How to (not) Start a Candle Company

Chris Anderson asked:

The following is about my experience with starting a Candle Company (www.zionsvillecandlecompany.com) from SCRATCH, a few of the pitfalls we had, and how we finally settled into a model that works for us. Please keep in mind that we had reasonable success with all the different models, and that “to each his own.” So keep in mind, just because we abandoned a certain business model, this may actually be the model that works for you, and vice versa, the model that we currently like may not be up your alley at all! Ok, here we go…

Two years ago, my wife and I decided to sell our fundraising business. No easy decision, since we’d been in fundraising for almost 14 years. At one point, we had 45 employees and were doing almost $1.5 million per year in sales. If you’ve ever purchased a discount card from a local high school or band (the discount cards featuring businesses that offer discounts) then you may be familiar with what I’m talking about.

We were incredibly burned-out. We worked with thousands of schools over the years and just didn’t have our hearts in it anymore. I had tried for years to grow the business to the next level. I tried hiring managers, recruiters, consultants, “seo” experts, etc etc etc.

All we managed to get were huge bills and little or no increase in sales or profits. We even invested $35,000 in a phone system and hired a “professional” telemarketing manager to build a call-center. Ouch.

Anyway, while researching possible products to add to our fundraising line, I “stumbled” across the idea of candles (as a fundraiser). Well, actually, I came across a new type of candle wax that was catching-on in popularity: Soy Bean Wax!

Keep in mind this is coming from a guy who had never bought a candle before (although my wife has bought a ton of them,) but we got so excited about the idea of promoting soy candles that we literally made the decision to sell our fundraising company to devote all our time to Zionsville Candle Company

Three Business Models in One Year.

Model One: Retail Brick and Mortar

We knew nothing about retail, but…. (and I even developed a 30page business plan!)

We started with a retail model, and set-up in a small “cottage” building in the Village of historic Zionsville, Indiana- it’s basically an antique/craft area in an upscale suburb of Indianapolis. Before opening, however, we had to “design” all our products, formulas, packaging, etc. Actually there was a list a mile-long. We spent months and months on formulas, researching vendors, designing the packaging, sales literature, pricing, and a million other things. We set our target opening date for Dec. 1, 2005. We managed to open on time and had a great month. We hit about $5,000 in sales, not bad for a first month, and not bad for being located on a quiet street near a “mildly-busy” retail area.

Coming off a great first month, we were on a HIGH!! I mean, even with staff, rent, etc, we managed to make a small profit for December, and had a blast in the process. A steady stream of traffic, a quaint building in Winter Wonderland. Cool.

Then Christmas ended.

And we headed into January.

And we knew virtually nothing about retail.

Can you say “Went from $5,000 in sales to under $500 in sales?”

Ouch. This isn’t fun anymore. We got our clocks cleaned in January.

And February

And March.

I learned (the hard way,) that if you combine a bad retail location with a mis-matched marketing plan with a quasi-seasonal product, you’re pretty-much doomed from the start.

Model Two: Wholesale

O.k., my wife and I are definitely “lemon into lemonade” people, so we got-up, brushed-off our knees, and tried again.

“I know. Let’s try wholesale. We can build a ton of retail partners to help us build the business. After-all, we have a lot of experience with direct sales (from our fund-raising days.) I said.

And away we went. Two full-time sales people, one production employee and me and my wife. Pretty fast success. We found that getting the clients (with our sales experience) WAS NOT THE HARD PART. So all is well? (Not quite.) 150 retail partners later, we literally COULD NOT KEEP-UP WITH THE DEMAND. Yeah, I got what I asked for. Not exactly.

In only a six months we: out-grew our current retail/production building, out-grew our second retail/production facility, and almost went broke from growing too fast. After doing wholesale for six months, we realized that we’re not the “high-volume, labor management types” and thus decided (to again,) switch models.

“I sure miss getting those RETAIL dollars for our candles,” I said to my wife. “This wholesale is a bear.” Some weeks, we had to pour several THOUSAND candles. By Hand. Until Midnight. Good problem to have. Not exactly.

You see, with wholesale volume comes wholesale margins. Not to say it can’t be done. But the way we were doing it was not working. I do know why. Combine low margins with high overhead and poor management (my wife and I have never claimed to be “slave-drivers,” and you have another recipe for disaster. As mentioned way up above, this could work for the right type of business owner. Just be prepared to micro-manage your staff, secure sufficient capital to grow, and service your retail partners to the best of your ability, and you’ll probably come out all right!

Model Three: Internet E-Commerce

Ok, this wholesale is killing us. I started to get REALLY frustrated. Having been involved with about 8 different companies over the years, I can tell you that systems are everything. However, you also need good people. And ask any entrepreneur about staff, and most will tell you that good people are hard to find. In fact, part of the “luck” to getting a business off the ground is being savvy enough to systemize your business and then, to be lucky enough to find a competent, hard-working, committed staff. Well, I’d been involved with another company years ago where I just COULDN’T find the right staff, and I finally gave-up (it was a very large hair-salon franchise, the chop-shop type (I won’t mention the name of it.) Anyway, sometimes you get lucky and sometimes you don’t. But again, my wife and I aren’t the “quitting type,” so we both decided to switch gears again.

“I know, let’s try an online store- you know, ‘e-commerce,’” I said to her. At this point, she was as tired as I was, but God bless her, she has faith, so she said “o.k.” After-all, anything had to be better than pouring candles until mid-night every other day.

Now I had attended a really awesome S.E.O. / Internet Marketing convention the year before to help with the fundraising business. We’d been burnt by many web development / s.e.o. companies over the years, so I decided to learn more about it to help keep a watch on the firms we hired. So this time, we decided to redo our own site, optimize it, and start building a retail client base (and also custom-candle base.) We launched the e-commerce store by November 15th of 2006, and (I think,) finally found our niche. In fact, we decided to completely stop marketing our wholesale products. We still service our current customers and work with select wholesale clients, but are careful to keep the load manageable.

Back to the e-commerce store. We started selling online and almost doubled our sales over our first December. We hit about $10,000 through online retail and custom orders (on top of our wholesale business.) Keep in mind, although we spent a substantial amount on Google
ad-words and marketing, our production for our retail orders decreased by about 50%. We went from pouring 100 to 200 candles for a wholesale order to pour 3 to 5 candles for a retail order. No payment terms (net 30 etc,) no bad debt. Only online credit card purchases and lots of marketing. Plus our staff reall
y enjoys working with our retail customers. We love the compliments we get. I’m not knocking our wholesale customers, but it’s different. We feel that to most of our wholesale customers, we’re vendors. It’s different. I’ll give you an example. I drove all the way across the state to call on one of our largest gift store customers (you’d recognize the name- they’re huge,) and I walked in, eager to say hi to the purchasing agent. I thought she’d be happy to see me and would be appreciative that I was willing to come to her store to help her with her Christmas order.

I walk in, say “Hi _______,” and she looks up and says, “I don’t have time to talk to you, just go take the order.”

Well, I’m not desperate, and I decided I didn’t want to work with her anymore. Just my choice. If I was desperate, I’d put up with it, but I’m not, so “no soup for you.”

Well, back to this paper. We feel we’ve finally hit our mark. We work with “like-minded” wholesale clients who appreciate hand-poured ‘gourmet’ candles, we LOVE working with people who purchase our candles online, and we enjoy working with clients who are looking for unique corporate gifts or private-label candles.

No-more wholesale accounts that try to “beat-us-up,” no more brick and mortar retail where we (or our staff) have to sit behind a register for 8 hours during slow times. And best of all, through our experience with building our e-commerce store, we decided to start a marketing / s.e.o. company (Queen Bee Marketing www.queenbeemarketing.com) so we can help others develop marketing and internet sites that actually bear fruit.

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