If you’ve spent any time on this site at all, you know that I’ve advocated in favor of multiple income streams as a strategy for dealing with everything from increasing your income to setting up a retirement Plan B. The world that we live in today is just not as simple as it once was, and the only real security comes from having more than one source of income. Along that line, I’ve been thinking for a while about adding a product line to my income mix.
Why Add Product Lines to the Multiple Income Streams Mix?
Since I already have OutOfYourRut.com and my freelance blog writing business, I’ve been thinking that adding one or more product lines to my income mix might be an excellent diversification. Now that I’m a member of the newly named mobile creatives class of entrepreneurs and semi-entrepreneurs, one of the biggest tasks at hand is to be on the constant lookout for new income sources to add to my income portfolio.
A product-based income source will be totally different from strictly providing cyber services, but it could be the type of revenue stream that might thrive when pure online businesses are sputtering. It’s an attempt to create an income that might be mutually exclusive from other sources that I have. You might want to think about doing the same thing, whether you have a business, a job, or both.
Choosing a Product or Product Line to Sell
Whenever you’re thinking about going into a new business, especially one that involves a physical product, it’s always a major debate determining what it will be. Personally, I favor products that are highly portable – the kind that are small, easy to buy, easy to sell, and easy to store in inventory. In addition, smaller products are also less expensive to ship.
There are a lot of possibilities here – and I may even violate my own guidelines and choose a product that isn’t necessarily small.
Two product lines I’m considering right now are jewelry, and buying and selling of used items (think Pawn Stars here). Truth be told, I know absolutely nothing about jewelry. But my wife is a jewelry aficionado, and has held part-time jobs in two different jewelry stores. She has been considering a jewelry related business, and we may be ready to put that into action. And jewelry would certainly fit the preference for small products.
I’ve already gotten my feet wet buying and selling used items. I prefer to shop at garage sales to buy various items, rather than paying retail price. Not only do we save a lot of money doing that, but every now and again we come across an item that we can resell. It’s sometimes possible to buy an item for $5 and sell it for $50. We’ve done it several times, but so far failed to turn it into an ongoing business. But it’s a lot of fun, and inventory is easy to come by.
Marketing on a Shoestring
One thing that working on the web has taught me is that it’s possible to market a business venture without spending a lot of money, or any at all. This is certainly a good way to start any kind of product-based business. Since such businesses tend to require more up front capital than service businesses, we’ll have to be able to do the marketing at a low enough cost that it can be sustained for months or years.
Beyond marketing on the web, we (my wife and I) are thinking about starting by selling our products at flea markets and street fairs. That will provide the opportunity to determine the market for what we’re selling, as well as to make any necessary adjustments, without taking a permanent space and investing a lot of money.
Getting Over the Technology Hurdle
Technology was once a major obstacle for the would-be self-employed, but that whole situation has been made much simpler by the web. Being able to accept credit and debit card payments is part of the infrastructure of any small business, particularly if you are doing product lines. You have to have a system in place that will enable you to take advantage of point of sale (POS) transactions, primarily credit and debit cards.
PayPal has been giving me the hard sell on their PayPalHere app. You can use it with your iPhone, iPad, or Android, for a fee of 2.7% of the payment amount per swipe. Since I’ve been working with PayPal for over a decade, and have found their services to be outstanding, this is certainly one possibility.
Shopify has an interesting product called the Shopify Cash Drawer, but also known as the Shopify POS, and it looks like a comprehensive tool for aspiring product merchants. It will require some cash up front, but it’s also a system that will allow you to handle the entire POS chain with a single app. There are three plans, Basic ($49/month), Professional ($99/month), and Unlimited, which is $199/month, but allows you to accept payments for a fee of as low as 2.15% per swipe (Basic and Professional have higher swipe fees).
PayPalHere looks like the better option for an upstart business, but Shopify POS can be a real deal for a high volume operation. We haven’t made a decision yet, but we will as we get closer to launch. If you are using another system that’s working well for you at a low cost, please weigh in with your recommendation in the comments below.
Avoiding the Bricks-and-Mortar Trap
A big part of my interest in the POS technology is my aversion to having anything that looks like a bricks-and-mortar business. I’m very sympathetic with those who run such businesses, and even a little bit envious of those who have managed to build very profitable operations. The resale potential on a successful bricks-and-mortar business can be outstanding, but for myself and for the way that I like to live my life, I much prefer the ability to travel light – even when it comes to running a business.
In the economic and regulatory environment that we are in right now, I think it could be a strategic error to sacrifice mobility in establishing a business. If you could know for certain that your business venture will be a gigantic success in Location X, it would be well worth establishing a fixed business. But if like me, you recognize the importance of relying on multiple income streams, you don’t necessarily want your roots growing in too deep in any one place.
The Payoff of Selling a Product Line
Perhaps the biggest advantage of selling a product rather than a service is that it’s usually easier to expand a product-based business. Since service-based businesses rely on the performance of individual services, you generally need to hire increasing numbers of people to get the work done. And when you start hiring employees, you have payroll to meet, regulations to comply with, physical space to house your staff, payroll taxes to pay, and various types of insurance to maintain.
With a product based business, you generally need far fewer employees, if you need any at all. The various functions associated with selling products can often be subbed out to third-party contractors.
In his book, The 4-Hour Workweek, Tim Ferriss made a strong case that product-based businesses are easier to automate than service businesses. The idea is to offer a product line, and then to have all the various processes and functions be filled by third parties. In this way, you can earn money from selling a product line while you are busy working on other projects to earn even more money.
I like that idea, and that’s the goal.
What do you think about starting a product based business?