Talked to state farm. I can get 1 million in coverage for $300 a year. Talking to another agency this week to get a second quote and see if my home insurance policy covers in-home businesses. Seeing the SCORE Counselor again on the 17th. I'll give an update after.

As mentioned in the above post, the industry average is around 146% (12.21% monthly). Given these numbers, my rates would be as follows:

MacBook Air 11.6'' 2gb (retail 1,000) my rate --> $121.66 monthly

MacBook Air 11.6'' 4gb (retail 1,199.99) my rate --> $145.99 monthly

MacBook Air 13.3'' 128gb HD (retail 1,299.99) my rate --> $158.16 monthly

MacBook Air 13.3'' 256gb HD (retail 1,599.99) my rate --> $194.66 monthly

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MacBook Pro 13.3'' i5 / 500gb HD (retail 1,199.99) my rate --> $145.99

MacBook Pro 13.3'' i7 / 750gb HD (retail 1,499.99) my rate --> $182.49

MacBook Pro 15.4'' i5 / 500gb HD (retail 1,799.99) my rate --> $218.99

MacBook Pro 15.4'' i5 / 750gb HD (retail 2,199.99) my rate --> $267.66

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Chances are I would only carry the cheaper of the two models. Not many, if any at all would NEED a faster processor or larger hard drive for the small amount of time they'll be renting the item from me.


edit

Forgot to mention...

If a customer pays cash upfront for 'x' period, they get a discount on rental rates:

3 month advance --> save 5%
6 month advance --> save 10%
1 year advance --> save 20%

example: A 6 month advance on a macbook pro for 218.99 would be reduced to 197.09 a month for a total savings of $131.40

--------------

Memberships

Been thinking about having people pay $200 a year and they get 20% off all rentals and same-day delivery! (essentially a 24hr service) NO competitor that I know of offers this. The membership however does not exclude them from late fees and other penalties.

---------------

Discounts to following groups:

10% discount to all military, police, fire and EMT customers
5% discount to students with GPA of 3.1 or higher

So basically, any of these guys that qualify for the discount program AND are members will be getting 25 to 30% off my services!. Not bad. edit

seeing business counselor tomorrow. Always a good experience. edit

Talked to counselors and attorney this week. Things moving in right direction. Still have to figure out this whole mess about my insurance. Liability isn't the problem, it's whether or not I can get insurance to cover stolen/ damaged property.

The Lawyer was a really cool guy and he seemed to know his stuff which is a major plus!. The price was also under what I had initially expected, but for 750.00 I can get the lease agreement drafted.

There are some questions that remain:

1. WHAT percentage of consumers will steal from me?

2. Will they pay the price I'm asking for?

3. What's the average number of months a customer will use my products?

Going back to score tuesday to discuss the finances .

edit

I think this is a great idea. Are you looking for partners edit

I'm open to the possibility . Do you have experience in the RTO industry or capital?

Honestly though, I could probably use an investor more than a partner. After this coming Tuesday I should have a more detailed list of my start up costs. My marketing plan needs to be fleshed out more as well.

I don't have a launch date in mind yet, but I aim to be up and running before years end.

edit

I'm open to the possibility . Do you have experience in the RTO industry or capital?

Honestly though, I could probably use an investor more than a partner. After this coming Tuesday I should have a more detailed list of my start up costs. My marketing plan needs to be fleshed out more as well.

I don't have a launch date in mind yet, but I aim to be up and running before years end.

edit

I'm open to the possibility . Do you have experience in the RTO industry or capital?

Honestly though, I could probably use an investor more than a partner. After this coming Tuesday I should have a more detailed list of my start up costs. My marketing plan needs to be fleshed out more as well.

I don't have a launch date in mind yet, but I aim to be up and running before years end.

edit

This is pretty good idea. How do you see yourself making money edit

Money is made through the monthly payments, late fees, and in extreme cases maybe lawsuits. edit

I'm not familiar with the RTO model as a consumer or firm, but at what point does a renter actually own the laptop? Rent-to-own isn't perpetual, is it? edit

The way I intend on addressing that issues is that whatever a renter pays for a laptop or tablet, that "x" amount of money they spent on rent will be deducted from their optional buy out price.

example: You rent a macbook air from me for $121.66 a month and you have it rented for say 4 months. Well you spent $486.64. What I do is then subtract the price of the laptop, in this case 1,000.00 from the amount you paid in rent and offer to sell it to you for the difference ( $ 513.36) .

So at the end of your 4 month lease, you can either buy it, continue to lease it, or return it.

If a renter decides to continue leasing the laptop and the monthly payments exceed the price of the item, I'll let them keep it and give them store credit for the difference.

example: you lease a macbook air for 9 months for a total of 1094.94 for an item that only costs 1,000. Well I give you the laptop and give you store credit for $94.94 on your next visit.

--------------

NO ONE else does that. Why, I don't know.

I still have a lot of work to do so I need to figure out if those ideas are even feasible given the risk involved in this type of business.





edit

The way I intend on addressing that issues is that whatever a renter pays for a laptop or tablet, that "x" amount of money they spent on rent will be deducted from their optional buy out price.

example: You rent a macbook air from me for $121.66 a month and you have it rented for say 4 months. Well you spent $486.64. What I do is then subtract the price of the laptop, in this case 1,000.00 from the amount you paid in rent and offer to sell it to you for the difference ( $ 513.36) .

So at the end of your 4 month lease, you can either buy it, continue to lease it, or return it.

If a renter decides to continue leasing the laptop and the monthly payments exceed the price of the item, I'll let them keep it and give them store credit for the difference.

example: you lease a macbook air for 9 months for a total of 1094.94 for an item that only costs 1,000. Well I give you the laptop and give you store credit for $94.94 on your next visit.

--------------

NO ONE else does that. Why, I don't know.

I still have a lot of work to do so I need to figure out if those ideas are even feasible given the risk involved in this type of business.





edit

WHY ARE MY POSTS SHOWING UP MORE THAN ONCE?

ADMINS!!, FIX THIS. WHY CANT I DELETE MY OWN POSTS!? edit

So at the end of your 4 month lease, you can either buy it, continue to lease it, or return it.

If a renter decides to continue leasing the laptop and the monthly payments exceed the price of the item, I'll let them keep it and give them store credit for the difference.

example: you lease a macbook air for 9 months for a total of 1094.94 for an item that only costs 1,000. Well I give you the laptop and give you store credit for $94.94 on your next visit.

.......

How will you make a profit if you do this? edit

Because the product would be marked up of course. edit

But thanks for bringing that to my attention. That slipped my mind. I know aarons charges 146% annual interest and I know they mark up their merchandise, I just don't know how much. edit

There is a ton of problems I can see with this business model. I am not one to crush someones dream to be an entrepreneur but as someone who has started 3 successful businesses from the ground up I do have some experience through trial and error and I see some issues that can cause you a lot of headaches.

1: You need $100,000 just to buy 100 computers.
2: When you throw in site development, insurance (if you can get insurance for this which I am pretty sure you can't), marketing ... etc. you are looking at least a $200,000 investment.
3. What's to stop someone from renting a computer, canceling the credit card they used to sign up and keeping it ... or breaking the computer accidentally and then canceling the card and not paying for the damage... etc. You will have a huge problem qualifying your renters... and if they do qualify, they would be able to buy it themselves, why pay so much more to rent?

If you can work through all these problems and are able to get the funding to start this venture ... more power to you, I wish you nothing but success.

Good Luck edit

I wont be buying 100 computers at first and secondly not all my merchandise will be 1,000 dollars. In fact many of the tablets I'll be buying will be far under that price. My marketing budget wont be anywhere near 200,000... a lot of it will be from social media and small-time county news papers.

The papers will allow me to print a business card sized ad for about 36.00 a week, but I can choose to print bi-weekly or monthly if I want to.

I'll be doing this part time until the business grows.

And yes, I do expect losses from customers stealing (or paying late) from me. That's just the way it is, however, I expect these losses to be no higher than 20%.

The contract will state their responsibilities and what will happen to them if they screw up. If they were to take my stuff and then cancel the payment then I would demand the product back immediately or sue them. In the state of Alabama we can take your house depending on the situation. Qualifying shouldn't be that hard, the standards are pretty low to begin with for these types of customers. edit

As long as you know your market, and you have a plan for your worst case scenarios... you seem like you will do well. You are doing the right thing by starting small and growing the business organically. Just make sure no matter how inexpensive the advertising is, know your target audience. It looks like you know what you are doing, I wish you the best of luck and lots of success with this venture if you decide to get it off the ground. edit

If you dont mind me asking, what businesses did you start. PM me if you want. I'm curious to know more. Thanks. edit

I first started a marketing company back in the 90's New Age Marketing, Inc. my second business was a transportation carrier company Carrier One, Inc. which I started in 2003, sold it in 2005 and opened my next and most successful company to date, Interglobe, Inc. which I built into $6.5M per year revenue with 57 employees. I sold that in July of 2008. I am now building a Video Production and Internet Marketing company Cinetell, Inc. We just partnered up with a Web/IT Development company called HeyMaan and are in the process of launching a new business model which will focus on providing fully-integrated marketing solutions for small and mid-sized internet businesses. edit

Very impressive!. Glad to have you on my thread :) . Would like to hear more input from you as my business plan develops. edit

Add me as a partner, and PM me with questions. I would love to help you out. edit

Nick, I'm trying to forecast my start up costs for 3yrs out, but I'm having trouble with some of the items like legal expenses, business cards/flyers, gas, and other variable costs.

These things need to be factored but I don't know how to do that. How can I accurately estimate these kinds of things?

thanks edit

Hey Nathan,

I personally don't believe that you can or should forecast costs 3 years. Many people will have a different opinion on this, but this is mine. I don't necessarily do business by the standard way. In my opinion, forecasting expanses 3 years is un-neccesary because it will never be right. You barely know where your business will be a year from now let alone 3 years. It can't be done. Especially in the Internet/Software/Technology space, tech is moving so fast right now, no one knows what it will be in 3 years time. How will the economy effect the dollar, or the inflation?

Legal expenses can not be forecasted accurately, and small expenses like gas, business cards etc. are not worth your time ... spend that time thinking about your marketing plan, how to get customers, how to MAKE money not SPEND money. If you are making a huge profit, does it really matter how much you will spend on business cards?

These are the little unnecessary things that some people focus on that eat up a big chunk of their time, and they forget to focus on the important things. If you have studied the market, have a plan how to attract the customers and how to protect yourself from theft and other things we discussed, and this is something you want to do, JUST DO IT! Start small, get 1-5 computers first. Test out your plan, your marketing you business. See how it works. If you rent them all out, and you have no problems with payments, theft etc. Get 5-10 more, do the same thing. Grow it organically. You will give yourself the best chance to succeed without learning an expensive lesson. I call it "Stupid Tax". You want to avoid that. Do it this way, and ease yourself into it. Who knows, you might find out that you really don't like this business in 6 months. And you won't have a $25,000 loan to pay back and 30 computers to chase back. This is what I would do.

Don't bother with the small stuff. Remember, you DON'T have to do business as they have been doing business for the past 50 years, that is the past. We are in a new age now. Things are different. The internet changes everything. You can work from home in your slippers and be making a million dollars per year. You don't need meetings, expensive suits, huge offices, employees or a BUSINESS PLAN ... Ohh no, if you don't have the business plan, if you don't have the forecast of your profits and losses for the next 5 years you will fail!!! Bull shit, don't fall for that old school way of thinking. My best advice is go out and get the book "ReWork" by 37 Signals... Read that, it's an easy 2 hour read, it will really change the way you see business. GL edit

Great post! Thanks . I'll go to the bookstore and take a look at that book. The only real reason I want to forecast is because I don't want to be in business one year and out the next becuase I ran out of cash. As they say " fail to plan, plan to fail" . But I agree, I need to focus more on how to make money through effective marketing and keeping costs down.

I go back to the counselor next week. My question is, and something I'm currently working on is " how much product do I need to at least breakeven on recurring monthly costs?" edit

Hi Nathan: Have you seen SCORE's financial projection worksheet?

edit

No but ill take a look. Thanks. edit

Nothing to really report after my meeting today. We talked about making a P&L Statement (income statement) and balance sheet that I'm supposed to project 3yrs out based on the amount of growth I expect to achieve.

Nick, I know you're not big on the plans, but my mentor is like 50+ and I might as well humor him and do what he tells me. It may not be necessary but I don't see that it could hinder me in any way.

I have another meeting next week once I get these statements made.

Hopefully by then I'll have a closer idea of how much capital I'll really need. edit

Hey Nathan,

You can never go wrong with a good plan. I actually do believe that you should have plans and goals, I just don't think that certain things are worth loosing a lot of time over by trying to over-plan and over-analyze. Just keep doing what you are doing, you are on the right track. You are being smart and taking it slow. edit

Another thing, how do I find out if customers are willing (or able) to pay the price I wish to charge? What are some ways to finding this out besides standing on a street corner taking a poll? edit

need input.. edit

Without doing a focus group or some type of a poll, I guess you can see what these things are renting for in the brick and mortar rent to own places or find out what other computers competitors are rending out for what price and adjust the price higher for Apple computers. In my case I usually would research and find out the industry standard price point on a product, find out the lowest priced competitors and the highest priced competitors. See what the difference was between both, and set my price point accordingly to what my business had to offer compared to the competition. I believe that you get what you pay for, so don't think that lower price is the only way you will be able to compete with the competition. You can have a higher price then the competition as long as you provide a better product or service. edit

Thanks nick. I submitted a request for a quote on some ipads from these guys


RentaComputer.com: Ohio
Vernon Computer Source: Georgia/Washington/ N. Carolina (businesses only)
Rentourlaptops.com: Ohio. (associated with rentacomputer)
Meetingtomorrow: Chicago
RentFusion: Chicago/ Las Vegas/ Orlando

So far I havn't found anyone based in Alabama, while some of these guys are national, most of them don't focus on the consumer market. edit

Thought I'd post some numbers. This will be adjusted several more times I'm sure. Some of these costs are estimated while others are optional. So this is a ball park figure.

One time costs:
legal ............... 750
site development .... 500
wordpress theme ..... 75
logo design ......... 300
quickbooks .......... 199.99
orion smb ........... 1000
giftcardcafe.com .... 29.95
inventory ........... 5000
cash reserves ....... 1000
business license .... 50
biz cards and flyers. 150

Recurring costs 3yrs projected:

insurance ............ 800
web hosting .......... 126.72
gas .................. 1920
phone ................ 4480
ups po box ........... 480
linkedin membership .. 1278
facebook ads ......... 3200
orion software ....... 3680
News paper ads ....... 3200

Total: $27,977.06
Per month: $874.28
edit

Nathan, I don't think this business model works. Some of your numbers are estimated and way off. In the book Reworked the authors say people are very bad at estimating things so you should always double your estimated numbers. I think that is good advice. Your site development is underestimated, a good website will cost you 2K-5K not $500. I am 100% sure of that, it is my business. Someone might design a site for you for $500 but no one that will attract many customers, and your website is your point-of-sale. Other numbers which are underestimated are legal costs, business license, advertising. Also, explain to me how you will make money with a $5,000 inventory... I don't see it. Maybe I am wrong, but by my estimates for 5K you might get let's say 5 computers, rent them out at $200 per computer that is 1K per month in gross, your expenses are $900 per these estimates... How will you make a profit? Just some things to think about, I just don't see it with these numbers. edit

I know the 500 is low. It's not for the purpose of being a point of sale right now. It's just so I can have an online presence and have a face for the company. The site will only be a page or two at the most. Remember, I'm not doing this as a full time endeavor right now. Other expenses were also optional which inflated the price.

Also 8,800 of this is in one-time expenses that was added to the 3yr projection. edit

If he wants to start slow and organically, doesn't that mean he would have to make a loss at the beginning (given the situation)? edit

I think so Jon, all of the startups I have started have operated at a NET LOSS for the first year or so, sometimes longer. It usually takes a little time for the business model to take effect, marketing, traffic, customers etc. until you start making a profit. This is why so many good businesses fail, because they do not have the capital to operate until they start turning a profit. It is very important to have the right funding to get you through this time.
edit

"many good businesses fail, because they do not have the capital to operate until they start turning a profit. It is very important to have the right funding to get you through this time."

^ My accountant is working on the financial statements. I'd do it but I'm at a total loss of how to get these done. He's in the middle of tax season so he's much busier than normal.

One aspect of the idea I think I'll be changing is that I won't be offering all these different products that I listed in my first post.

It's simply too much. I'll focus my funds on the ipad 3 and samsung galaxy tab, who I feel are the top brands in the tablet market.

Also when I think about it, there is no BIG difference between an ipad and a ultrabook.. Why buy a macbook air (no hard drive) from $1000 to $1500 when I could get a 64gb ipad with keyboard for less?

In time I'll offer more products but right now I need to be very selective.



edit

Hello, I found you when I was looking for research on this particular business model on google (Apple RTO), First let me give you some background about myself. I am currently a partner in a local small computer retail store. Me and my business partner got into the rent to own game after servicing 5+ so a week computers for an RTO company. We have done some RTO and I can share some insight and hopefully you can give me your insight respectively, currently the formula we use to calculate RTO (I have about 35~ accounts, none currently being apple)is as follows, cash price x 3 / 52 weeks in a year, OR cash price times 2.86 /12 mos. We take payments via ACH, we require a valid form of ID, a voided check, proof of residence(bill of some sort usually), proof of income for at least 6 mos, and 3 references. I haven't had a single one of my RTOs skip on me. However, when their e-checks don't clear I call their references and try to work out payment options. It's been a pretty good thing for our business but when things have come back damaged or whatnot we have the skills to fix them, avoiding one potentially big expense. OH and with early payoffs here how its calculated, of each monthly rental payment a set amount goes to purchase price (1/3) and we will allow someone to pay an item off early based on how many payments. edit

1. When you say 35 accounts..these are 35 different brands that your store carries? or do you mean 35 customers?
   
   
2. Your charging 286% for 12 months?.. you dont offer a 90 day same as cash deal?..

edit

35 customers, regardless of what (tvs, laptops, desktops) no 90 day same as cash. up until recently we mainly rented stuff we rebuilt. now i keep new items in stock by buying retail. edit

Oh and when it comes to physical theft (i've had one robbery).. It doesn't take much at all to claim.. I claimed about 10k with little documentation. edit

Seeing a score counselor who's an accountant by trade to help show me how to do a financial statement. My accountant is taking way too long. edit

Saw the counselor today and the numbers aren't looking all that good. It looks like I'll need 60,000 in startup over a one year period to cover bad debt, and other business costs.but these are just ball park guesses.

I may decide to go the b2b route and help small companies with their technology solutions.

Working on the income statement now. Will post it online when done. edit

As for a website - depending on how many skillful connections you have you can definitely make a descent website that is cheap but looks professional. There's a website maker called wix.com ; they allow you to create and launch your website for free! However, in order to have your own unique domain name there is a monthly fee. It's perfect for low budget start ups. all you need to really invest is time. You should check it out. It will keep your website budget on the down low!

With the right research you can maintain your budget but if you don't have the time for the research and networking then I doubt you'll find affordable deals.

Subscribe to my blog and you'll discover loads of similar business tips; I specialize mostly in Finance and Marketing.

: http://katieraspberry.wordpress.com/

Best Wishes Nathan! edit

other thing.. bulk purchases from apple really will get you a small percentage discount at best so I wouldn't really plan on keeping the change. edit

income statement. I don't know how accurate these gross sales figures are but here is something in the mean time...

http://www.fileswap.com/dl/OaIFOxm7L/income-stmt.xlsx.html edit

After about 3 months of planning I have decided that this business will not be a profitable venture based on some observations:

1. After creating an income statement I can see that the yearly cost of running this business would be pretty high, but this is not the primary reason for not pursuing it.

2. Technology changes very quickly and older technology depreciates rapidly.

3. The high level of bad debt increases my risk and cost substantially

4. I'm not really solving anyones problem. Places like rent-a-center and Aarons provide appliances and other things people need. Tablets are more of a luxury good.

5. I don't feel like the consumer would be able to pay the monthly fees I would charge, or be willing to for that matter.

6. Economic conditions are changing. With the rise of gas prices to new highs, low income consumers will be even more strapped to pay their bills.

7. Advice from a successful family member suggested that I focus on selling a product people will always need. He says that because so many businesses fail, it's best to play it safe and not try things that are "outside the box" unless I have significant capital to begin with.


I'm going to research some other ideas and make a new thread here in the future. Thanks to everyone that posted in my thread and I hope to read your advice in the coming days.

- Nathan edit