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Starting a Business

I want to start a business but I don’t know where to begin(?)

Do you have an idea for a new product that you would like to sell? Usually a new business is started with the excitement of a new idea. If you have a concept for a new product that solves a problem for someone in a way that hasn’t been done before, you are already on a good path. The first thing to do is to get that product idea out of your head and into reality.  You don’t need a perfect model, just a bare bones basic prototype to start testing out the looks and function of your idea.  My favorite cheap and easy prototyping materials are cardboard, a sharp knife, tape and a hot glue gun.  Start getting your hands on your product!

Is it expensive to start a business?

Today, more than ever, it’s actually possible to start a business with almost no money.  There are so many ways to make and sell products that  require only a small investment.  Without knowing exactly what you are thinking about for a business, it’s impossible to give you an estimate, but  I think it would be safe to say that you can get started for $100-$500.

Check out Chris G. book – “The $100 Startup”.  There’s a bunch of case studies in it that will help you see how other people have done it.

How much will it cost to start a product based company?

Physical products will cost something to make, even if you find materials and build them yourself.  Even if you are the “factory”, you will still need to get paid, or at least value your time, so there’s never a free product.  That being said – the costs to have someone else product your product will be the #1 cost.  Surprisingly, the #2 cost for my pet products business is shipping.  #3 would be marketing.  Your numbers may be different, depending on the size of your products, and the way you run your business.

If your product is simple, you could probably produce limited quantities (even 1 at a time!) using a 3D printing service like Shapeways.  That cost could easily be under $100.  More complicated products could be as much as $50,000 for a mold, with minimum production quantities of 2000 units – resulting in at least $100,000 spent before even having something to sell.  It all really depends on YOUR product, and how you choose to run your company.

How can I finance a new company?

For most of us reading this site, the answer is probably going to be – use your savings.  To get money from other people – as an investment – they’ll need to be confident that your idea is going to sell and make them money in the future.  That might be a hard pitch to make if you don’t have any product to show them…and of course, you would have had to make that product with some money – usually your own!

If you have the good planning and stomach for it, you could consider using credit card balance transfer offers to get some cash together.  Those offers often have checks attached, and you could write one to yourself.  The rates range from 2% and up – which is pretty good – but he danger is not paying attention and missing a payment, which bumps your rate up to 12%, 15%, 21% – and higher.

Once your company is up and running, and you have some inventory or collateral, check out getting a Line of Credit from your bank.  I was able to secure a LOC based on the value of my inventory for the cost of 5% interest + $250 annual fee.

Will a new business take all my time?

It’s up to you!  I started my pet products company when I had another job.  I worked part time on the pet company, and did put in a lot of hours in the evenings and weekends, but that was my choice.

The great thing about starting a business of your own is that you get to decide how you want to run it.  If you want to limit yourself to 5 hours a week, then make that planning a priority. If you have 20, 40, 60 hours a week to put into it, then do it!

More time invested will usually result in faster, bigger growth – but again, it’s up to you to plan your own future.

Legal

Do I need to register a business?

>> Info Coming Soon!

What’s the difference between LLC, INC, etc?

>> Info Coming Soon!

What about trademarks, and copyrights?

Overview of the differences, and advice on where to start:

Do I need a patent?

First, let’s go over the 2 main types of patents: Utility and Design.

Design patents protect your unique decorative design of your product. This is about the looks only.  It is possible for someone to make a similar design without infringing on your patent, by changing the overall design by XX%.

Utility patents protect a unique function that your product has.  Say, for example, you’ve developed a new can opener that uses 4 blades – and that’s never been done before. You could file a utility patent to protect your unique function.

Do you NEED a patent? 

Yes, if you want: to protect your unique design or utility concept, to have some transferable asset on paper (if you were to sell the company or license the patent, you need actual proof that you own it, and a way to transfer the asset. You can’t transfer an idea.)

No, if you want: to save money, aren’t worried about protecting your idea (maybe it’s not unique), couldn’t afford a lawsuit against an infringer anyway, believe that the best protection is more good ideas.

>> More Info Coming Soon!

Ideas

How do I hire a designer?

>> Info Coming Soon!

I can’t draw – what do I do?

Drawing is a communication tool. You may think of drawing as only an artistic ability, but isn’t an artist just using drawing as a tool to communicate the way they see the world?  There are certainly many styles and types of artistic drawing, and you may have your own approach as well.  The thing to remember for your product design needs, is that drawing is the tool to get your idea out of your head and on to paper or the screen. Don’t worry too much about how good your sketches look – focus instead on how well they explain your idea.  Use callouts (words with arrows) to explain the details if you can’t show them with lines.

You can also use images photos of similar products to show your ideas.  For example, if you had an idea for a new hoody, you could pull together a bunch of photos of other hoodies and clothes, and then circle the part of each style that you’d like to have in your new design.

Writing also helps.  Try describing your product concept in words. Write about the function, the form, the materials, the size.

Clay is a great 3D communication tool as well.  If drawing and writing aren’t easy for you, try forming your idea out of clay – it’s a cheap and fast way to get an idea out of your head.

Try combining all methods and finding your own way as well.  Drawing like Da Vinci isn’t the important part, it’s your ability to communicate your idea to others in the clearest way possible.

I think my idea is good, but how do I know?

We all have the best idea! It’s easy to convince ourselves that our new product concepts are needed by everyone all over the world and will make us instant millionaires!  The reality is, of course, a bit different.  Your idea may seem like the best to you, and you’d certainly buy it, but then great – you’ve sold one product.  The goal is to discover if anyone else also will spend money on your product.

The way to start finding out is to research.

Research basics:

• Google
• Amazon
• Keywords search
• Magazines
• Forums
• Stores

>> Info Coming Soon!

Prototypes

How do I make a prototype?

There’s many stages of prototypes: 1. rough model to test your idea, 2. refine and test function, 3. Actual materials to test look, feel, function. 4. Pre-production proto or sample.  Since you’re likely just starting out, I’m guessing you’re asking about #1, the first proto.

Depending on what kind of product you’re building, your choice of materials will vary greatly, but I bet you can make your very first, rough proto out of cardboard.

The basic steps to consider:

• Draw out your product from all views.
• Add dimensions.
• Figure out if there are parts that attach to each other – and plan each part separately.
• Determine if cardboard could work, or find another material (link to below).
• Transfer your drawings to the cardboard and start cutting and glueing!

Your first attempt will likely be messy, and possibly frustrating if you haven’t done it before, but keep at it.  Make one and then repeat the process over and over, refining each time until you make a prototype that is close to your product idea.

What are the best materials?

I like to work with cardboard.  We all have this cheap/free material somewhere in our houses.  It’s easy to build with cardboard and you can crank out physical prototypes quickly.  Be sure you have a sharp knife, good tape or hot glue gun, and a safe surface to cut on.

Other materials that may work for you:

• Clay
• Wood
• Bluefoam (this is what we used in design school – it’s fast and durable, but crazy messy!)
• >> More Info Coming Soon!

What is rapid prototyping?

>> Info Coming Soon!

How much does a prototype cost?

If you decide that you’d rather have someone else build your prototypes to help you test your product concepts, you’ll need to be able to communicate your ideas to someone else.  Check out the product brief (link) info to help you make a document that you can share with someone.

Costs for someone else to take the reigns can vary, but likely will be anywhere from $500 to $10,000.  It all depends on how prepared your idea is, the size and complexity of your product, materials, etc.

If you have the ability to make your own proto, the cost can be kept low – just time and materials.

3D printing is a great way to make a simple proto in plastic or metal.  Costs could range from $100 to $1000, depending on size and materials.

How long will it take?

I bet you could whip up a useful prototype over a weekend, working on your own.  Hiring a proto shop to make your proto could take at least a week, but likely 1-3 months.  Scheduling, communication, and revisions can all add time and cost.

Production

Do I have to make everything?

I hope not!  There’s two general rules of thumb for production. And by production, I mean making 1 to 1,000,000 units of your product to sell. Rule #1 – Make it yourself and charge enough to pay for your time, materials and still have profit on top.

Rule #2 – Get someone else to make it and charge enough to pay for the finished product and still have profit on top.

The big difference is that there’s only one of you and potentially 1000’s of other people to make your goods.  There’s a finite number of units you personally can make, while when outsourcing production, the sky is the limit.

So, say you can make 100 units per year, and you want to replace your day job earning your $50k per year. Each unit must profit you $500 AFTER all materials, your time, any any other selling expenses (marketing, etc.).  Working backwards, if the unit must have a profit of $500, and your average overall product profit margin is 50%* for the  we can loosely say that the product must have a retail price of $1000.  Now, a small portion of that $500 cost would actually be to pay you for your time to make the product.  I do not recommend that you ignore that cost, because if you do, then you will never have enough profit to hire someone to help you or to make the product for you.

So, after that longwinded blurb, the answer is no, you do not have to make everything.  In fact, unless you are in love with the craft of building things and your retail prices are quite high, I would not recommend that you make everything!

*Rough averages example would be at product that you buy for $25 would wholesale for $50, and then retail for $100.  4x markup. Profit is $25 If you are selling direct (as I recommend) then the product could still retail for $100, but your profit would be $75. But don’t forget your costs of selling at retail (that otherwise would be paid by a store).  You could estimate $25 for these costs.  Then your actual product profit would be $50.  For the sake of the explanation, let’s say you have a 50% profit margin on your direct sale products.

How can I find someone to make my products?

I won’t lie to you – sourcing production is hard.  Way easier than 20 years ago, when you’d have to get on a plane and fly to China, while faxing pencil drawings to the factories (I’ve literally done that), but still today in 2016, it’s hard.

Finding factories in the US and abroad isn’t necessarily the hard part – it’s finding the right factory that can make your products well, quickly and at the right price.

There’s lots of ins and outs to go over, and a start to it all is here (link).

The quick answer to how to find someone to make your products is this:

Start researching on Thomasnet.com and Alibaba.com.  You can search by geographic area, product or service type. You can even try google searches.  It’s best to have a solid idea of what you need and the ability to describe it with different words – and to search with those different terms  – in order to see all the options.

More Questions?

Leave your questions in the comments and I’ll do my best to get you the info!