Recipe for a Successful Business Part #1

In this series of articles, I am heading in a little different direction than previous ones.  In the past, I have written how I use the ShopBot to cut parts, hold them in place, and little extra gadgets, tricks, and accessories that can be added to the ShopBot.  This series will give you ‘food for thought’, and will give you insights from both myself and Scott, my son, who has been working with me each day since last November.  Together we will put our knowledge and experiences together in a form that we hope will help you along the way while, as an industry, we evolve and change to meet the demands of the current economic state.

With the current economic situation people are turning to smaller business structure where they produce their own line of specialized products. We recognize that there are lots of questions involved with starting a business like this, and it can be quite overwhelming to suddenly be handling your own research/development, manufacturing, marketing, and shipping.  That is why we have decided to publish a series of articles helping you with the various processes leading up to a successful small business based on a product line of your choice.  Picking these products seems to be an area where most individuals fail.  There is nothing hard about this step, and for some reason business owners make this a major obstacle.

The First step in picking your new product should be making a list of your current interests.  Then, review this list with an eye towards, ‘what can I produce to further other’s enjoyment in this field’.  You will find, that making a product that you have no interest or experience in will be much more difficult to be enthusiastic and knowledgeable about, thus making it more difficult to sell.  For example: we live in a rural setting where there are many farms that raise horses.  The extent of our knowledge with horses is limited to: they have 4 legs, hay goes in one end and fertilizer comes out the other!  With that degree of knowledge, we would surely fail in trying to produce horse related items. However, take camping, or outdoor cooking as an example, and we would be more qualified to produce a camp gadget or some other item of interest to outdoor enthusiasts.  If you will take a day or two to carefully make your list and then comb through it and find an area that most excites you, you have set the stage for picking your first product.  From here, you will want to put every idea that comes to mind for products down on paper, save it, and come back to it a few hours or even days later.

When it comes time to pick your product, give thought to how wide of an appeal this product has.  For example: If you come up with a perfect product that matches your interests, but would only have appeal to folks in your neighborhood, you more than likely will not be able to turn this product into a profitable business.  However, if your product has national or even worldwide appeal your chances for success increase exponentially.  You must also consider the method of delivery to your customer.  We have found that smaller more easily shipped items are much easier for me to get into our customer’s hands than large more bulky freight items that require trucks instead of UPS or USPS for delivery.  Also think about the time it takes to produce each product, remembering the more complex it is, the more expensive the product will be and thus, the smaller the audience you will have to promote your product to.  Think about utilizing the scraps generated in your shop or other shops close by.  If you can find a use for the material previously considered trash, this will allow you to keep the cost of your product down, and also keep the price point low.  Another benefit will be keeping this material out of the landfill!  Taking care of the environment is a project that we all should share, and with the prices of material rising as they are, every little bit helps.  Try to utilize your CNC Router or other automated tools for production, any time you can decrease the amount of human labor, the less costly the product will be overall. And finally, be mindful of the quantity of product that you can produce, keep quality on the top of the list, and don’t sacrifice quality for quantity.  You may find that you have to invest in additional equipment, or even expand your facility to meet the demand for your product down the line.  Don’t be lured into over-extending yourself financially by what may seem to be attractive terms or lease agreements.  Build your business on a solid cash base foundation, and you will not only sleep better at night, but you will be much more “recession proof” than the business next door that has monthly payments that exceed monthly income during slow periods.  Don’t be discouraged if your first months are slow, you still need to set yourself up for large scale production. If you can’t get the product to your customer, you will find you don’t have repeat or consistent sales.  Just because you aren’t moving 1,000 units this month, doesn’t mean 3 months from now you won’t be over your head swamped!

We have found that items priced under $50 each, no matter what they are, have a much broader appeal than items priced above that mark.  In today’s economic times people are tightening their budget when it comes to nonessential or frivolous items.  If your product is non essential, you must be sure that it has a “wow factor”.  We define the “wow factor” as simply the expression you see on a person’s face or their exclamation when they first see your product.  If you can find a way to partner this “wow factor” with the needs of their children or pets, you have now created a more appealing product.  Remember to view your selling price not only from a business standpoint (you’ve got to make a profit after all!)  But also view this price from your customer’s perceived value of the product.  Some business owners will argue it is better to make one item and profit $10, than it is to make ten items and profit $1 each.  While it is true that time is money, in the long run, we would rather have ten happy customers who are willing to buy from us again, than to have one happy customer who may buy from us again.  Keep in mind that people talk.  The word will get out to your customer’s friends and family if you produce a quality product that they find useful.  Thinking these situations through will put you ahead of the game when it comes to that difficult question of “what do I charge for this?”

In future installments in this series of articles, we will cover the actual manufacturing of this product we have chosen, as well as promotion and expansion of your product line.  We will also explore how to “think CNC” when it comes to production, as well as setting up your shop for successful large scale manufacturing.

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