Like a lot of people, we often thought about having our own ... but weren't sure what to do. One day my wife, Kim, was talking to her brother, Chris, and he started to talk about his six pack ab
Like a lot of people, we often thought about having our own business,
but weren't sure what to do. One day my wife, Kim, was talking to her
brother, Chris, and he started to talk about his six pack abs.
Not to let an opportunity to needle my brother-in-law go by,
I told him he didn't have six pack abs, but had twelve pack abs
from all the Budweiser he drinks. Of course this brought on an insult
melee, which turned into a brainstorming session on a company called
12 Pack Abs., which offered humorous athletic apparel.
As the discussion progressed, we felt that it was a novel concept
to offer this kind of athletic apparel, but "Abs" was too narrow and
thought Gym would be more encompassing. From that point on a business
concept was born. After that we met almost nightly, getting ideas
for different shirt designs. When we had ten or so, Kim, who is an
artist, drew up color pictures so we could see the designs.
What transpired below are our experiences in setting up our company,
12 PACK GYM, Inc., and our web site www.12packgym.com.
Since none of us ever put together a business before, the prospects of
doing so appeared daunting. However, we figured we were a reasonably
smart group of people with backgrounds in business, art, management,
and distribution. The first order of business was to secure a domain
name or internet address. I got a recommendation from a coworker.
I looked up that company on the internet, and they were offering a two
year registration for forty dollars. I did a search on www.12PACKGYM.com,
and it came up as available. The price seemed reasonable, so I signed
up for www.12PACKGYM.com domain name. I later came to learn that we
could have gotten that cheaper if we had researched other companies
that offer that service.
The next order of business was to figure out what type of business
we wanted to be. Since there are three of us, our choices were
Partnership, Limited Liability Company or L.L.C., or a
Subchapter S Corporation. Each entity has its own advantages and
disadvantages. Partnerships are relatively easy and inexpensive to
set up. The downside to them is you have unlimited liability.
With an L.L.C. you have the income treatment advantages of a
partnership, but you have limited liability. The downside to these
is that they are more complex and cost more to set up. Also, there are
differences in how L.L.C.'s are treated depending on what state you
are formed in and doing business in. In addition, if you get into
legal trouble, because of their relative newness, there is limited
case law for these entities. The last type of entity and ultimately
the one we went with is a Subchapter S Corporation. These are actual
corporations that you own stock in where the IRS treats income
distributed to the shareholders like a distribution from a partnership.
You have limited liability. There is very strong case law for this
type of entity and the rules are the same no matter which state you
are in. The downside to these is that they are complex to set up;
there are a host of different filing requirements with the state you
are incorporated in, and they cost more to set up. We set our
S Corporation up with the assistance of a company called
Par Corp Services, LTD, which I found on the internet. For a fee of
approximately $400.00, they filed the necessary paperwork with the
State of Illinois to incorporate 12 PACK GYM and answered questions
we had.
There are also additional things to be aware of when doing business.
In Illinois we have to collect and remit sales tax to the state.
Because we are so small, this is done on a quarterly basis.
The state contacted us shortly after we were incorporated.
They also need to know if you have employees for payroll tax
withholdings. Another beneficial thing to get from your state
is a tax exemption reseller's certificate. You contact your
state government, in Illinois they have a web site, and apply for a
tax exemption number. Once issued by the state, you can use it with
your suppliers to not pay sales tax on materials used in the creation
of your product. The theory is that the tax will be collected
and remitted to the state when that product is sold to the end user.
Be careful only to use this for things that are ultimately sold to the
end user, otherwise, if audited you could face back taxes, penalties,
and interest. Look through your state's web site or call them. They
are happy to help you with making sure you are following all the
rules and doing things properly.
Another critical element to your business is lining up suppliers for
the raw materials used in your product. Kim went on-line and
researched dozens of clothing companies and transfer companies.
We requested information from them and talked to the ones we were
interested in using. Most of them are wholesalers and require the
reseller's certificate number. If you do not have one, they will
either charge you tax or not sell to you. I would also suggest you
find different, multiple companies that offer the same or similar
products that you can use in production of your product.
This is just in case one is out of stock or goes out of business,
you have another place to go to get what you need.
At this point, you will need to also think about is packaging.
A good starting point for packaging materials is a company called
Uline. Generally, their prices and selection are the best and you
receive your order the next day.
Another decision you will have to make is on shipping. Who will
deliver your goods to the customer? Chris looked at all the big names
like Federal Express, UPS, and the U.S. Post Office. For our purposes
the U.S. Post Office Priority Mail was the best solution.
Keeping track of your company's financial information is critical.
There are numerous accounting software products on the market for
small business. Depending on the size and complexity of your business,
and your own comfort doing accounting, will dictate to a degree what
type of software to buy. With our business I looked at Quick Books
and Peachtree. Of those two, Quick Books is a good program,
but geared for someone not that familiar with accounting. Peachtree,
in my opinion, is a little more sophisticated and has a better
inventory module. I priced out Peachtree on-line and purchased
it for around $225.00.
In conjunction with all the above it is advantageous to have a
business checking account. We called around to many different banks
and received information on all their small business checking accounts.
We compared fees and services and decided on an account at a local bank
that offered free small business checking if we write ten checks or
less each month. Any checks written above that limit we are charge
a fee per check. We can also, at any time, roll that checking account
into a regular business checking account, but we will be subject to
additional charges.
A big and expensive decision we had to make was on a web site.
All three of us have purchased merchandise over the Internet.
So we were familiar with sites that offered merchandise for sale.
As we surfed the net, we wrote down things we liked about different
sites we used and the URLs so the web designer could look at them as
an example. Our next step was to roughly draw on paper what we thought
our site should look like. My next step was to look at canned
web site creation programs to see if I could do this myself.
Truthfully, it would have cost us about $500.00 for the software
and I am sure I would have been in over my head. Kim had a friend
that was a programmer and he said he would help us and create the
web site. He came over and got all our information and said we would
have it in a month. Well a month came and went and no web site.
We were getting a little upset because we wanted to hit the Christmas
season. Finally, after two months we decided to get a professional.
I went on-line and searched on web site designers.
A free service came up that required me to put in my desired
information about our web site and it would recommend a web designer
for us. We also looked in our telephone book for local web site
designers and contacted several of them. Based on our requirements,
they all submitted a proposal to create our web site.
We talked to each of them on the telephone and decided to go with
the firm that the on-line search site recommended. Let me tell you,
it was the best decision we made. They recommended a small firm based
in Chicago called www.evolvedsites.com. The owner is Siobhan Tobin
and she is absolutely wonderful to work with. They are very
professional, responsive, and will take the time to explain things to
novice people like us about how the web site works. I would highly
recommend that company to anyone looking to build a web site.
Another decision that must be made is if you are going to take
credit cards on your web site. A starting point would be to ask
your bank who they would recommend. Our web site designer has a
company they work with or you can look on-line and find a number
of companies. We looked on-line and asked our bank. Be aware that
some banks do not support some of these credit card clearing house
software programs. The company we use is Retriever and the
credit card processor (clearing house) is Authorize.Net.
A couple of things you will learn as you investigate these companies
are the fees that are levied. With ours there was a one time
application fee, fixed monthly charges of about $40.00, and a per
transaction charge. I approached dealing with these companies like
I do buying a car. I laid all my facts out for each of the companies
I was looking at and haggled with the price, but remember you don't
have that much leverage so be reasonable with what you are asking for
as a reduction. Also, American Express has a higher fee then
VISA/MC and with Discover Card you deal directly with Discover Card.
The last decision to get your web site on the Internet is hosting.
You can either host the site yourself with a server, some software,
a DSL line, and some technical know how for the set up and maintenance.
The other option is to have someone host your site for you, which
means you rent space on someone's server and they promise to have
your site up on the Internet. They do the maintenance on the server,
but probably not on the web site. You can find hundreds of companies
by searching on the Internet that offers this service. Originally,
we signed up with AT&T, but when our friend didn't come through with
the web site we dropped that service. That mistake cost us about $200.00.
We looked at other companies on the Internet, as well as,
our web designer's service. We decided to go with our web designer,
www.evolvedsites.com, services because their rates are competitive
and their service is excellent.
Once all of the above was completed, we went live with our web site.
I would love to tell you that as soon as we flipped the switch on our
web site we were inundated with orders, but that would be a little bit
of a stretch. We were just one of many web sites floating around in
cyber space. Marketing is the name of the game, but if you're like us
you have big plans and a little bankroll. My suggestion is to take it
slow in the beginning. One of the first things you should do is submit
your site to search engines. This service was included in our
web site design. You should also resubmit your site every twelve weeks
or so to make sure it is not dropped from the search engines.
You can either do this yourself or you can pay a company on the
Internet to do it for you. Doing it yourself is time consuming but
I'm told search engine programs are more receptive to this then the
mass submissions from companies. We have done both. After that is
done, it will take a couple of weeks for those submissions to take hold.
Another option is to issue a press release. Search on-line using
"press release" and many companies will come up. We used Majon
International. I looked at samples of press releases out there and wrote
my own, then submitted it to them and signed up for one of their release
packages.
Our results varied. We saw some increase in traffic on our web site.
We received numerous e-mails and calls from Internet Shopping Malls,
and Newspapers to advertise. We received a call from a home shopping
network company, which was very interesting, but would have cost us
$14,000.00 for a four minute test commercial. But best of all
we received a call from The Northwest Herald newspaper that did
an article on our business. It was half a page in size and when
it came out on 4/18/02, we saw a tremendous increase in traffic on
our web site. Another thing we have tried was to use a company called
I-web-marketing, which guarantees traffic to your site.
You select the number of hits to your site for a prescribed dollar
amount and submit your information with them. Our experience with
this is that we are seeing an increase in site traffic, but not the
corresponding increase in sales. Our next avenue is to put
advertisements in selected print publications.
Some of the marketing avenues we haven't tried are reciprocal
advertising, which means you put a link to another web site on your
web site and they put your link on their web site. We have not tried
banners or pop up windows because they are pay per click advertisements
and could get really expensive. Not to mention the pop up windows
are incredibly irritating.
It has been a fun, sometimes strenuous learning experience launching
our web site business. I hope some of our experiences can benefit
you as you plan your own web site. Although www.12PACKGYM.com has
only been up for a short time, we are encouraged by the response
and will continue with this journey. Remember to take things slow,
have a plan, and surround yourself with positive, capable people.
