Topic: Entrepreneur shout out! - Business Ideas & Help

[Stogi]

************NEED SOME OPINIONS***********

I've been an entrepreneur since the time I was selling lemonade on the street corner, and I've been a business moogle since the time I thought to use the smaller children in my neighborhood to run it while I sat back and raked in the profits.

Now I'm 22 and have been thinking about what exactly my first step should be. And after reading "What Would Google Do?" (great book), among other things, I think I've stumbled onto a feasible idea.

In my city, the University houses the most jobs. There are bars, cafes, shops and restaurants that line the street, but no hookah lounges. Inversely, a city two hours from me with another university and pretty much the same economical landscape have two hookah lounges, along with bars, cafes, shops and restaurants. Now my idea isn't just to balance the equation. Instead, I'd like to try something disruptive, something that has never been done before: A business run by consumers or a business club.

Now all hookah lounges do one thing: sell you hookahs. As silly as this sounds, I think they are doing it all wrong. Instead, I think they should give you the hookah, in appliance that you pay to stick around.

You see, my hookah lounge would charge a membership fee and as a member you not only get to smoke as much hookah and drink as much tea as you would like, but you would also get to be apart of a community and weigh in on a variety of issues regarding the lounge itself. For example, our club could host a fundraiser where an amount of the proceeds are sent to a cause of our choosing. I would allow my customers to actively shape my lounge with their input and ideas. I would value their ideas. The idea is to give them a platform and a setting for them to pursue their own connections and ambitions.

We could have debates, live music, and art shows. We could watch soccer, play videogames, and hell, even throw birthday parties.

And for those that don't want to join my club, I would offer daily passes at a fair price. Furthermore, if you forgo paying the membership fee but end up coming to the club enough to have paid for one, I will make you a member.

As an incentive to bring further members into the community, I would setup incentive programs; programs that the club itself make more enticing through gifts and the like. For instance, imagine an artist donating his art to our lounge as the incentive. The person who brings in the most people gets to own that art.

I would setup an online community in sites like facebook and myspace in order to rally the troops and keep them integrated and caring, as well as giving them another avenue to share their ideas.

Basically, I'd like to start a community driven club that one day becomes bigger than itself, while still being profitable, all around the central theme that we all love hookah and love people.

Do you think this could work?

[Nick DiMola]

I think this could work, but ultimately it's going to depend on your overhead. How much is rent? How much are supplies? How much should you pay staff? Does your business comply with all standards issued by the federal and state governments?

If you have some start up capital and a place to get word of your shop out you can probably make it happen.

What I would figure out is maximum cost of the hookah. If you were at max capacity with everyone smoking non-stop during business hours, would you still be making money? This is probably the most important point. If you can outpace cost with membership fees monthly you should be doing pretty well.

[Pale]

[BeautifulShy]

I was wondering when somebody was going to notice Stogi's spelling error.

In all seriousness Mr. Jack has everything covered.

[UltimatePartyBear]

Thank goodness for Pale.  I've been too busy to even attempt it, and I suck at such things, anyway.

[Nick DiMola]

Thank goodness for Pale.  I've been too busy to even attempt it, and I suck at such things, anyway.

True that, that picture is priceless.

[Caliban]

What's a hookah?

[Pale]

Something that he is using to slyly get around something that is against the rules of the forums (and country).  I am letting it go in exchange for the fact that I got to mock him a little bit. =P

[Caliban]

I see.

[Stogi]

The good thing about hookahs is that they are cheap to make and last for an hour.

But ok.....let's list this out

FIXED COST PER MONTH

Rent: 5000/month
Utilities: 100/month
Supplies: 50/month
Insurance: 50/month
Cost of staff: 9000/month
Total cost: 14600/month
---------------------------------------------------------------

PROFIT MARGIN
Wholesale cost of product: $0.25 (for both tea and hookah)
Sale price: $10/day pass $150/month pass $600/6 month pass $1000/year pass (TENTATIVE)

Customer break even point:
Per day: 40
Per month: 600
Per 6 months: 2400
Per year: 4000

Gross Margin: 85% (at worst)
----------------------------------------------------

BREAK EVEN POINT

Fixed cost: 175200/year

(variable cost included)
Yearly rate: 207 people/year
6 month rate: 346 people/year*
Monthly rate: 1375 people/year*
Daily rate: 20612 people/year*

*These can be returning customers
-------------------------------------------------------------------------------

ANALYSIS

Looking at the numbers, it seems daunting. However, hometown cafe's produce enough customers to easily quadruple the daily rate I would need for the whole year.

Honestly, the only problem I'm seeing is if it gets TOO popular. I'd then have to honor those with the longest of passes first, but that would immediately build a hierarchy and I don't want that....even if it could be good for business....

Making it more of a selective club isn't such a bad idea though. It would make those that I turn away wonder what is so special....

Anyway, what do you think Mr.Jack?

I was wondering when somebody was going to notice Stogi's spelling error.

What spelling error?

Something that he is using to slyly get around something that is against the rules of the forums (and country).  I am letting it go in exchange for the fact that I got to mock him a little bit. =P

Dude...seriously...I didn't know you too ignorant to know how to use google, but Hookahs are strictly tobacco. We've talked about tobacco and alcohol several times on this forum already with no repercussions. Hell, even Maverick has a pack as in avatar.

Furthermore, this isn't even about hookahs as much as it is a new business model.

[Pale]

I was going to let it go, but Hookah's are not strictly tobacco, they are often used for more illegal substances.  The fact that they are used for tobacco is how they get away with being sold and used at places like what you were describing.

So let me dude...seriously... you.

It's not like a locked thread or anything man.. i just posted a picture of a business moogle.

[BeautifulShy]

At the top of the page where it says Business Moogle. I think you mean Mogul. A Moogle is from the Final Fantasy series.
Hence why Pale posted a Moogle in a business suit.

[Pale]

Also, before I leave and continue allowing this thread to live and NOT locking it....

It's not like your past posting history doesn't make people question why you would be talking about such a device or anything. =P

[Stogi]

At the top of the page where it says Business Moogle. I think you mean Mogul. A Moogle is from the Final Fantasy series.
Hence why Pale posted a Moogle in a business suit.

No ****? hahaha I've never played FF before, but that's actually pretty clever.

Also, before I leave and continue allowing this thread to live and NOT locking it....

It's not like your past posting history doesn't make people question why you would be talking about such a device or anything. =P

PM'd

[Nick DiMola]

It looks like you have a good grasp of what it takes to get going, however I'd be slightly concerned with the membership costs. $150 a month seems prohibitively expensive considering that the demographic for hookah probably skews younger (read: poorer). The daily rate seemed reasonable and the 6 month rate should probably be closer to a 12 month rate.

Also, if you are doing very well and getting too much business, that's a pretty good sign that you should expand and open a second shop

Naturally, members should have access to either if that were to happen. Which also brings into question how you will manage members/sales. You'll probably need a P.O.S. system of some sort in order to track all your sales and members and those things aren't cheap either and must be figured into start up cost.

[Stogi]

The pricing is very tentative.

As for opening up a second shop, that would be fantastic but the whole idea is about community. So unless it is in the same building, I'd have to figure out a way to conference between both of them. (which isn't a bad position to be in)

I was thinking about how I would track the P.O.S and I'm not too sure right now. I was thinking about some automated system that involved cards for anything other than a daily sale (but still keeps track of those users somehow). And it's ok if isn't cheap just as long as it's effective and I don't have to replace it. Do you have any suggestions? I only need one.

Also, have you thought about what business you would like to go into?

[BlackNMild2k1]

I've never been inside a hookah shop, but are your hookas really gonna only cost $0.25 wholesale & last for an hour?
Are they made of plastic and eventually melt?

I personally think that in an economy like this, membership with an all you can lounge and smoke tobacco buffet might be a bad idea. it might work if all things go your way, like selection, crowd and word of mouth, but I just think you would have a hard time recouping your cost from a small crowd that just hangs out all day long.

With the other businesses that have already proven themselves successful, they probably had a similar mentality when going into the business, but then realized that you need a product with a very high mark up value to sell to not only break even but to make a healthy profit. Thats where your tobacco and Hookas come in.

You can always rent out your hookas, but why not have a "Pro" shop with expensive marked up hand blown Glass Hookas and a large assortment of tobacco flavors that the customers can purchase to take home. Also selling tubes and bowls for your hookas so that someone can full customize their hooka to their liking.

I like the idea and the vision for how you want it to work, but the other businesses don't work like that for a reason. Now once you get things up and running and have a very healthy customer base, you could always offer back room memberships to get heavily discounted items and access to membership exclusive perks (like special blend tobacco & Free hooka accessories or after hours parties & private party hosting)

[Stogi]

Ok let me start at the beginning.

I've never been inside a hookah shop, but are your hookas really gonna only cost $0.25 wholesale & last for an hour?
Are they made of plastic and eventually melt?

Buying wholesale tobacco, coals, foil, and tea is very inexpensive. Furthermore, packing a hookah head takes very little tobacco and due the molasses the provides the flavor, it smokes slowly for a long time. And hookahs themselves are meant to last for a long, long time. That's why the head is made of clay, the pipe is made of metal, and the chamber is made of glass. I plan on buying the very best hookahs and having the widest selection of premium tobacco imported from Egypt. Make no mistake, this place will be THE place for hookah officianados.

I personally think that in an economy like this, membership with an all you can lounge and smoke tobacco buffet might be a bad idea. it might work if all things go your way, like selection, crowd and word of mouth, but I just think you would have a hard time recouping your cost from a small crowd that just hangs out all day long.

That's exactly what I fear. What if it won't take off as a club? As a hookah parlor, I'm sure I'll find a niche (and I can't lose money from customers hanging out all day), but as a club? That's where I'll need serious help.

Still as a lounge, I can at least start to build a base by inviting them to participate in belly dances, fundraisers, art festivals, sports, ect. ect.

With the other businesses that have already proven themselves successful, they probably had a similar mentality when going into the business, but then realized that you need a product with a very high mark up value to sell to not only break even but to make a healthy profit. Thats where your tobacco and Hookas come in.

Right. I heard in food business you need at least a 66% mark up or a 33% variable cost. I plan to get no less than 80%.

You can always rent out your hookas, but why not have a "Pro" shop with expensive marked up hand blown Glass Hookas and a large assortment of tobacco flavors that the customers can purchase to take home. Also selling tubes and bowls for your hookas so that someone can full customize their hooka to their liking

I will not sell any of my hookahs, tobacco, and coals. It's not because it's a bad idea, but it's because of the principle. I want them in the lounge to study, chill, eat, get drunk, and whatever else they would do while smoking hookah.

I want them when they go home to smoke hookah to be like "This sucks. Let's see who's chillin at the club. Oh and don't forget the bottle."

I like the idea and the vision for how you want it to work, but the other businesses don't work like that for a reason. Now once you get things up and running and have a very healthy customer base, you could always offer back room memberships to get heavily discounted items and access to membership exclusive perks (like special blend tobacco & Free hooka accessories or after hours parties & private party hosting)

That's what it might have to be. And I know businesses don't work like that because most businesses want your money then want you to leave as soon as possible to free some space.

[ThePerm]

ahhh Hookah, i never wanted to take up smoking. To me if you get addicted to cigarettes your screwed. However Hookah..you smoke , it usually feels a lot lighter than a cigarette, and unless you buy your own hookah your not likely to form a habit. Visiting the Hookah lounge every two months or so sounds like a plan. Make sure to sell candy and soda though. Also supply free cashews and pop corn. I'm an art major and one of the cool things about the Hookah is that it ends up in a crapload of paintings.  I would include these paintings in the lounge
http://www.1st-art-gallery.com/thumbnail/171735/1/Preparing-The-Hookah.jpg
http://www.thehookah.com/images/history/painting3.jpg
http://www.thehookah.com/history/hookah_history_5.htm
http://cowshell.com/uploads/_sketches/caterpillar.jpg
http://minimonimania.files.wordpress.com/2008/03/alice15a.gif

[Stogi]

****UPDATE****

My business plan looks barely like it did before, but I think it's much better.

I'm still going to charge a flat rate to smoke all day, but my membership idea won't come into play unless I later conclude its a good idea. For now, I'm just going to serve hookah and beverages (alcoholic and non-alcoholic) and provide impeccable service reminiscent of the Arab world. I'm also going to sell hookah tobacco, coals and hookah pipes for retail to compete with a nearby market that sells hookah products (my only competitor).

This will be a solid step in building our brand and gaining support until we later expand and add a menu.

In the last couple of weeks, I've found a partner to completely fund the expedition. We have an appointment next week with his family lawyer. This will get the ball rolling....

Wish me luck!

BTW I was wondering, what would be the best month to open up shop to the students? I was thinking early March. Why? Because on some days it'll be nice enough to generate alot of foot traffic, but also because it'll be cold enough to make all those smokers who are forced to smoke outside of regular bars to consider a switch.

[BlackNMild2k1]

Whats the earliest you can open?

[Stogi]

It all depends on how long it takes to get a liquor and tobacco license and a stamp of approval from the city to bypass the no smoking ordinance. It's going to be an ordeal. I wouldn't be surprised if it took two months.

Other than that, we have a bit of remodeling we would need to do, interior decorating, shipping in the inventory, and hiring and training our staff. All of which can't be done unless we know for sure we can open up shop, but could be done a month.

My guess would be December at the earliest.

[ShyGuy]

My friend Marcus almost went through with a similar plan. He was "clean", but he had a lot of middle eastern friends which gave him the idea.

[ThePerm]

Advertise, become friends with the photocopy machine, find all the message boards in town, put stuff in your local paper

[Stogi]

Marketing won't be a problem. Just opening a smoking lounge will be news enough to get me in city and university paper. We have hook ups on the radio as well.

My friend Marcus almost went through with a similar plan. He was "clean", but he had a lot of middle eastern friends which gave him the idea.

How's it going with him?