I haven’t updated in a while since I’ve been pretty swamped with my own business. We grew our sales by 60% for the first 6 months of 2013 (vs the same period in 2012) and relocated for our business. More about that later, but today I was prompted to post about something that happens to me all the time and sort of drives me crazy. At least once a week I run into someone who wants to start a business and wants to ask me all about it. I am happy to chat with them but they ALWAYS ask me the wrong questions. Here’s what they usually ask:
- What should I sell? (I can’t answer that for you.)
- How much of X should I make to start? (I don’t know — what are your distribution plans?)
- How do I get a website? (There are many ways to go about this; what is your budget?)
- How do I get started? (Too open-ended of a question.)
I basically get a lot of broad questions I couldn’t possibly answer or a lot of questions specific to the product. Here’s what you need to know and what you should be asking:
1. The product isn’t as important as you think it is
People starting product-based businesses usually fixate on the product and it’s the wrong thing to fixate on. A product is not a business. Repeat this mantra; it’s the #1 rule everyone doesn’t understand. Your product could be awesome or it could be crap and it almost doesn’t matter. Your success is going to be dictated by your ability to sell, market and find distribution channels, not necessarily the product itself. Sure, produce a product that you think is good and that you think will sell. But don’t expect you will succeed purely because the product is good.
2. How much capital can you invest?
Yes, you will hear of stories where someone started a business with $5 and people write entire books about this; that sort of thing is popular to talk about because it’s what wannabe business owners want to hear. However, just because something is possible doesn’t make it probable. Those people who “made it” because their product showed up in a hit movie or instantly got picked up by Hot Topic, etc. are the exception, not the norm. Don’t count on results like that.
If you want to build a real business selling hundreds of thousands of dollars or millions of dollars in product every year then you should count on your start up requiring a large investment of capital and a few years to really become profitable. My own business was technically “profitable” when it wasn’t a real business. When I first started and was selling less than $20,000.00 a year in product I was actually netting a few thousand dollars after all the expenses. It wasn’t a real business though. I wasn’t going to be able to pay my bills or quit my day job. Since growing my business to a quit-your-day-job size proposition I have had to loan my company tens of thousands of dollars over the years. It was necessary to put in that kind of money to grow our business to the size it is today.
That’s the reality of growing a business — they require investment to grow. And if you want to really grow it, it may require a pretty substantial investment of both cash and time. Are you prepared to put both of those into your venture to make it grow? Whatever you think it’s going to cost, however long you think it’s going to take, you’re probably way off. It’s going to cost so much more and take so much longer than you expect. Is this something you’re prepared for?
3.What will your distribution channels be?
Know how I said the product almost doesn’t matter? This is what matters right here. If you have a product-based business you need distribution channels. How are you going to get your product into consumers’ hands? You should obsess about this; it’s the #1 thing that matters.
Are you going to sell online? If so, how will you bring people to your website? Are you going to be awesome at online advertising and search engine optimization? Are you going to sell at retail events like conventions and festivals? If so, which ones? How will you vet them and find the right ones? How many will you sell at? Are you going to sell through 3rd party marketplaces like Etsy, Ebay, Amazon, etc.? How will you generate sales on those sites? Are you going to wholesale to stores? How will you acquire stores? Will you do trade shows? Will you cold call? How will you track your sales leads?
How much product do you need to sell to pay your bills and at what price point? How are you going to meet those sales goals consistently? Will your distribution channels be able to meet your needs in terms of price point and sales volume?
3. Are you willing to take on tasks you don’t really enjoy and learn new skills that don’t interest you?
This is a big part of the J.O.B. right here. When people ask me and my partner about our jobs, they assume it’s a fun glamorous gig and that we design all day. Design is probably less than 10% of what we do. We spend 90% of our time doing other things for our business. In any given day we might be managing vendors, placing sales calls or following up on other business opportunities, addressing customer service issues, dealing with logistical and administrative tasks like bookkeeping, paying sales tax, etc.
The list of things you will need to learn is endless and there’s usually no one to teach you. Remember how I said you’re going to need more capital than you think? Some of it is going to go here. You’re going to make mistakes. Some of them might be big and expensive. You’re going to maybe hire the wrong contractor or employee. You’re maybe going to have a manufacturer screw up a release of your product and send you a shipment full of defective goods. You’re going to do an expensive trade show that turns out to be a bust. You’re going to invest in some piece of machinery or equipment that breaks or maybe doesn’t deliver the value you expected. Stuff like this is part of the learning curve with starting and growing a business and there’s no way around it.
You do have to be an expert in nearly everything your business does and becoming an expert on all of it is going to take time and cost money. It’s going to involve embracing tasks you don’t find interesting and don’t enjoy. You can eventually hire people to do some of it for you, but unless you’re an expert how will you know who to hire and whether the employee or contractor is doing the job right?
Still wanna go into business?
If you’re already in business you’re probably saying “amen” to everything I just wrote. If you’re not in business yet hopefully you’re taking it all to heart. I still don’t expect to have time to update here regularly, but I will try to add a few posts from time to time about what we’ve been up to at my company and stuff I’ve picked up as I’ve been growing my business.
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