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Posted: Wed 1st Mar 2023
The rules of business have changed.
For most of the last century, if you wanted to run anything more than a corner shop, there was a good chance you needed investors or had to quit your day job, at the least.
But the advent of the internet has brought us lifestyle businesses, bootstrappers and lean start-ups. You don't need to be a mass producer to sell to a global audience anymore.
And yet there's an implicit assumption. We often think of self-funded entrepreneurs as people who sell things like software, training courses or consulting, or services such as marketing or graphic design.
That's because it takes little or no start-up capital to launch products and services like these. All they take is time.
The unfortunate fact, however, is that these spaces are usually ultra-competitive.
Physical products are often a much less competitive space. Many industries aren't seeing rapid innovation. It's the right place to fight a downhill battle, assuming you can afford to play.
Can entrepreneurs get involved with physical products if they don't have investors behind them? Yes, they can, and it's only getting easier. Here's how.
It should already be obvious that if you're going to play the physical product game, you're probably not going to be inventing the next iPad.
It needs to be a simple product; something so straightforward that you can either:
build it yourself, from scratch
assemble it yourself, from parts you can afford
pay for someone else to assemble a prototype or a small run
These restrictions might make it seem impossible to come up with a new business idea. But all it takes is a little creativity and a willingness to innovate.
This isn't just so that you can find your space in the market. It's also so that you can sell at margins high enough to limit the risks associated with manufacturing, shipping and other costs.
Don't become the product expert. At least, not unless bringing the product to life is something you truly love and would like to do in the future.
Being an expert in product development isn't what's going to separate you from the competition.
It's the unique twist on your core product that's going to make it a seller. Take the Soma water filter, for example.
Mike Del Ponte didn't need to be an expert on water filters to pull over $100,000 on Kickstarter and launch a successful business to bring his product to market.
Instead, he approached David Beeman, a water filter expert who had worked with Starbucks and developed many innovative techniques, to design a compostable water filter that went above and beyond the competition.
Mike wasn't the product expert. He just had the unique idea: a beautifully designed and environmentally sustainable water filter. This was a product that did not exist. It was this idea that set Soma apart.
In Soma's case, it had to have enough capital to hire someone who could design a water filter, but this is by no means a necessity.
Remember, the key is to do something innovative in a stagnant industry, with a viable product that's relatively simple to design and manufacture.
It's important to be smart about how you invest your money. Here are a few specific examples:
Use a ready-made e-commerce software platform to set up your retail store and a tried-and-tested content management system (like WordPress, for example) for your blog.
Don't waste time or resources on web design or shop features. You want to have something up and running that looks professional without too much investment.
Outsource anything that would take a lot of time or resources for you to learn how to accomplish, and that doesn't match your skillset.
This has two obvious benefits.
First, it allows you to get things rolling faster.
Second, it allows you to clearly define what actually needs doing. If it's not one of your core skills and you aren't willing to outsource it, it probably doesn't need to get done, at least not yet.
Start talking to manufacturers and dropshippers. In the long term, you don't want to be manufacturing or storing the product in your own garage.
Most brand names are using white-label manufacturers and shippers. You need an idea of how much upfront capital you'll need to make this work.
Focus on minimum overall cost, not minimum cost per unit. Remember, this is an experiment.
Depending on the type of product you're developing, you may be able to start off early selling luxury, custom versions of the product. Since these are one-off products, the scarcity is high.
If your pool of target customers is big enough, this will allow you to earn a substantial profit with a relatively small number of products, because you'll be able to keep the profit margins fairly high.
If the product in question doesn't lend itself well to this kind of model, you'll need to either pick up a certain number of pre-orders or get crowdsourced funding to get your first manufacturing run off the ground.
Either way, you'll need to build a sufficient audience of potential customers for this to happen.
If you have a marketing team, great! But there are a number of ways to reach your target market without one:
How you choose to build an audience is up to you, your unique set of skills and your budget.
However, no matter what marketing strategy you use, the following three steps are absolutely vital:
You must transform exposure into an email list. No matter how many people you reach, and how much your project resonates with them, most will forget about launch day and probably forget you exist, if you fail to get an email address from them. Think about how to run a good email marketing campaign.
You must get as much valuable feedback from customers as possible and give them psychological ownership early on. This will allow you to hone your product to better suit your audience's needs and focus your attention on the features that matter, eliminating the ones that don't.
You'll almost certainly need to make some influential friends. This will most likely be bloggers or online influencers who have large email lists of their own. Give first and it will be much easier to ask for something in return.
You aren't launching an investor-backed enterprise, and you don't need to act as though you are. The purpose of the launch isn't to turn a massive profit or blow away expectations. It's to run an experiment and determine whether you have a scalable business model.
Whether you turn to crowdfunding or pre-orders, you want a strong product launch strategy with no surprises. Know exactly:
how much it will cost to manufacture, store and ship the products
what percentage of profits vendors, affiliates or other third parties are going to ask for
The point is to be over-prepared. You want to know exactly what sums of money you'll need, conservatively, for a successful launch.
You'll also want to know exactly how big your audience needs to be, conservatively, to pay for that using whatever funding you're assured of. Make sure you've taken the steps to prevent orders when the product is out of stock.
While a hugely successful product launch is what everybody hopes for, a weak launch is common and doesn't say much about your future success. Ramen profitability is a good sign. It means that you can invest the surplus back in your business and continue to scale.
