Finding
the "perfect gift" for a special occasion is, for
many
people, an exercise in frustration. Going from store to
store
only to find exorbitant prices or poor quality merchandise
can
take most of the pleasure out of gift giving. Too often we
settle
for a gift that isn't what we want to give simply to be
done
with the whole process. Wouldn't it be great to have a
selection
of creative gifts to suit any occasion?
Gift-giving
isn't just a seasonal concern -- there's always
an
occasion. And today, many people are taking the matter into
their
own hands by creating affordable, unique gift ideas. These
people
have discovered the exciting new business of custom-made
gift
baskets.
Gift
basket making has become a rapidly expanding cottage
industry,
allowing the entrepreneur to have fun, be creative, and
make
livable profits. The business of making gift baskets
requires
a small initial investment as a home-based endeavor and
can
grow into a multi-employee operation in a relatively short
time.
For the enterprising and creative person it is a great way
to
start a small business with an unlimited market.
Starting
a gift basket business as a home-based operation is
an
ideal way to begin since a lot of equipment is not necessary
and
there's no rent to pay on office space. The biggest expense
could
be a car to be used for delivery of the gift baskets.
Utilizing
existing shelving and garage space for storage also
helps
this home-based business cut down on expenses.
Some
people have found that by working an average of 25
hours
a week an annual gross of up to $15,000 is possible. Of
course,
profit depends on individual initiative and efficient
marketing.
Once a handsome "home-generated" profit is realized,
an
expansion to a larger gift basket service could mean a sizable
yearly
income.
BUSINESS
OVERVIEW
In
order to begin a profitable venture in the gift basket
business
the individual entrepreneur must be well prepared. If
the
business is to be, at least initially, home-based, several
basic
steps need to be taken.
(1)
Find the appropriate inventory at affordable prices.
(2)
Create gift baskets that are not only marketable, but
more
pleasing and affordable than those of the competition.
(3)
Develop an efficient system of delivery as well as
selling
retail for customer pickup.
(4)
Price gift baskets for the highest profit.
(5)
Promote the business at minimal expense.
These
initial steps are not all that difficult. They will
require
time, a small monetary investment, and even a little
experimentation.
Once you develop a system for making gift
baskets,
you can begin to be more creative, making specialized
"theme"
baskets filled with exotic treats that will increase
demand
by your market.
Most
people getting into the business of gift basket making
have
some experience at creating these delightful gifts. As a
hobby,
these people have made baskets for relatives and friends
as
gifts for special occasions. Creativity is essential. If you
are
skilled, or have some experience, in craft oriented ideas,
creating
unique and irresistible gift baskets shouldn't be a
problem.
However, the person who has no practical experience, and
who
is not "naturally artistic" might do well to hire a creative
friend
or relative as a partner in this business venture.
It's
a good idea to test your ability to create marketable
gift
baskets before you get into the business. You can do this by
purchasing
some baskets and basic materials such as gourmet
foods,
fragrant soaps, colorful ribbons, exotic teas or baby-care
items
for a "new baby" basket.
You
need not go to great expense. Get enough items to make
two
or three baskets and then experiment. You'll soon realize
what
it takes to make individual gift baskets -- patience,
creativity,
and imagination. Operating a gift basket service is
most
often an endeavor taken by people who relish the creativity
involved
in making the baskets. If you plan to establish a one-
person,
home-based gift basket service, you'll need the
discipline
necessary to perform a professional service. In some
instances,
usually during the holidays, you can plan on a
six-day-a-week,
10 to 12 hour a day job. If you know where to
find
the customers, and you're willing to put in some long hours,
the
pay-off can be quite rewarding.
GETTING STARTED
A
gift basket service can be a successful venture operating
out
of a home. Since there is no "store" location involved there
need
not be a substantial outlay for rent or equipment. Inventory
can
be stored in existing storage spaces within your home and
garage.
You may have to add some shelves for proper storage, but
these
can easily be constructed at little expense.
Most
homes already have some of the equipment needed for
business
use -- a phone and a typewriter. If your phone isn't
equipped
with an answering machine, you should get one since
orders
may come in while you are out making deliveries. Not much
else
in the way of equipment is essential. However, you may want
to
invest in some sort of file cabinet and cash box.
Another
piece of equipment -- a shrink wrap machine -- will
add
a touch of professionalism to your operation. This machine
wraps
your baskets in a clear or colored plastic film. Good
shrink
wrap machines sell for about $400.
If
you need to buy office furniture, don't get carried away.
A
small desk and chair, along with your file cabinet and
bookshelves,
are all that is really needed. This should be an
expense
you can hold under $500.
You'll
also need adequate record keeping equipment as well
as
stationery, envelopes, business cards, sales slips, invoices,
containers,
labels and other miscellaneous items. Most of these
items
can be purchased at local office-supply stores. Again,
don't
go overboard. Buy only what you need.
Most
gift basket orders can be taken at home by phone, and
the
finished product can be delivered to the customers home or
place
of business. If some of the deliveries are not within
reasonable
driving distance, the local UPS can handle the
delivery.
It
is important that you keep a log of all your deliveries.
Be
careful to get the full name, correct address and phone number
of
the recipient. Should you get lost, you can call and get
directions
to put you back on course. Most home business owners
average
from 2-5 deliveries per hour. All UPS deliveries should
be
logged the same as other deliveries, and you should keep a
record
of all postage costs.
Since
as much as 80 percent of your orders will come in by
phone,
you'll either have to be available or have an answering
machine.
Scheduling deliveries for morning hours will allow you
to
spend the rest of the working day answering the phone and
arranging
new baskets.
If,
for some reason, a home-based business is not feasible,
another
way to get started in gift basket servicing is to rent a
space
or office in your community. Specialty shops are good
locations
for a gift basket business because you will be
providing
a "special" service.
Renting
or subleasing space in an existing shop can be
beneficial
to both parties involved. You will be getting adequate
work
space for your business while paying a percentage of the
owner's
monthly rent.
Once
you've decided where you will start up your gift basket
business
you'll need to begin making "business" like decisions.
After
all, you will be the boss. You'll have to decide how much
time
you are going to invest in the business. You can plan your
hourly
work week by determining how many baskets you are willing
to
make. This is an individual matter. It depends on how much
time
you have and how much profit you wish to make.
INVENTORY
To
be successful in the gift basket business you must offer
baskets
that are unique and filled with pleasing and useful
items.
You'll need to locate a good source for the type of
baskets
you'll be offering, and you'll need to shop for the
appropriate
items to fill those baskets.
Initial
inventory should be a combination of wholesale and
retail
items. The wholesale inventory should be made up of items
to
be used in large quantities as "fillers" and in the most basic
basket
arrangements. Retail inventory should consist of items
used
in making customized or thematic baskets.
Some
people getting started in the gift basket business have
taken
the initiative to contact various stores and businesses
that
offer gift baskets for sale. Through these contacts, new
owners
can obtain information on what kind of baskets and themes
work
best. The beginner can then create gift baskets based on
what
has worked for others.
Most
home-based gift basket services purchase baskets
wholesale.
Before doing this you must determine the type and size
of
the baskets you'll be making. You'll need to know if you'll be
specializing
in small gift baskets or large, or a combination.
Depending
on your location, you'll most likely need to go to a
large
city to purchase baskets wholesale.
As
a small, home-operated service most of your customers
will
be interested in basic, relatively inexpensive gift baskets.
If
the need arises for more elaborate and expensive "designer"
baskets
you can purchase those wholesale too.
To
begin, you should purchase just a few types of baskets,
such
as planters, fruit bowls, baby baskets and candy baskets.
These
baskets are most likely to be in greater demand than other
"special"
baskets. When ordering baskets, it is a good idea to
ask
your supplier for recommendations. This is a good way to
learn
the proper styles and amounts of baskets you should have on
hand.
Of course, your customers will also furnish you with
invaluable
insight into the types of baskets best suited for your
market.
Once
you have located and purchased the types of gift
baskets
you plan to offer, you'll need to get items to fill them.
Keep
in mind the kinds of baskets you are offering. Don't go
overboard
on expensive merchandise that isn't appropriate for the
baskets
you have in stock. The thing to remember is ... stick to
the
basics.
Since
toiletry arrangements are very popular, you should
have
a good supply of lotion, shampoo, bath oil, soap, and
fragrant
powders. With these arrangements, it is also a good idea
to
have in stock several all-natural items, and children's
products.
The
initial inventory should also include items for popular
gourmet
food arrangements. You can shop around and find an
intriguing
selection of teas, coffees, crackers, cheeses,
sardines,
oysters and fruit. Some people include wine, beer, and
champagne
in these gourmet arrangements, but a special liquor
license
is needed to resell these items. That's an expense a
beginner
may want to put off until the business is turning a
profit.
Your
start-up inventory should also include popular items
such
as candles, toys, stuffed animals, dried flowers, small
books,
stationery, writing utensils, and an assortment of items
such
as golf tees, tennis balls, socks and gloves.
Another
aspect of gift basket inventory is decorations. With
each
basket you'll want to include an assortment of trimmings,
labels
and cards. You'll also need a supply of ribbon, artificial
grass,
tissue paper, small cards with envelopes and tape. These
items
can normally be purchased in quantity, and that can save
money
on your initial investment.
To
find current manufacturers and distributors of gift
basket
supplies you should scan the directories published by many
giftware
magazines. You can call or write to any of these
magazines
to find out if they have any directories to offer, and
if
so, how much they charge. You can also subscribe to trade
magazines
to keep abreast of new companies entering the gift
basket
supply market. A trip to your local library should furnish
you
with ample information about various giftware and relevant
trade
magazines.
Usually,
when starting up, a new gift basket service will
only
need a few suppliers. Besides locating these suppliers by
the
methods just described, you can attend tradeshows, wholesale
showrooms
and conventions. A thorough and patient research of
suppliers
will allow you to select the most reliable people to do
business
with. You'll also get quality merchandise at the most
affordable
prices.
When
selecting suppliers you should decide whether you wish
to
deal with manufacturers, distributors, independent
craftspeople,
import companies, or some combination of the four.
These
are general categories, but they do describe most suppliers
you
will be dealing with.
Many
small business operators buy from manufacturers because
their
prices are usually the lowest. One drawback to buying from
manufacturers
is that your business location may mean high
shipping
costs. Buying from a distributor usually results in
paying
higher prices than those to a manufacturer, but if the
distributor
is nearby, shipping costs are lower and delivery is
quicker.
Some
of the gift basket makers best purchases are made from
independent
craftspeople. Since most of their products are made
at
home, quantities of specific items may be limited, but often a
working
relationship between the craftsperson and gift basket
operator
is a profitable arrangement.
Depending
on individual attitudes about buying foreign
products,
import sources can supply a gift basket service with
both
exotic and practical merchandise. The type of suppliers you
use
depends on the type of merchandise you plan to market, your
budget,
and your business location.
Once
you have an adequate inventory of baskets and supplies
you'll
need to determine how to price the finished product. Most
first-time
business operators find that adding a 100 percent
markup
straight across is the least complicated method of
pricing.
This percentage of markup normally covers all expenses
and
still allows a reasonable profit.
You
can determine prices in a more complicated fashion. This
method
requires keeping a log of how much time it takes to make
each
basket. You'll also need to figure in the cost of the
basket,
the "filler" items, and trimmings. If the basket is to be
mailed,
figure in postage. If it's to be delivered, add for gas,
mileage
and time. Also determine overhead costs, and then decide
what
you consider a fair margin of profit. Once you've done all
that,
you should be able to come up with prices for each basket.
The
most important thing a new gift basket business owner
should
realize is that starting slow, with a small inventory is
the
most prudent and safest way to begin. It may take about one
year
for a new gift basket business to get established. After
that
amount of time and experience, the owner should be able to
determine
what sells best as well as monthly sales and inventory
turnover.
With this information, the owner can decide how much
inventory
to carry. If the business is to be profitable, it is
essential
to have the proper amount of inventory without an
excessive
outlay of cash.
THE MARKET
One
of the most appealing features of the gift basket
business
is the virtually unlimited market. Everyone loves to
give
and receive baskets, and gift-giving is an almost constant
occurrence.
The
most significant customers for a gift basket service are
women.
A large percentage of these women are married with
children
and full-time jobs. For whatever reason, these women are
still
largely responsible for selecting and buying gifts. Since
women
make up the largest percentage of the gift buying market
catering
to their tastes and ideas will furnish the owner with a
good
source of information about what arrangements work best.
Another
important type of customer for a gift basket service
is
corporate clients. Often, these customers send gifts to
business
associates and their own clients. For corporations and
businesses,
gift-giving can present a problem. Most businesses
choose
to give gifts not only during the holidays, but in
recognition
of employees promotions, retirements, birthdays and
anniversaries.
The gifts they choose need to be appropriate and
personal.
Gift baskets are ideal for this type of giving.
A
new business will have to do some promoting to let
corporate
customers know about their gift basket service. But the
effort
could be well worth it. Corporate customers could provide
a
sizable volume of sales, and on a repeating basis.
Even
if your gift basket service is going to be home-based
and
in a relatively small community, you will need to have a good
idea
of the available market. A decision must be made as to the
customers
you will cater to. This will help you determine the
type
and price range of your product. In order to understand and
best
utilize the available market, you should conduct a market
survey.
To
conduct a usable market survey, several basic steps must
be
followed.
(1)
Establish the limits of your market or trading area.
(2)
Research the population within your potential market to
understand
spending patterns and characteristics. A population
base
of 25,000 is usually a sufficient market for a home-based
operation.
(3)
Figure the trading area's buying power.
(4)
Find out the current sales volume of any competing
businesses
in your trading area. If there are no actual gift
basket
businesses, determine the sales volume of the type of
goods
you will be marketing.
(5)
Project a reasonable proportion of the total sales
volume
you can achieve.
Many
government agencies, trade associations, or other
businesses
within the gift basket industry have compiled reports
and
studies that will furnish you with much of the market survey
information.
Some information you will pull together on your own.
PROMOTING YOUR
BUSINESS
One
of the most important keys to the success of any
business
is marketing. In order to make potential customers aware
of
a new business, advertising and promotion are essential.
That's
because a new business needs a direct line of
communication
about the product to potential customers.
There
are many effective methods of getting the word out
about
your business. What works best often depends on location of
the
business and the amount of money available to spend on
advertising
and promotion.
In
some cases, especially in smaller markets, word-of-mouth
advertising
is responsible for a great deal of business. But, if
the
owner wishes to expand the business an advertising and
promotion
budget is necessary. The amount budgeted for this
purpose
can vary. Many businesses budget advertising and
promotion
based on anticipated gross sales. In most cases, an
advertising
budget of 2 to 5 percent of projected gross sales has
proven
effective.
Most
small businesses usually advertise in the following
media:
(1)
Newspapers
(2)
Radio
(3)
Direct Mail
(4)
Yellow Pages
(5)
Magazines
In
smaller markets, word-of-mouth advertising, combined with
the
local radio station and newspaper can be very effective at
reaching
new customers. Direct mailings are also a good way to
advertise
within your budget.
For
a home-based business catering to a local market,
newspaper
advertising works very well. Most local newspaper ad
rates
are reasonable, and a display or classified ad should bring
your
product to the attention of a high percentage of potential
customers.
Many
new gift basket service operators take advantage of
free
publicity generated in local newspapers. Most local
newspapers
are happy to give write-ups to new local businesses.
You
should also furnish the newspaper with any information you
have
about contest promotions or charitable endeavors. Anything
about
your business the local newspaper can use as "fill" in
their
paper, they usually will accept. This is a highly effective
way
of getting publicity for your business and catching the
attention
of potential customers.
Small
market radio is also an affordable means of
advertising.
You can get spot announcements on most small, local
radio
stations for less than $10 per announcement. Special
reduced
rates are usually available if you buy a certain quantity
or
"package". Although most local radio stations cover only a
limited
area, the coverage is sufficient for your market.
Gift
basket business owners frequently use direct mailing as
a
means of attracting new business. This form of advertising is
highly
effective in that it brings a straight forward sales
message
to a high percentage of potential customers. Since
special
postal rates are provided for direct mail it is one of
the
most affordable forms of advertising.
There
are different methods of obtaining mailing lists for
use
in direct mail advertising. Some businesses purchase them
from
list brokers while other advertisers consult the yellow
pages
under "Advertising." Normally, renting a mailing list for
one-time
use will cost up to $70 per thousand names.
If
you are purchasing a mailing list from a broker, choose
an
established service. Find out how often the list has been
rented
over the past several months. Also inspect the list
thoroughly.
It may be wise to contact some of the previous
renters
to find out what success they had with the list.
Another
highly effective form of advertising is the yellow
pages.
Regardless of budget, an ad in the yellow pages of your
local
phone directory is a smart investment. These advertisements
can
be creative listings complete with illustrations, or a simple
one-line
mention. If possible, get the largest display
advertisement
you can afford. Many local customers scan the
yellow
pages when looking for a special service, such as gift
baskets.
So an attractive yellow page ad is one of the best ways
to
advertise a business.
Many
small business operators also use brochures to convey
the
services they offer to potential customers. These brochures
describe
the assortment of baskets you make and contain your
mailing
address and phone number as well as outline your method
of
delivery. Your brochures can be as elaborate or as basic as
your
budget will allow. But they will lend an air of
professionalism
to your business as well as describe in detail
what
service you have to offer.
The
purpose of advertising is to entice potential customers
to
try your product. As a gift basket service owner you want to
convince
customers that your baskets are the best and most
affordable
on the market. Effective advertising and promotion is
the
surest way to reach potential customers and clients.
POTENTIAL
PROFITS
Since
the gift basket business offers a product that is
always
in demand, the profit potential is impressive. Some home-
based
gift basket services have reported gross profits of over
$100,000
a year. And many of these people started their gift
basket
services with less than a $2,000 investment.
Even
small baskets produce substantial profits. An average
gift
basket may cost the business owner from $5 to $10 and retail
for
as much as $50. Spare-time operators have reported selling an
average
of 10 baskets per day, priced from $35 to $50 per basket.
In
a year's time, that could mean a profit of nearly $100,000
with
very little overhead involved.
Although
the potential profits from a gift basket service,
even
with a minimal initial investment of $2,000, are
substantial,
you should have an estimate of your potential sales
and
profit before you start your business. There are several
factors
involved in estimating monthly sales and profit:
(1)
Make an estimate of how many people in your market are
viable
prospects as customers for your product. In making this
estimate,
be reasonable and conservative.
(2)
Estimate the average sales you can reasonably expect
from
each customer.
(3)
Figure out the total yearly sales volume by multiplying
the
projected number of customers by the projected amount of
money
each will spend.
(4)
Project seasonal sales patterns. Each month of the year
should
have varying percentages of the total volume, especially
holiday
months.
(5)
To estimate monthly sales, take the total annual sales
figure
from step three and multiply it by the estimated monthly
percentages.
(6)
Adjust these monthly sales estimates by taking into
consideration
the start up period. This will be strictly an
estimate
if you haven't yet started the business.
(7)
Subtract all your labor, materials, and overhead
expenses
from the monthly sales estimates. The remaining figure
is
your net profit before taxes.
These
steps may seem somewhat complicated, especially before
you've
started the business. But this projected operating
statement
makes good business sense and will give you a head
start
on handling your finances once your business is off the
ground.
Once the business is in full operation and actual
operating
information is available, you can update your projected
operating
statement on a regular basis.
The
potential for profit from operating a gift basket
service
depends on several factors. Most important is the market
of
potential customers. The amount and type of inventory you have
to
offer along with the creative quality of your gift baskets,
also
plays a major role in your financial success. If you are a
disciplined
and enterprising person, your potential earnings from
a
gift basket service could very well climb into six figures.
SUCCESS ANALYSIS
Eight
contributing factors are measured on a 1 to 10 basis
(with
10 being excellent) based on analysis of this opportunity.
1.
Time Investment
7
2.
Start-up Costs
6
3.
Gross Income Potential 8
4.
New Income Potential 7
5.
Income in Relation to Investment
7
6.
Stability 9
7.
Overall Risk
6
8.
Potential for Growth 9
Overall
Potential for Success 7.38
LEGAL
REQUIREMENTS
One
of the first things a new business owner has to consider
is
the proper legal form under which the business will operate.
The
business can either operate as a sole proprietorship,
partnership,
limited partnership, or as a corporation.
Whatever
the legal form of your gift basket service, you'll
need
to be aware of all the legalities involved. If your business
is
a sole proprietorship operation, you won't have many legal
forms
to worry about. The only legal papers required for a sole
proprietorship
are a business license and a fictitious-name
filing
with the county clerk's office.
If
you choose to operate your business using a distinctive
name,
other than your personal name, you'll most likely be
required
by the city, county or state to register the name. The
method
of doing this will vary from state to state, but in many
states
you simply pay a small registration fee at the county
clerk's
office. Some states may require placing a fictitious-name
advertisement
in a local newspaper.
To
find out the proper procedure for your area, contact your
bank
and find out if it requires a fictitious name registry or
certificate
in order to start a business account. If it does, the
bank
personnel can tell you where to obtain one. Filing a
fictitious-name
notice will cost anywhere from $10 to $100.
Unlike
other forms of business, a sole proprietorship
requires
no separate income tax returns. As a sole proprietor,
all
of your income and expenses will be reported on Schedule C of
IRS
form 1040. If your aren't familiar with tax laws and
regulations
for business operations, you should consult with a
professional
accountant.
Keeping
records of your business operation is also required
by
law. These records are used to determine your tax liability.
No
specific type of bookkeeping system is mandated by law,
however
your records must be accurate. They must also show your
income,
deductions, credits, and other information required by
federal,
state and local regulations.
If
your bookkeeping skills are less than adequate, you'll
need
the help of a competent professional. This will mean an
extra
expense, but it's an expense you cannot afford to overlook.
Having
accurate and complete records is not only a legal
requirement,
it is also an efficient and professional way to
operate
a business.
CONCLUSION
Operating
a home-based gift basket service can be a highly
rewarding
venture. By following several key steps, an
enterprising
individual can turn creativity into profit.
(1)
Investment -- Unless you have unlimited capital, keep
your
initial cash outlay for equipment and inventory to a
minimum.
You should be able to start up with an investment of
between
$2,000 and $3,000. In some cases, even less.
(2)
Product -- Learn to design and arrange gift baskets that
will
keep you far ahead of any competition. If you have no
practical
craft experience, there are courses that teach the
fundamentals
of gift basket making. If you have limited artistic
ability,
enlist the services of a more creative friend or
relative.
The irresistibility of your product is the key to your
success.
(3)
Marketing -- Investigate, then utilize the most
effective
means of advertising and promoting your business.
Develop
a realistic advertising budget that will allow you to
reach
every potential customer in your market.
(4)
Regulations -- Be well versed in, and adhere to, all
rules
and regulations pertaining to a small home-based business.
The
regulations vary from state to state and will most like
require
some research or instruction from a professional
consultant.
(5)
Bookkeeping -- Maintain permanent and accurate business
operating
records.
Since
the market for gift baskets is virtually unlimited,
the
business of making and selling this product is rapidly
growing.
Operating your own home-based gift basket service is an
ideal
way to be creative, have fun, and realize substantial
earnings.
If you're interested in starting a small business that
allows
you to be creative and to make money, a home-operated gift
basket
service is the perfect opportunity.
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