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jmansmc23
10-24-2011, 03:18 PM
Im new to this forum, but wanted to gather some ideas from anyone who was willing to offer some advice.

Im looking to start a Men's footwear/clothing consignment store in a suburb of Cleveland, OH. An example of the store would be similar to Flight club in NY, RIF in LA, and Off The Rack in Boston. My business partner and I both have full time careers and I recently purchased a home last year and have a 3 month old baby. Im 28 but have been working at the IRS for the last 7 years. While its a stable job, and government job, its not my passion, I hate getting up every morning and would much rather open my own business. With that being said, my business partner and I have said we need $50,000 on the low side, to $75,000 to get the consignment shop up and running. We both are able right now to come up with a total of $30,000 and are looking for ways to gather to rest of the money.

We have reached out to family, friends, and fools, and would possibly be able to get another $10,000 - $15,000. We are running out of people to ask, and really would like some suggestions on how to come up with the remaining cash. A bank loan is out of the question due to the fact they are extremely stringent in this economy. Any advice would help. :)

vangogh
10-24-2011, 10:48 PM
I hadn't realized how much it cost to start a consignment store. I didn't think it cost nothing, but didn't realize it costs that much.

Given how much you have and how many fools you can part from their money you're looking for anywhere from $10,000 to $35,000. What do you need the money for? I'm asking because when I started my business I mainly needed money for me to live on and I used a credit card to charge pretty much anything I could. I built up some debt on the card for a year or so, but it enabled me to begin building a client list. Could you get a business credit card and use it for some things to cover the low end of what you need. I'm thinking once you've set up (even at the low end) and have a business started it might be easier to get a loan since you'll have real proof you can get a business going and I'll assume some income to show the bank.

Could you or would you find another partner to kick in an equal contribution to the two of you? You'd still have to find the person, but it could extend who you ask beyond family and friends. Maybe there are some people in your area looking to invest in new companies.

You might try searching 'angel investors cleveland' or something similar. I think the range of how much angel investors are looking to invest is all over the board. You might be able to find someone looking to invest a few grand in a local business. I tried "angel investors for small business cleveland" and Google returned a lot of results. Probably worth clicking through the results and trying some similar searches.

Another thought is to talk to people at a nearby SBA and see if they have any ideas. Perhaps there's even some networking opportunities where you could reach people willing to invest.

jmansmc23
10-25-2011, 10:32 AM
Vangogh I appreciate your response. Since we will be having a brick and mortar storefront, we would like to have enough capital going in to pay all the rent for a year, leasehold improvements, and getting everything set up. We would really only need $35,000 to make that happen, but would want a cushion in case things take longer than expected to be succesful. I will google the angel inverstor idea you suggested. The SBA really didnt have a lot of assistance in getting inverstors, more so on how to approach the bank for loans. Finding the third person also has crossed our mind as well. Once again I appreciate your help!

When you first started out, was there any doubt in your mind that you could lose everything if your business did not pan out?

vangogh
10-25-2011, 12:01 PM
Glad I could help with some ideas.

When I started out I didn't have much to lose so I wasn't worried about losing everything. Early on though there were several times where I did worry about how I would pay the following month's rent. I trusted in myself and knew I was doing the right thing in starting this business. Some months I pushed a little harder to make it and some months it felt more like the universe was watching over me and providing for me, but I always seemed to make it through to the next month.

Don't let the fear of possibly losing stop you, but at the same time don't jus jump into something without putting a little thought into it. Starting a business is a risky proposition. You really won't know for certain how it will turn out so there is a bit of faith and believing in yourself that you need. One thing that may help is many successful people failed numerous times in getting a business off the ground. In failing they learned how to do better the next time. Failure is a part of business success.

A certain amount of success is simply about persistence and believing in yourself. I wish I could tell you that your success is guaranteed, but obviously I can't. I did have doubts about whether or not my business would survive at times, but I've never had doubts that I wasn't doing the right thing. I just knew what I was doing was right for me and if it didn't work out I would start over again doing the same thing.

KristineS
10-25-2011, 12:38 PM
One thing you could also do, while you're looking for money, is start making connections in the neighborhood where your shop will be. Connect with other local businesses and see if there is any kind of group advertising happening. Contact your local Chamber of Commerce and see what resources they have to help new businesses. Try to get some connections in place now so that you'll already have a network that will help you spread the word when your business goes live. It's easy to get so focused on the money that you forget you have to let people know about your business, if you start planting those seeds now, they'll be ready to grow when your business is ready to grow.

jmansmc23
10-25-2011, 02:50 PM
I thank you both for your input. You are correct that the success is failure turned inside out mentality is something that you need in business. I have connected with the local shops near by, but the Chamber of Commerce is a very good idea. Also I believe in myself, and my wife and I would be able to sqeauk by even if I had to take a PT position working 3rd shift until things got off the ground.

Business Attorney
10-25-2011, 06:25 PM
Your best bet is to try to network the family, friends, and fools who have indicated an interest in loaning you the money. Ask them if they know of anyone else who might be interested. Their decision to invest is a sort of endorsement of you and and your business plan, so people who they recommend are more likely to give you a chance with your pitch.

Your second best group to network with are people who seemed receptive to the idea but who said they could not invest for one reason or another. They might genuinely think it was a good idea, or they might feel guilty about not investing and might give you a good lead. Again, when you are referred by them, their is an implied endorsement of you and the investment.

I would not overlook angel investors but I think that is a long shot. A loan to a consignment shop, or even an equity position in the shop, is not the type of investment that most angel investors are looking for.

Another potential source is your suppliers, vendors and maybe even the landlord. I had a client who got almost everyone involved in his project to take a cash payment upfront and take a note for the balance. The note, of course, paid an investment-type interest rate, not like a secured bank loan, but it was cheaper than credit card debt. Say you go to the company selling you the store fixtures and offer to pay 75% now and the balance with a note at 15%. The 75% is probably enough for the vendor to make a profit on a sale that he might otherwise not make, and the 15% return on the note is better than he will every get having the extra cash sit in his bank account. Even if he has a bank loan himself, his loan is probably at less than the rate you would be paying, so he is making a little on the spread.

The biggest issue I find with startups is that they expect to get the funds too cheaply. Banks don't lend startups money because it is too risky, even when the loan is backed by collateral and a personal guarantee. I see too many people who fail to acknowledge how risky the investment really is. They want investors to make a business loan with no collateral and no personal guarantee at rates in the 8-12% range. Unless the investor is your mother, brother or best friend from college who is simply doing you a favor (or a fool who has no investment experience), the potential loss of their entire investment doesn't make an 8-12% interest rate worth it.

Steve B
10-26-2011, 06:45 AM
David - you need to save that last paragraph and re-use it everytime someone makes a similar post about trying to get a loan.

jmansmc23
10-28-2011, 12:38 PM
I thank everyone for their input. I plan on asking everyone who was receptive to the idea for any contribution, and also I plan to get a night PT job and just delay opening the business for a full year. At atleast 8-10 per hour working something relatively simple at 32 hours per week I should be able to come up with an additional $10,000 or more not including financial help from others.

melanie
11-10-2011, 06:28 AM
I would certainly look in to either gaining a third business partner or look for an angel investor. Working another job will raise the money, but it will take a long time and energy so I guess it depends how eager you are to get the ball rolling. (Not saying business is something that should be rushed, quite the opposite!!).

sgregory
01-17-2012, 12:30 PM
One place to check is the local microloans in your area. There are several entities that fund these (SBA, USDA, EDA, etc.) and they are available through local economic development agencies, towns, not-for-profits, etc. They typically don't have the same strict requirements that the banks have and are perfect for the amount you are looking for as many banks make it tough to get small loans since there isn't a lot of profit there.

TomWbl
05-01-2012, 07:58 PM
Could you start the business as a mobile business at local markets etc.. Would keep initial costs down and allow you to test your idea.