A friend came over this morning to talk about an idea we discussed briefly the day before on the phone.  I have know him for over 10 years.  He is a salesmen, and he had an idea that might only come from a salesmen.  He wants a business he owns, with a good salary, flexible hours, and minimum financial risks.  I think this is where the wheels started coming off of the business idea….

• Water Industry:  He has been selling in the water industry for many years.  He calls on small and medium sized businesses.  He puts water coolers into your business, and likely kicks some other company’s cooler out.  He make deals on monthly cost of the water cooler (the rental fee is a little flexible) and the water jugs. (also flexible)  He may throw in cups and other freebies to close the deal.  He sees some changes in this industry that might allow a small guy like himself to carve out 1,000 customers as his very own.  The cost of acquiring these customers is what we mostly talked about.
• Customers:  As he works presently, he walk into a company with a focus on getting a customer.  His employer automatically grants credit to all new accounts he sets up.  If he can get an installation fee, great!  If he gets first month payment, great! But, if he gets none of that and the customer pays his bill for at least 4 months, his employer does not charge back his commission.  The salesmen is happy and just keeps selling.  However, if he is going to do this on his own, it is critical he gets customer that will stick around for awhile.  The cost of the equipment and labor means the breakeven point is somewhere between 18-24 months.  (Still trying to track down the equipment and the proper labor to work on strict per hour rate.)  If I am going to be involved with this opportunity, it needs to be few bad customers and really quick break even.  I am concerned whether this can be achieved.
• Revenue:  While commission now is a one time thing, “owning” the company would allow monthly rental contracts from the customers.  This is good if you are looking at the income, but could be bad in other ways.  As a commissioned salesman, I believe he is very polished.  But, as an employee, he tries NOT to give things away and include them for free.  If it doesn’t affect his commission, it doesn’t affect him.  If all expenses come out of his company pocket, it is a different matter.  I am concerned the excitement of closing the sale may cause him to throw things in that shouldn’t be throw in.  I am very concerned an seed money I give him may quickly disappear.
• Worst Case Scenario:  If a water cooler is put in and IF the water cooler is bumped and IF a small leak develops, it could lead to a situation where the headaches are his and not those of his boss.  (Could cause lots of damage to the floor of the customer and others who share the building.) It is not good to be a pessimist and start a company, but it is not good to be a blind optimist either.
• Securing Equipment at Wholesale Pricing:  I have instructed my friend to track down the SKU or something to help me track down the correct cooler.  If we can’t find this product or comparable at the right price, it will make the “plan” much harder to achieve.

I know he is very hopeful this can all come together.  For his sake, I hope it can.  There are a few obstacles working against us/him.  I may take on a supporting/financial role for him OR I may not.  Regardless, I will still sell signs and see if there is anything else I can find to fill some of the voids….