Some entrepreneurs begin by creating a new product they believe will be a hit. But many aspiring entrepreneurs don’t know how to turn an idea into a profitable product-based business.
If you want to start a product-based business, here are some things to consider:
1. Test your idea
Before starting your own business, you should first determine its viability. After developing the product, research your direct and indirect market competitors. If you make a unique Mexican sauce, you should research your indirect competitors, such as other Mexican sauce makers. What food products will go with your sauce? Why use your sauce? It’s one thing to have a good idea, but another to make it popular.
2. Market research your product
Is your product in the right market? If you live in sunny California, you may have a great idea for winter gear, but little demand. How will you reach them? What are your customers’ buying habits? How often do they buy your products? Or is it seasonal? So how will you survive the winter? Your market will determine your distribution method, pricing structure, and other business variables.
3. Be familiar with it
Your legal structure will depend on your tolerance for risk, the number of investors, and the tax structure. You can start as a sole proprietorship if you are one person. As for partners or investors, you can form an LLC or corporation. Learn the benefits and drawbacks of each structure and pick the best one for you.
Even with a great idea and a ready market, you will fail if you lack capital. Know your manufacturing and operational costs. Decide where the money will come from – savings, relatives, friends, bank, angel investors, or SBA. If you plan to involve partners, define their roles and responsibilities and ensure that all agreements are in writing.
5. Make a plan
Check out the vendors. Locate your ingredients and raw materials. Consider the packaging; many new products languish on store shelves due to poor packaging. The initial consumer response to your product or service is determined by its presentation. Decide where and how to sell your product. Over-distribution of a specialty product, for example, may erode its perceived value. A mass-market product, however, must be distributed with consumer convenience in mind.
6. Create a marketing plan
Can you move your goods? How will your product be known? You must consider your product’s marketing strategy. Will you advertise in a market-specific publication? How much is it? Your marketing strategy should consider how your product will affect your target market. Your product must be designed and marketed to clearly meet an unmet need.
7. Plan your business
Steps 1-6 will provide you with enough information to write a business plan. Also, it helps you think about your business and what you need to do. Investors will also want to see your business plan.
8. If you plan to work from home, know the zoning laws
Some counties restrict what you can do for profit inside your home. Zoning considerations usually include traffic, noise, and safety. Check for any required licenses and permits now. Consult your government’s food administration office if you plan to sell food.
9. Begin the registration process
Depending on your legal structure, you may need a lawyer. Open a business bank account after registering your company and fictitious name. You may also need an EIN.
10. Obtain insurance to cover damage, theft, and other unforeseen events
Risk is inherent in entrepreneurship, and you want to minimize it. But beware of “overprotection” or getting too much business insurance. The general rule is to only insure what the company cannot afford to cover.
11. Defend your work
Patent your new Mexican sauce or mitten thermal system. It’s costly and time consuming, but it reduces the risk of someone stealing your idea.
12. Prepare your business cards, brochures, stationary, and other forms
Start building your online presence if you plan to promote your product online.
You’re now ready to go! Plan this event from the start date. Send out press releases to local papers about your new sauce. You can use this chance to promote your company.
No, starting a business isn’t 1-2-3. There will be many obstacles to overcome. But believing in yourself and your product will get you far.