Once we decide to leave our comfort zone and take the risk of starting our own business, the dream usually fades when we run into the obvious question: “What business can I start, what product can I sell?” That’s when we mentally start looking for business ideas.
We’ve already explained the 3 ways a business idea can come about: the spontaneous idea, the privileged idea and the deliberate idea. Entrepreneurs often have no choice but to go searching for deliberate ideas, so the points below focus on that kind of idea.
There’s another very common mistake we can make: looking for an idea that is too original and innovative, when the simplest thing is to adapt ideas or products that already exist. In fact, as we’ve explained before, nobody is going to have original business ideas anymore. And the truth is, you don’t need them either.
What can you sell online or in a physical shop that will be profitable?
Before we get to the central idea of “finding a product or service to sell”, don’t ignore the first two tips.
1. Don’t create demand; meet demand
This is one of the tips from Tim Ferriss, author of The 4-Hour Workweek. Many entrepreneurs create a very good product (probably an excellent one), and once they have it, they go out looking for potential customers to sell it to.
That’s a bad strategy to start with. It’s much more practical to look for a market with existing demand and then meet that demand. Look for customers with specific needs, and then invent, copy or adapt a product to sell to them. That way we increase our chances of success.
(See: How to validate a business idea in under 5 minutes)
2. Start small, but think big
The problem many other entrepreneurs have is that before they’ve sold a single product, they’ve already taken on a whole series of business expenses. Thinking big is not the same as starting big.
Many entrepreneurs complain about the lack of funding for their business ideas, but various studies have shown that businesses that start with more resources and capital than they need have a higher failure rate. Having too much capital often reduces creativity.
As a result, entrepreneurs who have to rely on their wits and creativity to start selling their products, and look for very cheap ways to do it, tend to grow more gradually, but on more solid foundations.
Even if the beginning is small, we should always have a broad vision of the future and never stop moving towards it. So if you can get a business off the ground with few financial resources, your business will be more likely to survive.
What’s more, once you have a business and can show that it’s viable, finding funding to develop it is much easier, because investors and banks appreciate ideas, but they prefer to invest in projects that have proven they work.
How do you find profitable products to start a business?
Here we turn again to several tips from Tim Ferriss, which I find genuinely useful.
3. Which social, industry or professional group do you belong to?
Although this first idea isn’t essential, the truth is that when deliberately searching for a business idea, we should start with what we know how to do, with the professional sector we know best, or with the hobbies we pursue.
It’s time to sit down and go over your skills: what kinds of companies you’ve worked for, which industry you’ve mastered, what your passion is, what kind of books appeal to you, what magazines you read… Basically, we’re asking, “What are we good at, what are we experts in?”
When we wrote our article “How to work out what to do with your life“, we focused on four pillars:
- What you’re passionate about.
- What you’re good at.
- What the “world” needs.
- What people are willing to pay for.
If you can come up with an idea that quickly ties these four concepts together, you probably already have a profitable business.
4. Clearly define how wide your market is
Here you’ll have to choose between an overly broad market and an overly narrow one. And be careful, because one isn’t necessarily better than the other.
A very broad market will certainly have much more competition. For example, saying “my product is aimed at athletes” means that in theory you have many millions of potential customers, but you’ll be competing against hundreds of giant companies, and against some of them it will be very hard to compete on price.
If instead you aim your product at left-handed tennis players, or only at people who box, your market will be smaller. Your customers will be more limited, but it’s also easier to become a specialist in a market where there won’t be so much competition. It’s just an example. Adapt the message to your case.
(See: These are the most searched-for and best-selling products online)
5. Now look for a product for that market
Once we’ve defined a market we know well and have a specific sector, look for products that market might need.
6. Your product’s main benefit should fit in a single sentence
Products and services that are hard to explain are, as a rule, also hard to sell. Don’t overcomplicate the message or make it too technical. Learn from Apple when it launched the iPod.
Steve Jobs didn’t walk on stage to tell the audience he had invented a portable device with X gigabytes of storage, a USB-compatible charging port and so on. What he did was simplify the message: “1,000 songs in your pocket.”
In your search for a product idea, don’t move forward until you find a simple explanation that takes no more than one sentence and that people understand perfectly.
7. Price your product between €40 and €200
This is a tip Tim Ferriss often gives, and while it doesn’t have to be followed to the letter, the reasons he offers for it make a lot of sense.
See also: Investing in a business: the most profitable investment
Most companies set their prices in the middle range, so that’s where we’ll find the most competition. And for Ferriss, setting a low price is not very bright, because there will always be someone willing to sacrifice even more of their profit margin and drive you into bankruptcy.
Ferriss is clear that a high price, besides creating the perception of an exclusive, top-end product (as long as it offers real value), brings a number of other advantages:
- With higher prices, you’ll have a higher profit margin.
- With higher prices, you’ll need to sell fewer units and therefore serve fewer customers.
- Higher prices attract customers who are easier to “maintain”. From his own experience, Ferriss says that customers who want to pay less tend to cause more problems and headaches than those willing to buy a more exclusive product (fewer returns, fewer complaints, fewer questions and more respect for their time and the company’s time).
But you shouldn’t overdo high prices either, because above a certain price, buyers will want to talk to someone and ask all kinds of questions before they buy, until they feel completely sure.
8. Justify the price
There are two kinds of commercial wars and sales arguments. Those who sell very cheaply generally defend only their low price, and that’s a war you should avoid. Those who sell high-priced products have no choice but to justify the high price. In other words, they have to explain why their product costs more than the competition’s.
And in this war, one of the greatest experts is, once again, Apple. The last time Apple defended the price of its iPhones, Tim Cook used an argument learned from Steve Jobs and made it very clear why they didn’t make a cheaper product. His message, in essence, was that others could make junk if they wanted; Apple doesn’t make junk.
Of course, given that your company won’t be Apple and you don’t have the reputation of Cook or Jobs, try to make your arguments justify the price in a more explanatory way.
9. Getting hold of the product
Now comes the most important part: how to get the product. There are several routes: distribution, licensing and manufacturing.
If you opt for manufacturing, try to choose a product that takes no more than three or four weeks to make, a point Ferriss considered very important.
A. Distribute a product
This approach consists of finding a wholesaler who already has the product we’re looking for. All we have to do is agree terms with the wholesaler and start selling the product to our market.
It’s undoubtedly the most convenient option, but also the least profitable. As Ferriss puts it, it’s the fastest way to get started in business, but also the fastest way to die.
The profitable life of a product sold under these conditions is usually too short, unless you have exclusive rights to sell that product, which is increasingly hard to get.
Even so, Ferriss does think it’s a good idea to become a distributor of other products related or linked to your main product.
B. License a product
Some of the most famous brands and products in the world have been acquired by other people and companies. One person invents a product, and another obtains the rights to manufacture, use or sell it, usually in exchange for a commission.
So we can be the inventor: we invent a product and license it. The other party takes care of selling it for us, and we receive a percentage of the sales. That would generate a steady passive income.
Alternatively, we can obtain a licence for a product so that we can sell it.
C. Create the product
This is the route Ferriss always recommends, because he says making your own product is much easier than you think. In fact, depending on the product, you can even contact a company that makes a standard or generic product, simply reach an agreement with them, and have them put your brand on it. For all intents and purposes, the product is now yours.
For Spaniards, the most basic example of this business and branding model is Mercadona’s Hacendado label (the own brand of Spain’s largest supermarket chain).
We can also make it ourselves, or contract the manufacturing out to a factory in India or China, where all we need to do is send what we want made, reach an agreement and get going.
10. Final tip: test whether your product can sell before going all in
Before you dive into the pool, make sure there’s water in it. In The 4-Hour Workweek, Ferriss offers various tips for running cheap tests of how viable our product really is.
Suppose we tell 20 of our friends: “Look at this cool product I’ve got, and it’s only €50. What do you think? Would you buy it if I started selling it?”
Most likely, your friends will say yes, that it’s going to be great and a sales hit. Now tell your friends: “Well, as it happens, I’ve got 10 of them already made in the boot of my car. Do you want to buy one now?”
Then you’ll see them falling over themselves to head the other way while coming up with all sorts of excuses not to buy.
That’s why before you start manufacturing or investing heavily in a product, you should start with a few units and sell them without trouble. If you struggle to sell the first 20 units of your product, it’s probably not a good idea to start investing in manufacturing it or in the infrastructure needed to sell it.
See also: How to turn $1,000 into a business making over $200,000 a year
Featured image: © Raimond Spekking / CC BY-SA 4.0 (via Wikimedia Commons), CC BY-SA 4.0, via Wikimedia Commons.
-9868.jpg){kind=link}