Starting a Daily Deal business is easy. Right?

So what’s so hard about this business anyway?

1. Simply put up a website of daily deals (you can easily buy scripts or templates nowadays),

2. Get some retailers on board

3. Put up your deals on Facebook and Twitter

And, what else? Hmm, not much really…should be straightforward.  Once you’re posting deals online you sit back and  wait for expected sales of 600-1500 vouchers sold per deal.

Collect the money, pay the merchant and repeat. Nice & easy. A breeze, really. After that, you’ll sell the business for millions to a larger company who is inspired by your success and how easy it was for you. Again, nice & easy.

Sounds great! Yup, I wish most businesses were this easy.

At Group Buying Canada we have too many conversations with entrepreneurs and industry professional who assume this business model is a magic pill for starting a business the easy way, for growing a business the easy way.

Here’s a wake up call. Pasting up a website may be easy…but Daily Deal/Group Buying services are not simply consumer facing websites. They are NOT easy.

Groupon, Living Social and thousands of others around the world have made it look easy to get started, because to most, it seems that all they do is put up a website. In reality, it’s what happens behind the scenes that is hard, is what’s necessary and is what most entrepreneurs don’t do well. Sure we all see Groupon’s success, the media has talked about their success constantly since early 2010 when they got a large amount of funding. What what the media does not talk about was what it actually took to get a Daily deal site launched, supported and scalable.

So you want to start a Daily Deal business. Great, consider this if you want to be successful at it:

Success is relative. Some are perfectly fine with a local business, others define success as generating 10 million or more in revenues, and others are not happy until world domination occurs and they go public at a $15 billion valuation. In our case, success means the ability to launch and grow a Daily Deal service to the point where it can meet your own definition of success. If the basics of what we cover below are not met, then no level of success will be met.

The following is certainly not an exhaustive list. There are many other operational aspects to this business model. The following are those that are top of mind.

1. Do you have funding? Bear in mind that $6000 is not funding.  It will take more…and not for what you think. If you have $500k -million in funding, launching and growing will be far easier. If you have 10k-100k then it will take longer and require more of your own elbow grease. Either way you can launch such a business, although with varying levels of scale.

2. Do you have the time? Doing this on a part time basis is, well, like most things, will generate part time results. Nonetheless, if you cannot dedicate a team to focus on this full time, then part time is better than no time.

3. Do you have the know how? Daily deals are not about posting up a website, nor are they about technology. Bottom line, if you or someone on your team is not well versed and experienced in sales & marketing processes then you will not be as successful in this sector as you hope to be.

This business is about sales and marketing first and about operational effectiveness second.  It’s about the deals you can deliver from retailers, it’s about the customer service you can provide to retailers. It’s about marketing to your audience and getting them to buy your deals. It’s about the service you provide your audience and it’s about marketing to a large audience and not just a few hundred people.

If you are not familiar with any of these concepts, then choose another business model or get someone on your team that does. We’ll repeat: this business is about sales & marketing. If you are a publisher, media company or large portal of some kind, well, you have an advantage; you already have a baked in audience of both retailers and consumers you can market to immediately. If you are an entrepreneur and just starting out, approach it one step at a time and spend most of your time and your team’s time on the sales & marketing aspect of the business. Without deals, your business will not be successful, without an audience your business will not be successful.

So how do you get an audience? Well, that’s another post all together, or give us a call to discuss.

4. Do you know about the Technology you will be using? Will you develop your daily deal site and its back-end with your team? Will you contract another development team to do so? Will you find some cheap script/template pre-built by a team in India or China or Eastern Europe? Will you decide to go with a Daily Deal SaaS platform company and use their technology while you focus on other aspects of the business? If you choose the platform company (good for you btw, you chose wisely) then which one should you use? Which one is best suited to your needs?

5 . Will you be a generic daily deal site or focus on a specific market segment? Generic sites have a larger potential but compete with Groupon, Living social, and all the major newspaper and media companies. While niche sites can be marketed more effectively and have more loyal fan base, but attract a smaller audience. What is YOUR strategy?

6. Do you have relationships with retailers? If you don’t, how will you go about sourcing deals? Do you have a sales team that knows how to speak with retailers, knows how to get the deal done?  Will you be signing up enough retailers to have a “Deal Flow Cushion”?  Do you have sufficient budget to pay your sales reps an actual salary plus commissions or are you paying them commissions/finders fee only? Are your sales reps employees, introducing  payroll taxes and administrative concerns, or are they contractors?

7. How big or small is your consumer list? Is your list large enough to sustain enough purchases on a daily basis to pay for your expenses, pay for your sales team, turn a profit? If you do not already have thousands of people on your list that are expecting you to send them Daily Deals, then don’t launch yet. Double your efforts to ensure a success list size/daily purchase ratio (What is that ratio? Get in touch and we’ll discuss the most effective ratios for your industry). Do you know how to increase the size of your audience and email list?

8. Marketing: Do you know how to attract attention from the media, from distribution partners, from bloggers, from your local community? You may know what to do, but do you or your team have the relationships?

9.Do you have enough staff to actually have the business? Do you have staff to enter the deals in your system, manage them, edit them, fix errors? Do you have dedicated people to look after any merchant support issues, customer support issues. Are you monitoring the deals on a daily basis to ensure there are no issues?

10. Miscellaneous considerations:

-Do you have an accountant or book keeper to track the ins and outs of cash flow. (merchant payout, taxes, if any, commissions, etc)

-Have you set up marketing partnerships in order to expand your channels of deal distribution?

-If you are launching across Canada or just in Montreal, then what is your strategy for the French market? Will the technology platform you use support a dual language strategy. (contact us, we’ll tell you which platform does it well, which ones tell you they have it but really don’t, which ones are working on it and which ones who are ready to do anything to get your business)

Is a Daily Deal business an easy business? Hardly! It’s a business venture like any other. There is no magic bullet. Even Groupon with it’s initial $1 million in funding back in 2008 took over a year to get something going that was remotely successful out of Chicago. Do not invest in this business sector or model if you do not love it, if you do not want to be in it for the long haul. Only passion, like most startups, will help you through the difficult times.

Are there any other points you would add to the list above? Let us know and we’ll include them.

1 Comment
  1. Agreed, trust me its hard, our small team has been working for months to get everything functioning properly. Our deals aren’t standard deals they get better and more affordable as users share and purchase them — they also have other cool hidden treasures as well, but its been a lot of hard work and as you said ELBOW grease =)

    We’ve actually got a few dealers in Canada gearing up to get their merchants on it so look forward to joining the Canadian market!