April 01, 2014

Is It Right?

Is it Right?

Hard to believe the First quarter of 2014 has ended, taxes have been filed and summer will not come soon enough for many people throughout the US. The second quarter is also one of the slower quarters in terms of candle production. However, now is not the time to slow down it is a key period for companies to develop new business for the Holiday Season and beyond.

One of the challenges business owners face is how fast to grow, what size orders to take and which ones to actually turn down. Turning down orders may seem like an option no business owner would do but in some instances the long term health of a company depends on your ability to determine if the order will actually help you.

If companies or individuals are fortunate to see the next growth of the candle industry in the very near future it is a good time to develop a plan that can not only help support this growth but also not jeopardize the business if things turn bad quickly. In addition if that next “extra large order” comes knocking on your door, is it right to accept it?

For those that were fortunate to remember the tremendous growth of the candle market from 1995-2002 you will recall almost any type of candle developed could find a market and there were some truly remarkable and unique candles sold during this time period. Many candle companies grew with leaps and bounds and along the way built an unsustainable infrastructure to support the organization if any type of reduction in sales occurred, which it did from many. Many added staff too quickly, purchased equipment too early and moved to bigger facilities much too early. When the market started to turn downward many learned very quickly that it is very difficult to reduce any organization and fixed cost in a very short time period.

There are very few things more exciting to a business owner than getting that call from a large potential customer that would be equal to your entire production for the next 3, 4 or more months. The natural inclination for many would be to look at what their current best price is and then possibly discount a little more off that price. The next step is normally to do whatever else may be necessary to ensure they get the business. This may be the right thing to do if the circumstances are correct but in most instances when it is such a big departure from your normal part of business you need to spend a great deal of time assessing if it right for you. The same logic/calculation applies even if you are making candles in your kitchen/basement and in some instances even more factors need to be considered

While the following will not guarantee at the end of the transaction it was in your best interest we hope it will help you make an informed decision:

  • Is the new account going to require you to purchase more molds, equipment and add personnel? This action will require additional funds to be expended and needs to be calculated into the cost of how long or reasonably long they can commit to you. The longer the commitment they can give you the more you can amortize the new cost. There are very few companies that will guarantee purchases past a fairly short time period you should try to get as much of a commitment as they are willing to consider. Be sure to get as clear of an understanding as they can give on the arrangement.
  • If you are a home based business is the size order going to require you to produce some place other then your existing location? If so be sure to know all of your cost including your own time in terms of travel, wear and tear on vehicle and if you have to engage child care or other arrangements.
  • What type of payment terms are they asking for? If it is 60 days then you will need to identify what the cost of carrying that type of receivable. Keep in mind the few vendors giving terms these days rarely are more then 30 days so what ever you sell them in the addition 30 days has to come from somewhere (it is even a great cost if the large customer wants 90 days). Lines of credit, bank loans and other traditional financing all carry cost be sure this is part of the equation. Even if the profit is healthy (which is not always the case if the order is very large) it is still awhile before the amount you make as a profit covers the cost of taking on the new receivable. In addition you are continually going to be building Inventory which requires you to outlay additional funds. The Inventory number can become deceivingly high with labels, glassware, fragrance, wax and then the need to store the items.
  • If the order is an ongoing proposition what if any notice will you receive when they wish to stop purchasing from you? Larger orders will take longer to produce but your customer will want product in a shorter time period so you will constantly be building inventory. If they end the arrangement on very short or no notice you will be “stuck” with a great deal of inventory.
  • What is the financial strength of the customer you will be selling? The worst outcome for any transaction is the company you start to sell to shuts down soon or for that matter anytime you start to sell them. In today's business environment few companies if any can survive a large hit on receivables.
  • If the customer is already purchasing candles try to find out why they are considering changing suppliers. Getting a good answer on this inquiry is going to be the difficult area to access. The information you are able to secure may help you understand if the situation is then going to be right for you. Maybe their current supplier went out of business, or unwilling to make a shape design they desire or they did not like the quality of the product.

While larger and new customer transactions are a part of business everywhere preparing yourself and making sure you have considered all cost is necessary to make sure it is the best decision for your particular situation.

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CHANDLER'S CORNER

Is 5-6% fragrance enough for my candle?

This is always a difficult question to answer in that in most cases only half of the information is available. While many fragrances suppliers have tried to simplify things and identify that it is the right amount the reality is there are different strengths of fragrances. Some manufacturers may purchase for lack of a better term “more concentrated” fragrances where they may only need to add 2-4% to achieve good scent throw. Cheaper fragrances on the market may actually need 7-9%. In addition the fragrance itself may dictate if that percentage is the right load, a Cinnamon is generally very strong and you may be able to use a little less, whereas a lemon may need more to achieve the same scent throw. Fragrances are definitely a case by case issue and should not be shopped on price alone.

WHAT’S NEW

Over the upcoming months you will see more videos launched on the website. Our first one was on how to use the granulated wax. This is a fun and easy way to transition into making candles. This product is good for any size group or age with the proper adult supervision. If you have a store and looking for some types of interactive activity the granulated wax is a great addition.


April 2014

Featured Project:
Summer Sand Candles

With spring upon us, the flower candles and scents will soon be what every one is asking for. The Rose Floater is a nice addition to any outside party or inside party filling your bath tub.

Materials

You will need a "long pointed" object to force the wick through the hole. Once the wick is passed through the bottom of the mold, secure it on top of the mold with a wick bar. If you don't have a wick bar, a popsicle stick will work.

Once the wax gets a film on top; place the wick assembly into the wax. As the wax gets a little harder you may want to add shells and other non-combustible decorations.

Once the wax gets a film on top, place the wick assembly into the wax. As the wax gets a little harder you may want to add shells and other non-combustible decorations.

SOCIAL HOUR

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