I always liked the idea of fresh eggs every morning from my own hens.
When I was researching what chicken coop to buy, the restrictions that the council bylaw’s imposed, how much the grain costs etc, I found that very few chicken coop builders sold their chicken coops online. A few sold via TradeMe but, at the time, only one had their own website.
I saw an opportunity there, so I made deals with 8 suppliers through-out NZ.
I created a website that showcased their chicken coops with details and photos and an order form.
With almost zero competition, I dominated the search engine results in a short time. I got great website traffic, I got a high rate of conversions.
Every few months I called each supplier and asked them which of the enquiries/orders I had passed through from my website had converted to sales. And then I invoiced them for a 4% commission (that’s all they could afford).
After 18 months I had sold $25,000 worth of chicken coops.
Sounds pretty good, right?
But you are forgetting that my commission was only 4%, so I had made just $1000!
The project had been 100 hours of work so I was making $10 an hour!
I was disgusted and sold the website to one of my suppliers for a few hundred dollars.
Lesson #1: Don’t Work With Low Profit Margin Items
- The profit margins were so small that there was very little money to share with me for a commission
- Instead: Ensure there is a healthy profit margin in the items
Lesson #2: Don’t Sell (Or Resell) Physical Products
- The logistics of moving a physical product around make it so complicated
- Physical products are more susceptible to competition which decreases prices and reduces profit margin
- Instead: Consider digital products, subscriptions, advertising programs etc.
Lesson #3: Don’t Rely On Honesty Or Memory For Commissions
- My honesty system for collecting commissions was time consuming and open to dishonesty (or forgetfulness)
- Instead: If an automated system can’t be easily and cheaply created, forget about it