The furniture industry is experiencing its biggest boom in decades. Amidst a global supply chain disruption, demand for American made furniture has never been greater. In fact, the industry is at a point where there is not enough supply to meet soaring demand. It’s not surprising then that entrepreneurs such as yourself are considering starting furniture businesses. With supply and demand so imbalanced, there is room for new players to meet demand and earn healthy profits. In this article, I will tell you about the important considerations you need to make in order to start a successful furniture business.
What Kind of Furniture Business Will You Have?
The first question you have to ask yourself is what kind of furniture business will you have?The furniture value chain offers many ways to participate in the industry. Broadly, you can either be a manufacturer of furniture, or, sell it through an online or physical store.
The second thing to figure out is what your value proposition is? In other words, what are you giving customers that they cannot get elsewhere, without perhaps having to pay more or having to endure an inferior quality of service? If customers do not experience any value from your business, they will not feel any need to do business with you, or to pay you at a rate which will keep you profitable. The best value is the kind that leaves your customers believing that they have gotten more out of a transaction than you have. The best place to think about a value proposition is by putting yourself in the position of a potential customer and asking what specific pain point they have in the furniture business. For instance, in the market you want to serve, do customers find it difficult to find high-quality Wellington’s leather furniture? Or is there an issue of delivery speeds?
You have to understand where customers are frustrated because it’s by solving customer problems that you can earn and conserve attractive profits. As an entrepreneur, you have to creatively reconfigure elements of the value chain to solve these hard problems. Management guru, Peter Druker, once said that the purpose of a business is to attract and keep customers. When you can solve a specific problem faced by consumers, you will be able to fulfil this purpose.
Your value proposition should be the organizing principle around which everything in the company is done. Every decision, from picking the company name, to selecting items to produce or sell, should be done with this value proposition in mind.
You have to realise that the more competition there is in your business, the harder it is to earn profits. You will need to solve a really hard problem well in order to earn and conserve attractive profits in a competitive market.
Undertake Market Research
In your journey to understand the value chain and your customers, you need to conduct market research. This will help you define how big the market opportunity is, gain conservative estimates of how much it is likely to grow by, and figure out what your target customer looks like. Your portrait of your typical customer needs to be as granular as possible because your business will be built around solving this person’s furniture related problems. How many people are there like this typical customer? What’s their disposable income like? Where do they live? Where can you target ads to them? What defines their tastes? Think of this stage in very concrete terms. Rather than understanding the “market”, you want to understand this typical customer. No business can cater to “everyone”. If it tries to, it dilutes its message and its value gets lost and confused.
You also need to understand why your target customer chooses to use the options they have now, if indeed they have definite problems they need solved. What is preventing your prospective rivals from solving these hard problems? How are companies pricing, distributing, delivering and marketing their furniture? It’s also important to understand what potential competitors are getting right in the industry.
Figure Out the Costs of Doing Business
In order to turn your business into reality, you will need to figure out the costs of doing business. The costs depend on the business model you choose. For instance, a dropshipper has a very different business model to a furniture maker selling their goods online, or a furniture maker selling to retailers. The economics of your business will determine your budget.
Your budget should be designed in such a way that it is based on extremely conservative, if not pessimistic forecasts. No business plan survives first contact with the market. That does not mean business plans are useless. They are important exercises, but it does mean that the more optimistic your forecasts, the greater the risk that you will seek to raise money you cannot return to a lender or shareholders, because your forecasts proved so off. It is better to start from pessimism and deliver beyond expectations, than to start from optimism and fall short.