Simon,
Maybe I've misread your posts, in which case I am sorry...
What you say is true though and your advice should be listened to, especially for the newbies among us! (Which after nearly 4 years, I class myself as)
I would never use Groupon, I have looked into if it could work for my business and the definitive answer is.... Not a chance....
I would NEVER buy from Groupon either, Men's Health have a section about Groupon on page 147. Makes for a very interesting read from a customer's point of view...
Hi Colin,
I started out in business when I was 20, I’m now 56 and everything I, or my family have has come from my own efforts. I used to deliver milk for my father-in-law and decided to start a milk round of my own. My father-in-law sold me the milk at a profit margin of half a pence, even though he was on 4.5p. I had to tolerate this as you couldn’t buy milk from a wholesaler until you had 20 gallons per day. So I built my round up before going to work for him at 3.30 in the morning.
The .5p profit was my Groupon. I was losing money on every pint of milk I delivered but made a few quid from extras, eggs, potatoes etc, also not unlike groupon. I knew that if I kept going I’d soon get my 20 gallons and my losses would turn to profits, which took a year of graft to achieve, but I got there. In the meantime all of my living costs were covered by my wages from my job so I could afford to take the losses. I ended up with two round selling 200 gallons a day.
The reason it was possible was that people needed milk every day, so once you got a customer you had them for good and that is what made my milk groupon work. The problem with carpet cleaning is that the repeat time is 18 months – two years before you may see that customer again. I say MAY because even when you do a fantastic job, some people don’t come back, forget who you are, go for someone cheaper etc and so they are never really your customer. The business conundrum in doing Groupon is: Can I afford to take the losses? Will I be able to blunt those losses by selling extras, add ons? And will these people come back to me next time around? These questions define the risk you are taking and that is why in the vast majority of cases groupon isn’t a good idea.
I used to be a consultant for the Prince’s Trust and would help start up businesses in the first few months. Astonishingly all of my people, hairdressers, window cleaners, undertakers, Mobile DJ service etc couldn’t tell me what their breakeven point was, the point at which you have neither lost nor made money. If you don’t know that you cannot make any decisions about your business, at least not good ones. I developed a very easy to use Budgeting system on an Excel spreadsheet that updates automatically as you change or add a value which gave the vision they needed to see their sales targets and make good buying decisions. If anyone wants a copy email me:
simon@gerrardscarpetcleaners.co.uk I, just out of interest looked at ours from a Groupon point of view and saw that we would need to subsidise every groupon job by a lot, or would have to do an awful lot of up selling to make the figures stack up. The decision was an easy one, not least because of the repeat time and the fact you really can’t answer 'yes' to the really poignant question: Will these people come back to me next time around? In my milk groupon scenario was a very certain 'Yes' and formed the basis of everything I have today.
Groupon is an investment that may pay off in the long run, but certainly isn't, in my view, a money making scheme in the short term. Indeed, it could be a recipe for disaster, especially for the less experienced.
Simon