Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
Jeffrey Ribeiro, 26, started Repti-Ledge in his mother's Toronto basement with $246. He designed a product that today is sold in 53 stores in North America as well as in Germany, Mexico and Britain.
The 26-year-old's "real" job is environmental consulting. But his hobby is raising and breeding geckos, specifically crested geckos. With 24 of the creatures to feed, Mr. Ribeiro was finding it expensive to buy the ledges that support their feeding cups. (Geckos are happiest when they can eat their fruit-based diet on an elevated surface.)
So Mr. Ribeiro designed a ledge of his own on a three-dimensional printer. Through a colleague, he found a Chinese factory that could manufacture the ledges in a cost-effective and environmentally friendly way. They would cost $15 retail, half the price Ribeiro had been paying.
He ordered 100 ledges, kept 24 for himself and posted the rest on the classified advertising site Kijiji. They sold within about 2 weeks. He thought: "Maybe this is a viable business option."
He took the ledges to local pet stores and they agreed. One shop liked the product so much it became a distributor. PetSave Direct, a distributor serving the chains PJ's Pets and Big Al's Pets, also took it on.
"There are 900,000 households in North American that keep reptiles as pets," Mr. Ribeiro says. "And the crested gecko is the fifth most popular reptile."
A social-media marketing campaign led to more sales. He also snagged a $20,000 grant in a business plan competition sponsored by Ignite Capital, and received $45,000 in financing from Futurpreneur Canada. This infusion allowed him to develop 11 more products, including modern looking acrylic cages, gecko food, disposable feeding cups, places for reptiles to hide in their cages and a digital thermometer for temperature control.
He has moved out of the basement into an office, hired a bookkeeper and an intellectual-property lawyer and brought in one of his friends as a partner.
Now Mr. Ribeiro is eyeing the big time, which in his world means PetSmart Inc., the largest pet supply store in North America. The company has expressed some interest, he says.
But he is already manufacturing in batches of 1,000 and selling out within two weeks. He knows the big players need a consistent flow of inventory.
He has talked to venture capitalists but says it is too soon to give up a chunk of the company. On the operational side, he wants to learn about inventory and supply-chain management and wonders what kind of people could help take his company to the next level.
The Challenge: How can Repti-Ledge make the leap into high-volume production and be picked up by big retailers?
THE EXPERTS WEIGH IN
Mr. Ribeiro has a limited niche market, but I admire his entrepreneurship for getting it off the ground. He is doing the right thing by adding distribution of other small-pet products to his line. China makes it all, and many small importers carve out a good living bringing in container lots, taking a good markup and selling to a group of independent pet store retailers. But cracking into PetSmart or Wal-Mart with one item is next to impossible. And even when the little guy gets in, they shave his margins down to where his company is barely profitable.
Getting a patent is very expensive. To patent a cup on a shelf would require something unique in the design. He could possibly register the design, but that will not prevent a competitor from making small changes and calling it Gecko-shelf.
Mario Fallico, partner, Deloitte LLP, Vaughan, Ont.
Mr. Ribeiro should start with an updated business plan, which would include a cash forecast so he will know how much he will need. It would also include his talent. He may not be large enough to hire everyone he needs, so there are outsourcing opportunities for a lot of this – inventory management, order processing, production forecasting, logistics.
In terms of financing, there are federal and provincial programs, and he should make sure he has explored all of those first. Then there are family and friends. And then there are the angel investor networks. When he has settled on his equity, then he can look at who can lend him money relative to that equity. Typically the banks will lend against receivables and a bit against inventory. as well. But he'll need to find a way to finance the initial working capital.
He will have to address his supply chain. Some of the large retailers have very specific requirements for doing business with them. And they would be doing things like purchase orders and invoicing electronically, and would require his computer system to meet their standards. There's a lot to cover off to prepare.
Julie Cole, co-founder of Mabel's Labels Inc., Hamilton, Ont.
After 10 years of selling Mabel's Labels online, we branched out with a retail product. This was a big step, and trying to get our product in stores was a daunting task.
If you don't know something, you must learn it quickly or outsource it. My advice is to outsource. We hired a professional research firm to study the opportunity. Once we understood our product would be viable, we then hired a retail consultant. Consultants understand how supply and demand works, how to create a successful pitch and the nuances of the bargaining process.
Okay, so you've hired a consultant and practised your pitch, and now it's show time. If your pitch is successful, make sure that you have a plan in place to deliver what you've promised. A clear understanding of all of your production, supply, distribution and costing issues will help you accomplish this.
We were pleasantly surprised how receptive retailers were to our product. At first we felt like the "little guys" in this "David and Goliath" relationship, but we quickly learned that we didn't need to be intimidated. Always remember that you have something of value to offer and never lose sight of your goal. If you have a solid offer, retailers will work with you to make your introduction into the market a success.
Conversely, do your part by having a clear understanding of your prospective partner and showing that you understand their customer. Be proud of your business, and if you have an interesting story behind it, don't be afraid to share it.
THREE THINGS THE COMPANY COULD DO NOW
Expand your product line
Continue to introduce new products, which will make it more likely that PetSmart and other big retailers will pick you up.
Improve your supply chain
Some large retailers have very specific requirements for doing business with them.
Look for help
Find a retail consultant to hone your pitch for PetSmart.
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Interviews have been edited and condensed.