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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 over $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.
SOURCES
Business Guides:
AEA Business Manual No. X130, Gift Basket Service.
From American Entrepreneurs Association, 2392 Morse
Ave., Irvine, CA 92714
Tara Perkens Baskets, 2796 Harbor Boulevard, #107
Costa Mesa, CA 92626
Publications:
Giftware Business, 1515 Broadway, New York, NY
10036 (212) 869-1300
Associations:
Gift Association of America, 1511 K St. N.W., Ste.
716, Washington D.C. 20005
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