Thoughts about starting a mystery shopping company

Has anyone ever thought about starting their own MS company? It appears to be very easy and i've noticed several companies sprouting up within the last few years. I'd love to hear your thoughts, suggestions and ideas!

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The biggest problem I see is cash flow in the beginning. Most businesses have a significant tangible inventory and/or other assets that, if the business fails, the lenders can put a lien against and auction off to recover some of their money. A mystery shopping company, on the other hand, is almost 100% intellectual property in terms of assets. That makes it very hard to get an investor interested as there are not enough physical assets to cover the first year or two.

Shoppers can gradually ease into shopping, adding more companies to their list as they get more comfortable with shopping. A MSC on the other hand, has to be able to provide service to clients immediately; it's a harder business to "grow".

This might prove to be an interesting project for a business program at a local college/university. Most business departments have classes where students can help entrepreneurs work through the start-up, funding, etc. on a business.

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You mentioned "very easy". Are you referring to the MSC operations, the hiring and remuneration of staff, the mystery shopping, the scheduling, the editing, the client and shopper relations, the test or survey creation, the collation and distribution of information, and/or to something else?

Are all aspects of the start-up equally easy?

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I think it might be an interesting venture if you were to be able to get local and regional businesses interested in being shopped and that could be a one or two person possibility, but as far as some of the national clients, I think it would be very difficult, given the established competition out there. Also, given the number of scams out there, you'd likely run into many skeptical shoppers as well if you were to try to recruit on a national level.
I don't believe starting any business would qualify as easy. OTOH, I don't think starting a small mystery shopping company would require all the financing mentioned above because you should not have a lot of overhead.

Let's say you are going to do some of the shopping yourself along with all sales, recruitment, editing and analytics. There is no overhead, just a lot of time. If you keep your client payments tight, you aren't paying shoppers until you are paid. With a small company you could be sure to recruit a handful of shoppers you can rely on while the low overhead would allow you to pay an attractive fee. If you are starting locally you could even meet new shoppers face to face. There are a lot of shoppers, myself included, who would not have an issue waiting 60 days for payment for the right fee. There are ways to have shoppers report outside of using the existing platforms or creating one for yourself. I have worked for a couple small companies and the reporting was done via an Excel spreadsheet.

Bottom line, if you know how to create the product the client wants and want to hustle, it is doable.

I forgot to add this. A friend made a really good point about selling MS services locally. The ideal client will be small, but will usually need to have at least two or three locations. With only one location it is likely the owner is on site during most business hours.

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Edited 1 time(s). Last edit at 08/11/2017 02:30PM by LisaSTL.
i wouldnt want those headaches. there are lots of whiners in just forum but most shoppers arent on forum so lots more whiners out there, ill let others have that fun.
The MSC that has become my main client was actually started the way the question was posed. An employee of a large management company observed that a lot of cash was being diverted by employees. He went undercover to locations where he was not known, did video of transactions with irrefutable evidence of cash diversions and presented that to the owner. The owner rewarded him and asked him to start a small business devoted to discovering the techniques and employees associated with those losses. What began as a small, part time venture turned into a growing, full time company with many shoppers coast to coast and many more clients in the industry. But, remember, the shopper started out having to keep the day job. AND, growing fast put quite a strain on cash flow! Since the crash in finance industry 10 years ago, working capital for small businesses has all but disappeared! Banks USED to lend, or some did, for this sort of start-up, but not any more.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
I think the best way to start your own msc would be to graduate into marketing for one of the established companies and learn all you can about the business. When you later break away to form your own company, some clients are likely to follow you when their contracts are up. And you will already have learned the marketing experience that you will need to start up your business.
OK, here's some data for you -- can't tell you where I ran across it, because I read EVERYTHING, but it was either some sort of restaurant magazine or business magazine: to be competitive, you'd have to charge the customer between $2-4 A DAY PER LOCATION. That's $60-$120 a month, per location. The $2 average is for a straight report: did employee A, B, C, & D each meet corporate standards. The $4 fee would include "full analytics". How many shops a month that fee includes determines whether it's profitable for the MSC -- and the chance that they can find a shopper to perform it at a fee that leaves the MSC a profit.

OK, you got your first client. We won't consider overhead, fixed, or sunk costs for this exercise, for purposes of simplification. He has 3 stores, all within 15 miles of where you live. He agrees to $120 a month, per location, and wants each location shopped every WEEK. He wants a straight report on his desk by 8 AM after the day of the shop, and "analytics" at the end of each month. To keep your costs down, you decide to perform the shops yourself (no law against it; you're in business for yourself).

You just tied yourself down to 12 shops a month, PLUS all the reporting to the client responsibilities, for $360 a month. Or, even worse, you have to find a shopper that will do the shops for say, $8 each, leaving you with $264 profit. Of course, that's only gross profit; if no shopper flakes, you edit all the reports yourself, etc., etc., then it could be your net profit, too.

Feel free to extrapolate.

smiling smiley
Assuming you don't have a non-compete clause.

@AZwolfman wrote:

I think the best way to start your own msc would be to graduate into marketing for one of the established companies and learn all you can about the business. When you later break away to form your own company, some clients are likely to follow you when their contracts are up. And you will already have learned the marketing experience that you will need to start up your business.
I knew someone would think of that. You would have to make sure your non-compete clause had a time expiration of some sort. I'm sure a good lawyer would find holes in it that you could get around.
I think the point is that starting a msc would not be a light, simple, or easy undertaking for most of us. And if you wanted to start an msc in NV, you would have additional expenses and regulations and requirements to deal with.
Getting around the clause to just start a company might be easier. Actually poaching clients would be more problematic.

Equal rights for others does not mean fewer rights for you. It's not pie.
Never try to teach a pig to sing. It's a waste of your time and it really annoys the pig.
Banks still lend to small businesses. The loans are backed by the Small Business Administration.

"Life is a fight...FIGHT!"
Greenleaf
Would take a huge payroll to start an MSC business today, beside being competitive, finding clients, help
and all a new business entails...I'd never want the headaches. Success depends on years of growth, won't
happen in a day. I think other business's would be a better start up. Very risky....

When you know better you do better....

Oprah
@Shop-et-al wrote:

You mentioned "very easy". Are you referring to the MSC operations, the hiring and remuneration of staff, the mystery shopping, the scheduling, the editing, the client and shopper relations, the test or survey creation, the collation and distribution of information, and/or to something else?

Are all aspects of the start-up equally easy?

That's just the surface. Client acquisition is complex. One would need to put together a comprehensive marketing plan plus a proper business plan. Developed a presentation model. Identify points of contact, most of which aren't the actual decision makers. Research and understand each potential client, tailoring each potential presentation accordingly.

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