Financial Independence is a goal of many people. Ever since I had my first job (making bagels for an unreasonably controlling boss) I knew that wasn’t what I wanted. I didn’t want to have to work underneath someone, hour after hour, and wait for a paycheck to come every two weeks. I wanted to be able to take vacations when I wanted to, and have the personal and financial freedom to live the life that I wanted.
Most people decide to get into entrepreneurship because they want money and freedom. But being successful takes a lot of work and a little luck.
There are many routes down the road of financial freedom and they all have their distinct challenges and rewards. You can create a product, sell a service, own a retail store, write a blog, etc. If you have a great idea or invention, starting a product company may be right for you.
I have several products that I have gotten to market or am currently developing. Below I’ve made a step by step list that will hopefully help you understand the process a little better, and give you the confidence to get started, which is often the hardest part. If you take the risk, challenge the status quo and do something different, you may just be richly rewarded.
Step 1: The Idea
The first step in starting a product company is the idea. You need to find a way to bring value to the world. Find something that makes peoples lives better, easier, happier etc. If you can create value, you can create wealth.
Value can come in many forms. Most often it comes in the form of solving a problem or making an improvement.
Every day of our lives we perform hundreds of tasks without even thinking. Some of those tasks are difficult, inefficient or boring, yet we have been doing them so long we don’t even notice. Something I like to do is analyze in depth a simple task, that most people perform mindlessly. I look for improvements I can make that would simplify or add value to that process.
One example is going to the toilet in the middle of the night. Most people, when nature calls, are half asleep and don’t want to turn the light on. They end up stumbling over things and stubbing their toes. And once they get to the toilet, peeing in the dark becomes a challenge (especially for men who refuse to sit while peeing). So some geniuses out there decided to come up with the motion activated night light, and the toilet bowl light.
These modest inventions aren’t the products of the century, but they sold and made money, and solved a simple problem. The best way to solve these problems is to brainstorm and make a list. As you go through your day, try to adopt a new perspective; a perspective of intolerance towards inefficiencies and difficulties. Every problem you come across, write it down, and then later sit down and start brainstorming solutions.
Step 2: Design and prototype
The next step is to refine your product and get a working prototype in your hand. There are many ways to get a working prototype of your idea. Many companies offer designing and prototyping services, that can cost huge sums of money. My advice is to stay away from them at all costs if you can. The last thing you want to do is refinance your home, and go into debt for a product that is not even proven to sell.
If your product is so complex, that you need to hire someone to help, then I would seek an outside investor. If your product truly is promising, an investor will see the value and want in. You will offer them equity in your company, and they will inject a predetermined amount of money into the business.
The best method by far to get a working prototype is to do it yourself. Make it in your garage out of popsicle sticks and glue, if that’s what it takes. If your product requires welding, borrow a welder and learn how to weld. Learn the skills that you have to. The internet is an amazing resource and you can learn almost anything, like never before.
Once you have your first prototype, refine it. Test it out and see how it works. Find the problems and fix them. Get your product working in exactly the way you want it to.
Step 3: Patent
The next step in your product development is getting a patent, or more specifically putting in a “provisional patent application”.
A traditional patent is a filing with the government, that guarantees you the right to your invention. If you don’t have one, anybody can steal your invention and use it, even if you can prove you invented it first. You see, the United States recently moved from a “first to invent” system, to a “first to file” system. This means that even if you can prove without a doubt that you invented something before the other guy, it won’t matter. You must be the first one to file a patent with the USPTO office.
A typical design or utility patent requires a lengthy patent search, professional drawings, convoluted and complex design explanations and expensive fees. If you hire a lawyer to help you with the process it can cost from $5000 to $15,000.
Luckily for us, the US Govt created something called a provisional patent. A provisional patent isn’t a real patent. All it is is an official filing with the government to declare that you are the first to invent something. Once you file a provisional patent, you have 12 months of breathing room to file an official patent. During that time you can use the term “patent pending” and even start selling your product. A provisional patent is no guarantee you will get a real patent, but if it’s done correctly it can give you time to start selling a product, develop your proof of concept, and get investments for a full patent.
There are only a few procedural requirements for a provisional patent. Patent searches, drawings, and lengthy writings are optional, and the whole process can be done online. The filing fee is only $60 (for a micro entity), and the whole process takes about an hour.
Now, even though extensive detail is not required in your provisional patent, it is a good idea to put as much as possible. Take photos of your prototypes, make pencil sketches, and explain in high detail every aspect of your product. This will protect you best in the future.
Step 4: Production
Once you have your prototype in hand, and a provisional patent filed, its time to start making your product. If your product is simple, and you can make production models at home, just like you did your prototype, then do it. Keeping costs low, and proving your product is important.
Make 10 units at home and sell them on eBay, Amazon, trade shows or wherever. If they sell, get feedback from your customers on what you can improve. Then take the money you made, make more product and continue selling. Once you are confident you have perfected your product, then you can approach a manufacturer.
If your product is slightly more complex, and you can’t make it yourself, you will have to use a manufacturer. With this, comes some financial risk. You are about to order a large amount of a product, that you’re not entirely sure will sell. Regardless, if you have no other choice, sometimes the risk is necessary.
To find a manufacturer, start with the internet. There are plenty of manufacturers in the United States, but they can be expensive. Factories in China aren’t as cheap as they used to be, and they have a habit of stealing your inventions. My best advice would be to find a reasonably priced offshore manufacturer, that has an office in the US. They will be able to work with you in person, while still offering lower costs.
Once you have found a manufacturer that you like, call them. Tell them what you want to make, and set up a meeting. Many offshore factories will be competing for your business and often will provide free designing services. It is a good idea to get quotes from several factories, before making your final decision.
Also, make sure that you are scrupulous in the details of your agreement. Make sure the exact quality specifications, shipping details, and payment terms are well understood. Most manufacturers are honest, but you want to be well educated in the process.
If you can’t afford the manufacturer cost’s you are quoted, you can try Kickstarter. Kickstarter allows you to crowdfund your product to get enough capital for manufacturing. Be aware though. Not all products sell well on a platform like Kickstarter. If your product is not demonstrable, it may not be something Kickstarter backers are interested in.
Step 5: Packaging:
I would recommend, no matter what product company you start, to start selling outside of retail. However, if you want to jump straight to retail, you need retail packaging. Search online for box manufacturers, and take the same steps and precautions I described above for manufacturers.
The box designing and details are mostly done on what’s called “vector” software. If you are not familiar with graphic design, this software can be difficult to use. Many offshore box manufacturers offer free packaging design services.
You can also utilize Fiverr. If you search for packaging design on Fiverr.com, you can find graphic designers that will design your entire packaging for less then $100.
Step 6: Sell, sell, sell!
As Mr. Mark Cuban always says, “Sales cures all”. Your sales are the most important aspect of your business. If you can’t sell your product, then there is no point in making it. When you first make a product you can do one of three things to sell; you can sell your entire product, patent and manufacturing rights, you can license your product to let a company sell it for you, or you can sell it yourself.
When you are first starting, I would ALWAYS recommend first selling the product yourself. If you can prove your product sells well, then you are going to get a lot more money in a buyout or licensing deal later on.
The key to start selling is to know who you are selling to. If your product is a general interest product, that ships well and is appealing in an online environment, then start on Amazon or your own website. If you have a product that sells better in person (food, beauty products etc.) you can start selling at trade shows, farmers markets etc. Your best customer may even be business’, and not consumers. One of the first products I developed wasn’t selling well directly to consumers. I modified my sales strategy, and found out it sold remarkably well to hotels and resorts.
If you want to go straight into retail, start making cold calls. Start with small “mom and pop” retail stores, as they are much easier to get in to. They don’t have to get extensive approval for new products like chain stores do.
Every day you should be doing something that improves your business and makes sales. Always be on the lookout for the next market to sell your product in.
Step 7: Evaluate
This is one of the most important, but most forgone steps. Constantly reevaluate your product and your company. Take a step back, and remove yourself emotionally. If your product is not selling, you need to find out why, and ultimately make the decision whether it’s worth your time to continue.
Also, listen intently to your customers. Find out what they want and how you can do better. A good entrepreneur is always making changes and analyzing the company. Complacency kills when it comes to business. You will quickly become outcompeted.
Step 8: Make Money!
Once your product starts to make money after you’ve put your blood sweat and tears into the project, it’s important to remember why you started your own business in the first place; Freedom. Don’t let the business take you over completely. Work hard, but know when to take a break and let the money roll in.