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A key question often asked by start-up entrepreneurs is: What should I sell?
The selection of the right product or service is critical. In fact, the
choice of a product or service for your business can make or break your
business. Choose a product that requires significant production capital when
you have none and couldn’t find any, and your business is compromised from the
start. Offer a service that a hundred other entrepreneurs offer in your
locality and you may find it hard to get noticed above your competitors. Or
select a product with an extremely specialized market yet you do not know
how to reach the potential customers, and your business can go kaput.
Your products or services define your business. Your products are your
business! If you want to turn your business into an income-generating
machine, the first step is to choose the right product or services to sell.
With the right products, you even stand a better chance at keeping your
customers. The idea is to keep your customers forever by continually
offering them a valuable product or service, thereby diminishing your costs
of reaching and appealing to them. Wise product selection is therefore
critical to your business success.
How do you choose the right product to sell? Here are a few questions to
help you narrow your focus and hopefully select the product that will work
for you:
1. What are your primary considerations for
choosing a particular product?
Make a list of your selection criteria, and what you think are important to
you in identifying what business to engage in. There are a myriad reasons
for selecting a product, and these reasons can include: financial benefit to
your business, relatively low investment requirements, positive return on
investment, fit with present strategy, feasible to develop and produce, easy
to source and procure, relatively low risk, and time to see intended
results.
2. Can you meet the needs of the customer and
solve a specific problem?
Your product must address a need or an opportunity. You need to know how
your products or services can assist customers. It must have a real value
that customers can recognize, want and need. Include in your product
information and sales materials how your products can benefit the customers,
e.g. help reduce time, effort and expense.
3. How capable are you to produce the product?
Just as an athlete needs to know his physical condition before he enters
a race, you must also know if you have the time, resources and capability to
produce your product. Many entrepreneurs make the mistake of going forward
with a business idea only to find that they cannot afford the manpower
required, or do not have the resources to outsource the product development.
As a result, many experience slippage in release dates making the mistake of
launching half-finished web sites. You must also evaluate at the onset how
you can scale up the production if there is a strong demand for the product.
4. What is the size of your potential reachable
market?
You need to at least get an idea of the size of your market. Know who are
likely to use or benefit from your products. If you are selling an
information product on how to sell at eBay, define who will be your
potential customers you think will be interested in your product. Many small
and home business entrepreneurs view market research as an unnecessary and
expensive cost, but understanding who and how big your market can pay off in
the long run.
5. Would you need to comply with new laws or
government programs?
New laws or government programs can impact your product. Some products
can be sold immediately without the need for government approval. Others,
however, require permits, licenses and approval from the government.
6. If a similar product exists, can your product
be superior in its functionality, presentation or marketing?
This entails knowing and understanding your
Unique Selling Proposition .
Your unique selling proposition is the one thing that makes that your product different than any other.
It's the one reason they think consumers will buy the product even though it
may seem no different from many others just like it. It may be that the
product has a lower price or more convenient packaging, or it may taste or
smell better, or last longer.
7. What barriers must be overcome for a
potential new product entry?
Barriers to entry include high research and development expenditure, high
presence of start-up or sunk costs, and international trade restrictions
such as tariffs and quotas. Patents are likewise important barriers for many
small and home-based businesses, where your competitor may hold legal
protection for an integral component of your product and hence may prevent
you from manufacturing your product. Other barriers to entry include
predatory pricing of competitors that will force you to operate at a loss,
high advertising and marketing costs to compete with established brands in
the industry, and the cost advantages enjoyed by your competitor that allows
them to set lower prices.
8. What are the potential sales, growth,
profits, and time for payback?
Before starting your business, run your numbers first. Get a clear idea
of your cost structure, how much sales you need to have to breakeven and
post a profit, and what your return on investment will be.
About the Author:
- - George Rodriguez is a writer for PowerHomeBiz.com. For information on
starting a small and home-based business, visit PowerHomeBiz.com at
http://www.powerhomebiz.com
December 2, 2003
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