A product-based business generates most of its revenue from the sales of physical or digital goods, either to other businesses or consumers. Some examples include bakeries, boutiques, florists, online shops, e-book sellers, smartphone app developers and department stores. Product businesses have a tendency to require a higher level of commitment and investment, but they also tend to pay off when they’re successful.
Advantages of Starting A Product-Based Business
Designing and manufacturing a product is an opportunity to sell something totally unique – an innovation. You’ll need to patent, design, manufacture, and market your new idea, but if it takes off, you’ll be a sole source with no competitors. Designing a new product is more achievable than ever with crowdfunding. All you need is a sea of customers lined up and ready to buy. You won’t need to spend a penny on creating your product until you’re sure there’s a demand for it.
Selling a product also means you can scale more quickly. You won’t need to fulfill a service for each customer, or even know their names. You’ll never get more time in the day to work, but you can always make larger orders with your manufacturers as your customer base grows.
Disadvantages of Starting A Product-Based Business
Cost and time to startup are drawbacks for entrepreneurs, especially if you are starting small. There are other challenges unique to product sellers. All of these hurdled can be conquered. They won’t necessarily stop you from becoming a success.
Many products, particularly those related to fashion, technology and children’s toys, rapidly go out of style. You’ll need to be on your toes if your niche comes with fast-changing trends. Otherwise, you’re bound to end up hoarding outdated stock that nobody wants. Women’s fashion is the worst for this, as you’ll need to buy seasonal stock months in advance. Unless you know what Jennifer Lawrence will be wearing next October, steer clear of women’s fashion.
Where To Get Products To Sell
If you’re starting a retail business, you’ll need an EIN number and resale certificate before beginning a relationship with a supplier. These documents allow you to purchase items for resale at wholesale prices, and most likely without tax. Only use suppliers that ask for copies of these documents, otherwise, they might sell to just anybody, meaning you won’t get exclusive products.
How Drop-shipping Works
Instead of purchasing or manufacturing products to ship to customers, you can choose to base your business on drop-shipping. This means you will take orders from customers and pass them on to your supplier, who will ship products directly to customers’ homes. You won’t have to store products or package and ship them yourself.
Very few manufacturers drop-ship, and even fewer do it reliably. You will also need to compete with other drop-shippers who sell identical products. For best results, avoid widely-known drop-shipping suppliers. Some manufacturers might be willing to drop-ship with you, even if they do not advertise that they do. You’ll need to look beyond the first page of Google results to find your ultimate supplier.
- Gourmet sauces and condiments
- Artisan soaps and candles
- E-books and digital downloads
- Pet supplies
- Spice garden kits
- Sewing project kits
- Subscription box services
- Solutions to everyday problems (e.g. the Snuggie, The SlapChop)
- Home-delivered, homemade food
- Weight loss products
Product-Based Business Ideas To Start With
Selling physical products can be complicated and costly, but that shouldn’t discourage you from building the business you really want. Make sure you have more than enough funding to take care of the complexities, the setbacks and yourself in the few years it will take to make a profit. Otherwise, start low and slow and find your market online before taking the plunge.
If you need help with your business taxes for your product based business, contact us for a free quote.