Saturday, May 2, 2009

Business Decisions and Teaching My Daughter

One of the reasons I decided to try Scentsy is because my teenage daughter was so fascinated by it, when we went to a party. I thought doing Scentsy could give her a close-up look at what it's like to run a small business and make business decisions. I even thought that if she does Scentsy with me and she likes it, perhaps when she is 18 she can start a Scentsy business of her own. This could give her options when she needs money to put herself through college, or if she needs to supplement her family income when she marries.

So today we sat down for a minute to talk about Scentsy so far.

We had a party with $60 in orders. We could submit those orders as individual orders, and not have to spend any money out of pocket (low-risk). Or we could submit those orders as part of a regular show order, and supplement the balance out of pocket to buy inventory (higher risk, potentially higher return). Going this route, we would have to invest some of our own money, but we would get a lot of inventory at a discount, that we could sell later.

Here's what we did:

* We ordered a Double the Scentsy multipack, first ordering the 11 bars from the orders placed at the party, then ordering the remainder of the bars and the warmers as inventory for ourselves (13 bars and 2 warmers).

* Used our half-price item to order a $44 Scentsy System for only $22 (3 bars and 1 warmer).

* Used our $15 in free product credit to order 3 Scentsy bars.

* Ordered the room spray and car candles as separate items, covering the cost by the customers' payments.

We paid $162 (before taxes) for 30 bars and 3 warmers. 11 of the bars were paid for at $5 each from the orders, so our cost was $107 for 19 bars and 3 warmers (regular retail value would be $155). 20% commission on the $162 total is about $32, so in reality our out-of-pocket cost for the inventory is about $75. If we can sell all that inventory at regular retail prices, we'll more than double our money (our cost $75, retail value $155).

As I explained to my daughter, a 100% profit on a business investment is pretty dang good.

As I also explained to her, it will take some work and some time. So we have to take the long view and be patient.