small business startup: video game/computer wholesalers

[9mmCensor]

Ok, 2 friends and I are looking at setting up a videogame store / video game playing place (pc and consoles).

None of us have an money to start it with, so we are looking at bank loans and grants for most of the start up capital and maybe some cash from family.

So right now, I am working on the business plan and estimating costs. and now I have a few questions.

How is the best way to setup a business between three people?

What suppliers should I be getting quotes from for lots of computer hardware, consoles and games?

[nutsackninja]

I researched this alot trust me unless you already have a ton of cash there isn't money in this.

The markup on computers in basically nil, the markup on consoles is even worse. Most stores lose money on consoles in hopes of getting customers to do trade-ins on their used games.

Its an extremely completive business, not saying you can't do it but probably not the best type of business you want to start off with.

[red120]

Don't set up business trading commodities unless you have some kind of competitive advantage.

[Just Confused]

I don't know much about the video game business, but I do know a bit about business partners and human nature when money is involved. You may have 2 friends today, but if you don't have a clear written agreement about your proposed partnership you won't be friends as soon as you have your first challenge in the business.

Make sure the agreement is written on paper and clearly discusses
1/ Who is responsible for what?
Does one individual have to do all the work in a certain function? Or is always split 3 ways? Some jobs are best if one person does them. Others need to be shared. You have identified all the functions to be done in your business plan... right?

2/ How decisions will be made?
Unanimous? Majority of 2? Does someone have overidding power? What kinds of decisions can be made with this method? What decisions can be made on-the-spot by one individual?

3/ Who owns the business?
Is it based on % of the contributed money that is put up to start? How you do you account for sweat equity by one or all in start up activities. Do you all work equally? How will that be measured? What about those family members that just put in seed capital?

4/ How the costs will be shared? (and the future earnings)
Split 3 ways equally? based on ownership? Make sure you know who is on the hook for any catastrophic expense that may arise? You will need to put more money into the business from time to time. How do you share the burden to cover operating expenses going forward?

5/ Who has signing authority at the bank?
Can one or two people walk off with any loose cash? Who can sign contracts and other commitments on behalf of the business?

6/ When and how can earnings be withdrawn from the enterprise?
How does a partner get out of the business? Will you accept new partners? How and at what price?

That's all I can recall without research. You can probably get away without a lawyer. There are people in this forum that can probably point you to sites or books that are written by lawyers that cover this kind of stuff.

I know I was frustrated when I was in partnerships because it seems all this stuff just slowed me down. That's why I'm on my own. But I recognize it is essential because nobody wants to pay for my mistakes. I'm not always right but it's pretty clear who is on the hook for the mistakes! (and the profits!)

However, a committed business partner and a good written agreement allows you to share the pains and thrills of being in business together.

[wong8egg]

What suppliers should I be getting quotes from for lots of computer hardware, consoles and games?

This statement alone tells me that you and your friends aren't ready yet. Do your own research and I can tell you people don't share their business contacts easily unless you have something to trade with.

And does take "Just Confused" comment into your account. It is really true.

[9mmCensor]

Thanks for all the advice everyone, I appreciate the helping hand, but I didn't ask on advice on how to start or run a business, nor do I need help with that, looks like we are going to run as a partnership for the first bit for simplicity sake, and we may incorporate later.

I have not shared our plans, other than what was needed to try to discover the information I was seeking, so while it may not seem to be solid now, realize that you don't know our situation or business plan, and your critiques are not based on all the necessary data to come to an informed decision.

[9mmCensor]

This statement alone tells me that you and your friends aren't ready yet. Do your own research and I can tell you people don't share their business contacts easily unless you have something to trade with.

And does take "Just Confused" comment into your account. It is really true.
I am doing my research. If people who know this sort of thing want to PM me, they are welcome to if they dont want to openly share, but I know I am not competing with anyone here.

Don't set up business trading commodities unless you have some kind of competitive advantage.
And your error is assuming that I do not.

I researched this alot trust me unless you already have a ton of cash there isn't money in this.

The markup on computers in basically nil, the markup on consoles is even worse. Most stores lose money on consoles in hopes of getting customers to do trade-ins on their used games.

Its an extremely completive business, not saying you can't do it but probably not the best type of business you want to start off with.
I know the margins on this stuff are low. Thats why it would not be our only source of revenue.

[Gee]

Well, you have been warned.

There are tonnes of computer suppliers. But there are only a few console suppliers. For the consoles, you need to commit to quotas. The biggest one that everyone should know is Ingram Micro. However, they only concentrate on the big box movers. Best Buy, Future Shop, Walmart etc.

I know a few of the smaller ones, but that will be a PM message.

[red120]

What suppliers should I be getting quotes from for lots of computer hardware, consoles and games?

And your error is assuming that I do not.
Right. Totally prepared.

Good luck there.

[Just Confused]

How is the best way to setup a business between three people?


I appreciate the helping hand, but I didn't ask on advice on how to start or run a business

??

[stevelam]

well this business has already started on a path of failure! nothing like snippy kids getting riled up after being given a reality check.

[9mmCensor]

Right. Totally prepared.

Good luck there.
Thanks for the well wishes. I am not totally prepared. I am working on that though.

??
I was looking for other peoples perspective on a partnership or corparation.

Well, you have been warned.

There are tonnes of computer suppliers. But there are only a few console suppliers. For the consoles, you need to commit to quotas. The biggest one that everyone should know is Ingram Micro. However, they only concentrate on the big box movers. Best Buy, Future Shop, Walmart etc.

I know a few of the smaller ones, but that will be a PM message.
Thanks. This is what I was looking for.

well this business has already started on a path of failure! nothing like snippy kids getting riled up after being given a reality check.
Considering how little you know about my business plan, you stating that I am a snippy kid destined for entrepreneurial failure does a remarkable job at illustrating your ignorance. You may be right that this business may fail, but I can say that knowing the complete picture, with all the angles of revenue, the location and market conditions, that you do not know about.

[toalan]

You can no make inroads selling retail, you gotta have an angle. In retail there is no easy to add value to the product you are selling, you are just like every other guy who buys in bulk and puts the stuff on the shelves.

Back in the summer of 98 me and my bud started a small computer store, rent was dirt cheap and it was month to month, also we did not carry much inventory. What inventory we did carry was the stuff we actually wanted for ourselves when the business went under. Margins for computer hardware is like 3%, the goverment makes more money off each sale than you do. Mostly that summer was spent palying starcraft with my buds at the store, looking back it was quite fun and enjoyable, but not profitable.

I learned a very important lesson, in whatever you do you either need a competitive advantage, an angle that no one else is working, or a great opportunity to add value.

[Jon Lai]

You can no make inroads selling retail, you gotta have an angle. In retail there is no easy to add value to the product you are selling, you are just like every other guy who buys in bulk and puts the stuff on the shelves.

Back in the summer of 98 me and my bud started a small computer store, rent was dirt cheap and it was month to month, also we did not carry much inventory. What inventory we did carry was the stuff we actually wanted for ourselves when the business went under. Margins for computer hardware is like 3%, the goverment makes more money off each sale than you do. Mostly that summer was spent palying starcraft with my buds at the store, looking back it was quite fun and enjoyable, but not profitable.

I learned a very important lesson, in whatever you do you either need a competitive advantage, an angle that no one else is working, or a great opportunity to add value.

That's all the info OP needs ;)

[poppa]

just ask yourself "Why would consumers come to my store to buy video games and/or computer components?" Keep in mind if you are in the GTA, it's already saturated and dominated by big players with connections to the East (China).

[riskit]

Start Your Own Computer Business (http://www.amazon.ca/Start-Your-Own-Computer-Business/dp/0972380108/ref=sr_11_1/702-0064577-2772040?ie=UTF8&qid=1189973709&sr=11-1)

[van]

From experience, I would concentrate on the services rather then sales. Repair and consulting, and maybe hosting LAN parties (BYO) only if well organized.

As mensioned, the sales margins on computer hardware and consoles are close to zero, so it would be stupid to place any effort there.