Selling corals commercially

[xine]

Background:
I'm aware of the risks but am dedicated to starting a small business selling corals, primarily as a side job while I'm in medical school and because it's fun. My partner runs his own business so I have a good idea of the challenges involved.

I've invested about 1.2k in corals and have ~45 unique corals I'll be growing out and fragging to start, including colonies of several popular high-end pieces (anywhere from $100-500 per frag depending on the piece). For a quick return I have mushrooms, zoas, palys, xenia and various polyps, btas, phytoplankton, rotifers, copepods. For intermediate-long return I have hammers, torches, alveopora, goniopora, and some faster growing sps. I should be able to make 4k fragging the zoa and mushroom colonies alone but for now I just want to recoup my losses. My goal this year is to grow sustainable colonies so that I can produce enough to meet demand and comfortably offer 7-day guarantees on most items. I know bad actors are a major time suck and I'd rather replace corals than fight chargebacks and bad reviews, plus I love great customer service.

I've also registered as an LLC so I can start looking at wholesalers to decide who I'd like to source corals from in the future, but for now I'll be selling privately on eBay to learn more before I officially launch the business.

Questions:
- Do I need any special permitting or licensure if I'm not collecting corals from the ocean myself or importing them internationally? Located in Denver, CO. I couldn't find any requirements.
- Should I carry commercial liability insurance since I'll be selling palys? Is insurance necessary while I'm selling privately on eBay or is a disclaimer sufficient?
- What hidden costs have surprised people selling corals either privately or commerically? I'm making my own website, making my own frag plugs, using free accounting software, etc. I know I need to set up a shipping account, purchase shipping materials, set aside money to pay taxes, and eventually invest in marketing and branding once I launch the website. Anything else besides the cost of replacing corals that fall under DOA/guarantee policies?
- Finally, photography! iPhone macro lens will do for now but it means I'll have to photograph every coral just under the surface of the water since the working distance of the camera is so limited. I'd like be able to take macro shots of coral at a distance of up to ~2 ft through glass and water. Any recommendations for cameras and lenses? Preferrably ones that are a little older and can be bought secondhand.

 

[Fish Fan]

I think that's great that you want to try something like this, but you probably already know it's a very competitive industry, so keep that in mind and your expectations realistic.

I'm not at all a business expert, but a few things off the top of my head:

You will need to be (in my opinion) a "real" business with an inc. or LLC or something other than a sole proprietorship. You want to make sure no one can go after your personal assets if they decide to sue your business. Likewise, you should definitely have some kind of insurance. Besides paly toxin, you can't imagine what people will try to sue for these days. It would be best to be protected.

I imagine you'll need some kind of possibly aquaculture license, and possibly even Federal permits to ship livestock commercially (I'm just guessing here). But start by calling your local Denver small business development office or the like. Let them know what you want to do, and they will help you understand the legal requirements. Then, do the same thing on the State and Federal levels. I'd advise to play by all the rules, and not cut corners.

A business plan is a solid idea for sure. A business plan can be an evolving document that helps you keep your business goals on track.

I don't know, I've never owned a coral business, but what I think tends to "sting" them the most is when everything is going well and you're making some sales and some money, and then one order gets stuck in transit, and right or wrong generally it's the coral vendor that makes it right for the customer. That means you may have to replace a whole order, which can wipe out days of steady profits in one swoop.

So again, just a few thoughts from a total non-business expert. Good luck with your future coral empire!

 

[AW001]

Just remember to think long term. I'm not sure about during med school, but in any residency other than derm you probably won't have time to maintain anything more than a nano tank.

 

[Uncle99]

You’ll need to drop out of school and manage your systems in hopes to make any money at all.

Corals (or the good ones) can take a year to get ready for sale, so you need a large footprint to keep revenues coming.

Coral farming is at least, 16 hours a day job.

With tons of risk.

 

[Northern Flicker]

I think if you are just doing it on the side, you've got the right attitude. Get some brood stock, figure out how to grow them quickly, make sure you have a local marketplace, etc. Good luck!

 

[BeanAnimal]

- Should I carry commercial liability insurance since I'll be selling palys? Is insurance necessary while I'm selling privately on eBay or is a disclaimer sufficient?

If you have a business you should have insurance and an LLC... otherwise you are playing Russian roulette.

- What hidden costs have surprised people selling corals either privately or commerically? I'm making my own website, making my own frag plugs, using free accounting software, etc. I know I need to set up a shipping account, purchase shipping materials, set aside money to pay taxes, and eventually invest in marketing and branding once I launch the website. Anything else besides the cost of replacing corals that fall under DOA/guarantee policies?

Your entire investment dying? Lawsuits? Utilities? Time? Customer Support?

 

[BryanM]

This still sounds far more casual than a business.

I cannot imagine trying to make a business out of this hobby without a ton of real estate, $$$, a business plan, and willingness to not make money for a few years at least.

covering costs by fragging things in your tank, that is totally different.

 

[Cichlid Dad]

The person I get mine from sells out of her garage, 7 days a week, at least 12 hours a day 1000.00 power bill, whole house generator and still calls me for help once every few months when there's some kind of emergency and she needs help. She sells privately through word of mouth and you have to make an appointment due to the number of people coming to buy her coral. I can't see going to school for a real estate license let alone med school. She is barely making it and has a extra large two car garage, her upstairs hallway, entry way and two bedrooms full of coral.

 

[xine]

The person I get mine from sells out of her garage, 7 days a week, at least 12 hours a day 1000.00 power bill, whole house generator and still calls me for help once every few months when there's some kind of emergency and she needs help. She sells privately through word of mouth and you have to make an appointment due to the number of people coming to buy her coral. I can't see going to school for a real estate license let alone med school. She is barely making it and has a extra large two car garage, her upstairs hallway, entry way and two bedrooms full of coral.

Wow. Is she aquaculturing everything herself or does she do resale as well? It sounds like she has more coral than any of the LFS near me! Most of the stores only have 1-2 large frag tanks but maybe that's a Colorado thing.

If you don't mind me asking, do you know what she's doing for 12 hours a day? Is that time mostly spent with customers or tending to the tanks? I would imagine customer service is pretty demanding since she's so popular, but are there other things that become more demanding once you scale to that point? Right now my tanks only require a couple hours a week of attention and that's mostly feeding and then cleaning/water changes once a week.

Thankfully most med schools don't require in-person attendance for lectures and everything is recorded, so besides research and rotations my schedule will be extremely flexible and I can work from home most of the time (I'm finishing a PhD currently with very similar structure so I have a good idea of what it will look like) and listen to lectures while I work on the business.

 

[Cichlid Dad]

Wow. Is she aquaculturing everything herself or does she do resale as well? It sounds like she has more coral than any of the LFS near me! Most of the stores only have 1-2 large frag tanks but maybe that's a Colorado thing.

If you don't mind me asking, do you know what she's doing for 12 hours a day? Is that time mostly spent with customers or tending to the tanks? I would imagine customer service is pretty demanding since she's so popular, but are there other things that become more demanding once you scale to that point? Right now my tanks only require a couple hours a week of attention and that's mostly feeding and then cleaning/water changes once a week.

Thankfully most med schools don't require in-person attendance for lectures and everything is recorded, so besides research and rotations my schedule will be extremely flexible and I can work from home most of the time (I'm finishing a PhD currently with very similar structure so I have a good idea of what it will look like) and listen to lectures while I work on the business.

She does have more coral than any LFS I've ever been to . As I stated above it not an exaggeration of the number of rooms hallway, full garage . All of these spaces only have room for two people to be in at a time and you have to maneuver around each other just to get around. You ask why so many coral? She has to be able to offer a wide selection of product to keep people coming, she has to maintain mother colonies not order from some supplier.
She has to be store front, coral fragger, tank maintenance water change ECT at such a level so she doesn't loose her stock. One tank crash could wipe out years of work. With what you describe as your tanks you will not have the inventory or selection to keep people coming.

 

[Cichlid Dad]

.

 

[Opus]

You should check out Reefkoi in Colorado Springs. He has been in the game for many years and started out selling in his house. Really nice guy and he might give you some advice if you go to his shop. I haven't talked to him in years since he quit doing the frag swaps. I think he finally realized reefing was taking up too much of his time.

We have several "basement" stores in my area. They all mainly deal off FB, not much from their websites. They run a batch of corals every day or every other day, either by "mine" game or auctions. Some do raffles though that is illegal. One of them is always posting what he is sending out that week, which is usually 12+ boxes of corals. All of them grow very few of their own corals. They just bring frags in from wholesalers.

 

[xine]

She does have more coral than any LFS I've ever been to . As I stated above it not an exaggeration of the number of rooms hallway, full garage . All of these spaces only have room for two people to be in at a time and you have to maneuver around each other just to get around. You ask why so many coral? She has to be able to offer a wide selection of product to keep people coming, she has to maintain mother colonies not order from some supplier.
She has to be store front, coral fragger, tank maintenance water change ECT at such a level so she doesn't loose her stock. One tank crash could wipe out years of work. With what you describe as your tanks you will not have the inventory or selection to keep people coming.

That’s even more than what I was imagining from your initial comment. Wow. Sounds amazing but also very overwhelming for a single person.

I’ve actually really been enjoying getting the business set up so it’s become quite a bit more than I initially planned. I’m officially an LLC, have a federal tax number, state licensing, and resale license now so I’ve been able to register with wholesalers and after seeing their prices I completely abandoned my initial business plan because of how affordable wholesale corals are. I could probably fill two large frag tanks with colonies for under $2k with mid-grade corals with a handful of high-end or rare pieces mixed in. What I have so far includes a number of higher end corals so I’m thinking I’ll grow those out as a long-term investment but focus on building volume and variety with wholesale corals and inverts in the meantime. I feel like the high end pieces are really just to entice people to place an order, especially if you can offer a nice price on them, whereas the lower end pieces end up being where the majority of the profits actually come from.

Otherwise, I agree I definitely would not have the variety to keep customers coming back, plus shipping is so expensive I know people need to be able to buy a decent amount to even justify placing an order so wholesale is definitely the way to go for now. And I’ll retain a small part of every colony I sell to grow out so I can continue to offer increased variety over time.

Hearing how difficult it is to run a business based solely on aquaculture (even once you’re successful and established like the woman you buy from) is good confirmation that having my own mother colonies is something to work toward over the course of years but is absolutely not a sustainable business plan to start with, so thanks for the info!

 

[VintageReefer]

I would avoid eBay and make a website to sell from direct

I sold a 100 item on eBay. I put in the dimensions of the package. It charged the buyer 31$ shipping. With the eBay discount, shipping cost me 33$

The final value fee comes out of the sale price + the shipping money. So even though eBay already undercharge the buyer on the sh and I lost 2$, then they charge a final value fee on the sh and I lost even more

In the end, the item sold for 130 with sh, I ended up around 75$ deposited to me, and that’s not counting the sh materials and for corals you need
Small boxes lined with styrofoam
Bags
Rubber bands
Heat packs
Packing materials
Tape
Labels

^ not a lot for someone mailing out a box once in a while but if you had 20 a month then this starts to add up.

Anyway, make a website. Sell from there. Or give eBay 20% of your profit on every sale

 

[xine]

I think that's great that you want to try something like this, but you probably already know it's a very competitive industry, so keep that in mind and your expectations realistic.

I'm not at all a business expert, but a few things off the top of my head:

You will need to be (in my opinion) a "real" business with an inc. or LLC or something other than a sole proprietorship. You want to make sure no one can go after your personal assets if they decide to sue your business. Likewise, you should definitely have some kind of insurance. Besides paly toxin, you can't imagine what people will try to sue for these days. It would be best to be protected.

I imagine you'll need some kind of possibly aquaculture license, and possibly even Federal permits to ship livestock commercially (I'm just guessing here). But start by calling your local Denver small business development office or the like. Let them know what you want to do, and they will help you understand the legal requirements. Then, do the same thing on the State and Federal levels. I'd advise to play by all the rules, and not cut corners.

A business plan is a solid idea for sure. A business plan can be an evolving document that helps you keep your business goals on track.

I don't know, I've never owned a coral business, but what I think tends to "sting" them the most is when everything is going well and you're making some sales and some money, and then one order gets stuck in transit, and right or wrong generally it's the coral vendor that makes it right for the customer. That means you may have to replace a whole order, which can wipe out days of steady profits in one swoop.

So again, just a few thoughts from a total non-business expert. Good luck with your future coral empire!

Thank you for the input and the well-wishes! I think you hit the nail on the head with the shipping issues being one of the bigger issues. I’ll definitely have to look into what kind of shipping insurance is available and figure out what value order it makes sense to insure. In an ideal world customers would just pursue a claim with the mail carrier but I’ve seen enough with my partner’s business to know that a lot of people are lazy and would rather call their credit card company and start a dispute and those are a huge time suck. I’ll definitely make sure I have a plan to deal with these situations before I start selling much.

I am officially an LLC now with all the required licenses (which actually wasn’t as bad as I expected). Thanks for the well wishes and I’ll make sure to update everyone as I make progress!

 

[xine]

Just remember to think long term. I'm not sure about during med school, but in any residency other than derm you probably won't have time to maintain anything more than a nano tank.

True! Med school itself is very flexible but if I want to continue during residency I’ll definitely need to have my tanks heavily automated and probably hire an employee or two to manage customer service and shipping.

 

[BeanAnimal]

I can’t honestly fathom how you expect to handle medical school and open a profitable small business at the same time. A coral fragging and shipping business is not a few hours a week thing.

 

[VintageReefer]

Thank you for the input and the well-wishes! I think you hit the nail on the head with the shipping issues being one of the bigger issues. I’ll definitely have to look into what kind of shipping insurance is available and figure out what value order it makes sense to insure. In an ideal world customers would just pursue a claim with the mail carrier but I’ve seen enough with my partner’s business to know that a lot of people are lazy and would rather call their credit card company and start a dispute and those are a huge time suck. I’ll definitely make sure I have a plan to deal with these situations before I start selling much.

I am officially an LLC now with all the required licenses (which actually wasn’t as bad as I expected). Thanks for the well wishes and I’ll make sure to update everyone as I make progress!

As far as I know there is no sh insurance on coral

I just had this happen to me last week.

I rarely sell corals. Rarely. Decided I had some high value ones and was in a need for extra cash. I sold coral for 600$. Shipped ups overnight by noon. Took it to ups in the afternoon and dropped off

That night check tracking - it’s scanned in. But nothing else

Next morning. Nothing.

Call ups - they won’t do any thing until 7pm

At 6:30 pm (was supposed to arrive in another state by noon!) tracking is updated. It’s 4 states from me. In the opposite direction as the destination.

Next day. It’s in the correct state by morning. Then I get a notification. They ar delaying a day due to weather

I call. They won’t let the Buyer pickup from the local hub.

A day later. It arrived. All dead

Now I’m out 600$ + the high end coral. Complete loss for all if us

Can you sell enough to be able to absorb things like this ?

Ups covers nothing except the sh fee I bought because next day air is guaranteed. So wow. I get 50$ back. Not even the 100$ all packages are insured for because coral isn’t covered

 

[Rollnwthdatide]

I'd start small and local through med school and residency and slowly expand to shipping afterwards. My main goal would be to complete med school and residency then focus on expanding the business once my schooling was complete and my primary income is secure.

 

[Gumbies R Us]

I agree with others, I would start a local business first, sell through local ads (Facebook market place, frag swaps). Then go from there. I feel like trying to balance studying for med school and running a dragging business seems like hard work, but if you feel like you can do it more power to you!