meaningful enrichment activities for their children.
Kids' Plus-Size Clothing
Childhood obesity has become an important issue over the past decade. According to the National Health and Nutrition Examination Survey, one-third of U.S. children and teens are either obese or on the brink of becoming so. Babies are also larger than ever before, so interest in clothes and equipment for bigger babies and children can only continue to increase.
What's the size of this market? According to a new study from the Packaged Facts Division of Marketresearch.com, sales of women's/girls' plus-size apparel is $47 billion, accounting for 27 percent of all clothing sales and nearly 40 percent of all women's/girls' apparel sales. And let's not forget the boys: Men's/boys' big-and-tall sales are $29 billion, representing more than 16 percent of all clothing sales and 50 percent of all men's/boys' apparel. And there's no sign of this market slowing down any time soon.
The NPD Group estimates that in the 9-to-12 age group, 31 percent of boys and 38 percent of girls are sizing up and wearing men's, juniors' or women's sizes. Global Purchasing Co., a retail strategy planning and training firm, notes that the availability of attractive, flattering and stylish children's plus-size clothing is scarce, and that mothers and children alike are dissatisfied with the selection and styles.
Kids' Cooking Classes
Parents want their kids to be well-rounded and high-functioning adults. Yet many people either do not have time or do not feel qualified to teach their children traditional skills. Interest has grown in classes that teach cooking, sewing, carpentry and even etiquette. Cooking classes and products for kids have become especially popular.
The proliferation of cooking shows on TV and a recent educational emphasis on health and cooking in response to the childhood obesity epidemic have also added to the number of kids interested in experimenting in the kitchen. According to the Food Network, TV chefs such as Rachael Ray often draw more tween fans than 35-to-45-year-olds at public events. The Bay Area is currently leading the kids' cooking trend, with interest high in cookbooks, cooking demos and classes, but this market can be expected to keep growing nationwide.
What It Takes
Do you have what it takes to run one of these businesses? Not surprisingly, the typical owner of a kids' business enjoys being around children. Even if you're not dealing directly with kids on a daily basis, you'll still need to get feedback from them and be sensitive to their interests, so having an appreciation for how they think, learn and play is essential.
Being interested in kids isn't all you'll need. Depending on what kind of business you start, you may need some of the following traits as well:
Patience: Working with kids takes patience, even under ideal conditions. Accidents and bad moods can create a tense atmosphere, not to mention you may need to deal with a wide range of behavioral issues, personality differences, energy levels and attention spans. You need to be able to work through it.
Flexibility: The ability to deal with the unpredictable glitches that arise is essential.
Sense of fun and wonder: Kids live in a world of magic, excitement and endless possibilities. Try to enter that world with them. This is especially important if you're designing kids' gifts or toys.
Empathy: Remember what it was like to be a kid? The better you are at putting yourself in the place of your young customers, the stronger your business will be.
Persistence and energy: As with any business, perseverance is an important success factor. Launching a business is a time- and energy-consuming venture. It's not unusual to work 70 to 80 hours per week during the first year, or even longer.
In addition to having a personality that meshes well with children, there is an entire range of skills and experience needed to run a business. If you're operating your business solo, you'll need all of them to at least some degree, unless you outsource the work. If you hire employees, make sure to hire people whose skills complement, rather than duplicate, yours.
As a general rule, you should have some kind of experience with whatever you're selling. You or your employees may need a background in the following:
Sales/marketing: While you don't need a degree, you do need to be good at selling-or hire someone who is.
Public relations: Any business owner needs to know some basic guidelines for dealing with the public and the media.
Accounting/bookkeeping: If you don't have an employee to handle these tasks, consider outsourcing them. To tackle them yourself, you'll need some previous experience and preferably a bookkeeping class.
Management: Chances are, you'll start out with no employees and therefore won't need this experience. As your business grows, it may become more important. The more employees you have, the more time you'll spend on management-type tasks. Informal management experience is usually sufficient for dealing with a small number of employees.
Design: If you're planning to design the products you sell, you'll need some design experience, preferably with the particular kind of item you have in mind.
Sewing/arts/crafts: Launching a custom sewing business (for custom-made plus-size kids' clothes) naturally requires skill at sewing.
Teaching: A teaching background is helpful, although not mandatory, for conducting cooking lessons. You can get by without formal training, but it's best to have at least some practical experience.
Cooking: As common sense would indicate, you need cooking experience, even if it's not formal training, to teach cooking classes. Even if you hire all your teachers, knowledge of cooking basics is important.
Event planning: There's no substitute for experience in party planning. Consider volunteering to help at a few children's events or getting a part-time job with another party planner to learn the ropes.
Parenting/mentoring: No matter what kind of kids-related business you decide to start, experience with children is important. If you don't have it, do whatever it takes to get it.
Niches Business by Business
Following are some niche possibilities for each of the five types of kids-related businesses. Keep in mind, however, that children's products and services already constitute a niche market. For some of these business types, further specialization may not be practical.
Kids' Party Planning
You already know you'll need to make yourself stand out in kids' party planning by establishing some kind of niche, but where should you look for one?
Probably nowhere, at least not immediately. Instead, you should try different types of parties to see which work best for you and which offer the best market for you. This strategy will also help ensure that you don't wind up without enough parties to plan..
Even once you're better established, be careful not to restrict your market too much. You can become known for, say, tea parties and yet still produce other kinds of children's, and even adults', events. In all but the biggest, most affluent markets, too narrow a niche is a problem in children's event planning.
With the understanding, then, that perhaps only about half your business may be in a niche market, here are some possible ideas:
Tea parties: Usually these are dress-up parties at which "tea" is served and often a little etiquette lesson given. These are popular for girls in the 4-to-9-year-old age range. With the proper marketing and adjustment of activities, the age range could probably even be extended beyond 9.
Spa parties: Any kind of "pamper me" party is popular with girls 10 and up. Hair, makeup, manicures or pedicures, facials and any other pampering activity are good entertainment ideas.
Holiday parties: Christmas parties are the most common, but any holidays are possible. You'll need to target a geographic area with high levels of disposable income.
Bar or bat mitzvah parties: These can be a good bet in areas with a significant Jewish population. "About 40 percent of my business is bar and bat mitzvahs," says event planner Beth Shubert, owner of Glen Rock, New Jersey-based Evention Inc.
quinceñera (age 15) parties: In areas with relatively higher Hispanic populations, this is a good niche possibility. Overall, as the U.S. Hispanic population increases to a projected 25 percent, this niche will get even better!
Sweet 16 parties: So far, this type of party is prevalent only in the trendiest, wealthiest areas. But that could change.
High school-related parties: Prom, homecoming, winter formal, senior breakfast and graduation can provide a niche market in areas of the country with large schools. Currently, California seems to be the main market for professionally planned school parties, but the market may expand.
If you decide to try a niche, keep in mind that what's trendy or popular in one area of the country may not be in another. How do you find out this information? One way is by interviewing professionals in related fields. Photographers, florists and caterers know what types of events are popular in their areas. They may even have suggestions for site personnel (such as hotel managers, for example) you should talk to.
In addition, interview prospective clients in affluent households. Doctors' offices and law offices are good places to start. Also, joining local business organizations can put you in contact with businesspeople with high levels of disposable income. If you say you're conducting market research and then keep your questions to a minimum-four at most-people will usually cooperate.
Kids' Gift and Bath Products
Creating a product to fill a need that you have in your own life is one good way to find a niche. When Nicole Donnelly, for example, wanted her baby to go diaperless for a while to clear up a rash, she needed a way to keep the baby's legs warm and her knees padded for crawling. "I cut up a pair of my socks and made little baby leg warmers," she says. The idea was an instant hit and she sold 100 pairs in two weeks. She launched her company, BabyLegs, in Seattle in 2005.
The following are some possible niche ideas for children's gift and bath products:
Craft kits: scrapbooking, knitting, sewing, woodworking, jewelry
Accessories: handbags, totes, backpacks, hats, scarves, gloves, hair décor
Storage containers: hat, jewelry, trinket or treasure boxes
Jewelry: dress-up, casual, "best friends" sets, backpack décor
New baby/sibling items: blankets, T-shirts, photo albums
Bedroom or locker accessories: photo frames, memory books, wastebaskets, desk accessories
Personalized items: Just about anything above could fit into this category!
Ethnic/world culture items: dolls and other toys from around the world, ethnic dolls, world games
Organic bath products: shampoo, lotion, body scrub, bubble bath
There's no substitute for getting out there, doing the legwork and finding out what's available. Check out any trade shows or consumer gift shows you can find. While the main trade shows for the gift industry are in major cities like New York, Atlanta and Dallas, many cities across the United States host consumer shows.
Kids' Educational Toys and Games
Whether you're selling ready-made toys and games or those you produce yourself, it's a good idea to remember that educational toys and games already make up a well-defined niche. However, if you're starting up with low costs and you have an expansive reach (such as by using direct mail or the internet to get the word out), you could specialize in one or more of the following ways:
Age group: baby, preschool, primary, tween, teen
Skill type: motor skills, alphabet, reading, hand-eye coordination, cognitive skills
Activity type: toy, game, puzzle, enrichment, sports, dress-up
Play medium: paper, game board, manipulatives, keyboard
Kids' Plus-Size Clothing
Although the children's casual plus-size clothing market may be well enough served, it seems clear that plus-size clothing for teens and young adults is a good niche opportunity. When LeRona Johnson launched her teen and young adult plus-size clothing store, MerriBella Fashions, in 2006 in Chicago, she knew how hard it was to find fashionable clothing to please her own teenage daughter. For her 15-year-old, the Lane Bryant retail store wasn't an option. The styles and fabric types were different from what her friends wore. And she had another objection. "She doesn't want to shop where her mom shops," says Johnson.
Department stores are problematic, too. Those that carry junior plus sizes are few and far between, and selection is limited.
In her store, Johnson stocks the types of styles her daughter wants to wear. Customer response to MerriBella's trendy, youthful style selections has been enthusiastic. "It makes me feel good to hear customers say they've been looking for a place like this," says Johnson. One of her customers lives in Iowa. "She comes up here once a month and shops with us because she says she can't find these types of things for her daughter."
What's the secret? Doing something different, according to Johnson. "You really have to have that niche," she says. "You have to pretty much be doing something no one else is doing, or the competition, the bigger stores, will kill you every time.".
If you plan to sew custom clothing, your avenues for eventual specialization might be wide open. According to veteran pattern maker Sarah Doyle, who spent several years collecting measurements of plus-size children, current standard industry plus sizes are often not "plus" enough. Although clients are unlikely to pay custom prices for some basic kids' clothing items like T-shirts and shorts, there are other items Doyle says they will pay more for. These include the following:
Formalwear: bridesmaid and prom dresses, suits
Casualwear: fashionable tops, skirts and pants
Underwear: slips, sport bras
Outerwear: coats, jackets, snow pants, sweatshirts
Nightwear: pajamas, nightgowns, robe
Kids' Cooking Classes
This type of service is novel enough that making parents aware of it, and getting them to pay for it, should be a greater priority than looking for a narrower niche market. A further challenge is that most children are in school much of the day.
You can be creative in structuring your classes, however. For example, what about offering a cooking class that focuses on foods inspired by popular kids' book characters like Harry Potter or American Girls? Talk to parents of prospective students (starting with your friends and acquaintances) and see what kinds of classes interest them.
Days in the Life of..
Kids' Party Planning
Event planners typically find themselves performing a whole range of tasks, particularly when they first start out. For many planners, this variety in their working life is part of the job's appeal. From phone negotiations and computer data inputting to shopping around for that perfect site and brainstorming the ideal party theme, planners wear many hats-sometimes even an emergency rescue one!
Yvette Jackson and Tiffany Brown own Wow! Special Events in Huntington Beach, California; the company specializes in high school events such as proms. Jackson recounts the time a deejay forgot to bring the coronation song for the crowning of the prom king and queen. "One of our coordinators ran home, downloaded it from the internet, burned a CD and ran it over to the venue," she says.
If your company provides one or more vendor services, such as décor, floral treatments or entertainment, your day will include even more variety, since you'll add painting, construction, flower arranging and talent scouting to the list of possibilities.
Whatever you do, your day will be filled with people, so make sure you enjoy working with others! Solid time management skills and the ability to multitask are also important. All in all, planning parties involves a delicate balance of the practical and the creative.
Kids' Gift and Bath Products
Eleanor Keare, president and co-owner of Santa Monica, California-based Circle of Friends, a children's bath products company started in 1995, says her day is split between the present and the future. She spends a significant amount of time approving orders, maintaining accounts, dealing with customer service issues, checking inventory and supplies, and making sure that production is moving forward. To develop new business, she oversees accounts, looks into acquisitions and works on developing new products.
Kids' Educational Toys and Games
If you sell ready-made toys and games, your day-to-day activities will be similar to those of other owners of inventory-based retail businesses. If you develop your own toys and games and then sell them, your primary activities will depend on what stage of development your toys and games are in and how you decide to develop and sell them. In general, however, you'll add research, design, testing, manufacturing and packaging to the general activities common to most businesses.
Andrea Barthello and her husband, Bill Ritchie, started ThinkFun, originally named Binary Arts, in 1985 in the basement of their house. They started out making brain-teaser puzzles based on binary-code concepts of the kind used in computers. "We evolved into calling them mind-challenging games when we came up with Rush Hour, a multilevel game," says Barthello.
Once they finished their design and development, they found their time sharply divided. "We were trying to sell [our games] during the day and making them at night," says Barthello. They looked for local target markets, phoned business owners and provided product samples to prospective specialty store customers.
These days, ThinkFun occupies a large two-story building. The company's award-winning games are sold in most educational toy stores and also in huge retailers like Barnes & Noble and Target. While Ritchie and other company executives head up operations and product development, Barthello handles corporate development and sales and marketing. You, too, can expect to be involved in a variety of different activities, many of them concurrently.
Kids' Plus-Size Clothing
If you're starting a retail business, then your day will probably be similar to that of any retail store owner. You'll approve orders, sell to customers, supervise employees, check inventory levels, deal with customer service issues and do a host of other tasks as well, depending on your sales venue.
MerriBella Fashions owner LeRona Johnson spends a significant portion of her time on research. She looks for wholesale clothing online at www.fashiongo.net and www.lashowroom.com . She checks out the competition in local malls. She also keeps a close eye on her customer database. "I want to know who my customers are, who's shopping with us on a regular basis, and how much they're spending," she says. She sends customers coupons and information on new clothing lines. She also stays current on building plans in the area, especially since she's planning an expansion within the next two years.
Johnson also feels it's important for her to spend time on the sales floor. "No one should know your business more than you," she says, "and [you should] know what your customers are asking for."
If you're creating custom-made plus-size clothes, then you have a service business rather than an inventory-based one. Most of your day will be spent at your sewing machine, with additional time allowance for consultations, fittings and paperwork. "Sometimes I go fabric shopping with a client," says Mary Stevens, a Cincinnati-based entrepreneur who started creating custom garments in 2004 under the shingle Majestic Sewing and Apparel.
A designer's day includes reading current fashion magazines, newspapers, and other media that reflect current trends and tastes. You might attend fashion shows or meet with customers and contractors. You are constantly on the look-out for new ideas, whether you do that by sketching new designs or scanning the net.
Kids' Cooking Classes
Just imagine it: You tool through the farmers' market in the morning, picking out the freshest produce and the most tempting cheeses. You stop at the coffee shop, where you sip your favorite brew while researching French history on your laptop. At the bakery you buy two baguettes. Then it's onward to pick up four aprons donated by a local gourmet shop.
Back at the office, you collect the recipes you'll need and put the finishing touches on your lesson plan: Dinner in Paris. Then you open mail, collecting several deposit checks. After school, the kids arrive. They make a perfect tarte a l'oignon (onion tart) appetizer, followed by an equally wonderful boeuf bourguignon, salad and crepes. You send them off and leave the remaining cleanup to your assistant while you answer messages and book four more 6-year-old girls into your Eloise in the Kitchen summer camp.
You'll probably do at least some of these things, although you'll also undertake many other less glamorous tasks, like testing recipes, mopping up assorted spills and figuring out a last-minute substitute for that burned tray of hors d'oeuvres.
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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