September 21, 2019 at 7:15 pm #114988
Tried creating this thread once. Trying again.
tldr version: I like to innovate/invent/design and don’t like business stuff very much. Looking for advice on how to start a small scale business that allows me to keep focusing more on inventing and less on the business stuff while making enough money to live off of (not get rich).
This is a question mostly for Ryan, because I think I’d like to adopt his business model as I understand it now. I’ve been working on making a product for over a year and a half now. I got into 3D printing, bought and built a LowRider to help build the product. I’m finishing up a prototype that I think I’ll move forward with. I’m not sure what I’ll do next.
I started making the product because I wanted it to exist, but it doesn’t (at least in the form I want it to). I like the challenge, the 3D modeling, 3D printing, milling, and all the other inventing kind of stuff. I have fun designing, building, and testing. In other words I’m passionate about the inventing/innovating. Additionally, and very important, I’m in control of it, meaning I get to work on it when I want, at my pace. No boss or anyone besides myself pressuring me to get it done, go faster, or do it a certain way. But in the end, I’d like to make some money with it. Not get rich, but it’d be awesome if I could live off the income (I’m pretty frugal).
With all that in mind, now that I almost have a prototype done, I need to decide what kind of business model I want to use. I could try to go full startup. Quit my job, find investors, get a patent, find manufactures, marketing, etc. The problem is all that business/legal/marketing stuff doesn’t sound like something I’d like to do. The innovating/inventing part of a business sounds like something I’d enjoy, but the business stuff sounds terrifying, stressful, expensive, and not something I’d enjoy.
Another thing to keep in mind is I’m not in the position where I hate my day job and want to start a business as a way out. I like my job. If I won the lottery or knew with 100% certainty that my business would succeed would I quit? Probably. But as far as regular jobs go, I think it’s one of the best I’m going to find, and for the most part I enjoy it. I’m comfortable where I am in life and don’t want to risk it all by going full startup.
All of this is why what Ryan’s doing sounds appealing to me, at least what it appears to me he’s doing. He has his products and runs a small scale business where he sells DIY kits himself. It seems like small scale home manufacturing. Maybe I’m over simplifying it, but it seems appealing to me to be able to start out small, making and selling DIY kits and doing some small scale advertising (buy ads, go to trade shows or maker faires, connect with YouTubers or create my own channel). Possibly get a provisional patent (which I’ve seen can cost anywhere from $130 if you do it yourself up to $5k if you hire someone) and use the year it gives me to see if the business actually makes money and can scale up to the point where it makes sense to get a full patent. It seems to me that if I keep it small I’ll be able to focus more on the inventing and less on the business stuff. But if I see the business seems really viable and could make lots of money, I might be more willing to do more business stuff. Or I could just stay small if I don’t want to scale. I’m not looking to get rich (although I wouldn’t mind :D). I want to make enough to be able to live off of if I choose to, but even if I make less than that there’s a good chance I would keep it up if I enjoy it. Oh, and keeping it small sounds like I could still keep my day job.
So question to Ryan, am I completely off with my observations? Do you (or anyone else) have any advice for someone like me? Thanks to anyone who has read this far. If anyone has any information on home based, small scale manufacturing, please share. I found this video and this video to be helpful.
By the way, some might say that product licensing is a good option. I’ve read a couple of Stephen Key’s books on the subject and done research. My general feeling is that with product licensing you have very little control and can end up wasting a lot of time and effort. Take a look at this post to see what I mean.September 21, 2019 at 7:37 pm #114991
I would suggest finding a partner to handle the stuff you don’t like. If I were to try to launch a business, I know there are certain things that, because I don’t like it, just wouldn’t get done. Different people have different propensities, and might be differently motivated by money. For example I could never sit in a booth at a craft fair and sell carved things. Or let’s say it would have to be extremely lucrative. But perhaps I could do the CAD + CAM and babysit the machine and let someone else sit in the booth selling the stuff twice a month or whatever.
This is from someone who doesn’t have a side business, so maybe not worth much, but I have considered for my situation what it would take to be worthwhile, not just in terms of money but in not doing things I hate.September 22, 2019 at 6:11 am #115004
I’m going to give a brutally honest devil’s advocate opinion here.
If your product is to have any chance of being successful then you have to have complete faith in it. That might mean raiding your savings and selling your possessions to drop $5k for a patent; if you’re not keeping control of it “in house”. If you don’t believe in it enough to make that commitment or investment then how can you realistically expect anyone else – potential business partner, licensor etc. – to?
Entrepreneurs don’t get anywhere by cautiously dipping a toe. In saying that I wish you all the best!September 22, 2019 at 7:06 am #115011
A lot of times I see people think that just because they have a good idea means they can be successful. That is absolutely 100% wrong. An idea is nothing without execution, and that means everything involved on the business side. If you aren’t willing to put in the work on the stuff you don’t like, you probably shouldn’t try making it into a business. Also, I’d highly recommend against a partnership. Just my 2 cents. They almost always end poorly.September 22, 2019 at 8:04 am #115016
Thanks for the advice. I’d like to test out the idea before trying to find a partner, if I need one. The hard part is he/she would need to be someone I could trust.
I don’t really agree with the statement that in order for the business to succeed I need to risk everything or have 100% faith in it. 50% of startups fail within the first 5 years for a variety of reasons. There’s actually a study that found that entrepreneurs were 33% more likely to succeed if they kept their day job and started the business part time. Going all in may be a bad move much of the time. There are lots of people who start out side hustling and succeed. And yes, there are many examples of people who did go all in from the beginning and came out very successful. But I wonder for each person that went all in and succeeded, how many equally capable people did the same thing and failed. Survivorship bias can make it hard to tell what ways there are to succeed.September 22, 2019 at 9:30 am #115022
Wow, there is probably a whole book series worth of questions in there. I skimmed through the vids you linked as well, I think they have some great things to say and I didn’t find anything I disagreed with. What I am hearing is you would prefer to license your idea, and not do it yourself. You mention doing it like me, from home but you also say many times you don’t want to deal with all the rest of the stuff. Sadly my job is 99% other stuff. In the last 7months I have probably spent 45 minutes in CAD. I am at a tipping point but not relevant to your questions. One person from home can literally only do so much, and I assure you you are not considering all the actual stuff that needs to be done. Without an idea of your idea it gets more complicated. For example if it has to deal with kids in anyway….good luck, insurance and safety tests will sink you without help. Even then lawsuits can still happen, this in my book is a licensing situation for sure. I helped a person with a simple baby product 4-5 years ago I just saw it for sale from her socials directly.
You are almost done with a prototype, that is not really very marketable unless it is groundbreaking. So you do not have a product yet. Either way you need to figure out sourcing of materials, parts, and/or assembly, packaging, shipping possibilities (why I do not ship rails). I worked at a design firm. When a project was done we gave the clients all the files and instructions needed to manufacture the thing as well as vendor options with prices and packaging options. They could literally hand off our folder to a manufacturer or do some changes themselves. If you want a licensing or royalties you need to have all of that done, they might not use it but the info needs to be there. 10 units to 1,000,000, profits come with production.
To give you a rough idea if you have something viable for licensing, the retail store will want at least 100% markup, the manufacturer gets paid and you get your royalty before that. So lets say you have a $20 coffee mug after manufacture your cuts and boxing, no store will want that because they can not sell it for $40. To give you an idea Hanes and fruit of the loom Tshirts are about $1.30 in white and $1.80 in color, in low volume much cheaper at 10,000. Go check walmart or target for blank T-shirt prices on the shelf.
To give you a rough idea of doing it yourself. I would say doubling your costs is a minimum target to do it yourself, triple or higher you might be able to get royalties instead. Maybe to drive that home a bit in California for a small business I have paid 42% of my profits to taxes every year no matter how much I made. So your double, is about 50% profits in your pocket, but really even less.
I could go on forever really. In the end I say do it part time. You will know really quickly if you should go full time. If you can not handle tow jobs you can not handle one mildly successful biz. I have had all sorts of side businesses from grade school up (seriously), almost everyone of them eventually got to the point of success where I had to make a choice, “is this what I really want to be doing 80 hours a week?” most cases it was no and I was content with my regular job after that for a while. There is nothing better than trying. There are a million things to to learn, if this is not successful you you will know how to get into the next one easier.
I unfortunately can not weigh in much on licensing and patents. Provisional is fine, if you want to talk to large companies, you can actually get away with more than a year. Patents are giant hurdle that can make or break you.September 22, 2019 at 10:05 am #115032
I don’t really agree with the statement that in order for the business to succeed I need to risk everything or have 100% faith in it.
I wouldn’t say you have to risk everything but the wording in your post seemed to suggest an overall attitude of “it might work out it might not” and that’s not what any investor, licensor or customer wants to hear. Working two jobs is absolutely fine and doesn’t show a lack of faith – it shows that you’re determined to make this succeed and willing to work all the hours to make it happen. We all need to eat. I think you really do need to be 100% confident in it as fully functional product to convince others though – and that may involve making some form of calculated financial risk.
When looking at viability, evidence helps. What is the size of the market you’re selling into? What is your share of that market likely to be increasing year on year? Who are your competitors? How might legal restrictions affect your sales (differing local bylaws and regulations)? I don’t know much about small business in the US but over here in the UK most small businesses fail through lack of up front planning. Even “success” can kill you if you hit issues with cash flow or with your suppliers. Very much depends on the nature of your business. Write a comprehensive business plan – the exercise in itself might answer many of the questions you have. One way to get it sanity checked is to take it to a bank and ask them to loan you money to start up – they’ll soon point out the flaws; along with rejecting your loan application!
Absolute worst way to start a business venture is with the attitude that you only have a 50% chance of success – no matter what the studies say.September 22, 2019 at 11:31 am #115036
Thanks for all the advice Ryan! It’s great hearing it from someone with your experience. Especially the advice about marking up the product’s sale price. I didn’t think about that and didn’t realize how much more the sales price needs to be. With the product I have in mind, it might not be possible to charge so much.
It’s disappointing to hear that you don’t get to spend time on designing. Sourcing and making the parts and then selling DIY kits is just one option I am considering, and the videos made it seem like I’d have way more time to focus on design.
Another approach I could do, that’s even simpler, is once I have the product done to make a few videos showing how to build one yourself and try to make money from the videos (maybe start a full fledged YouTube channel), affiliate links to all the components, donations, etc. But I probably won’t make much money that way, at least at the beginning (maybe it could be scaled, or lead to a kickstarter or something). But I get to focus on what I enjoy doing. If I go with a YouTube channel, I could keep it going with other product ideas I have as well.
I have had all sorts of side businesses from grade school up (seriously), almost everyone of them eventually got to the point of success where I had to make a choice, “is this what I really want to be doing 80 hours a week?” most cases it was no and I was content with my regular job after that for a while.
Hearing that makes me feel better. Like I said, I like my job (as far as liking jobs can go). I feel pretty comfortable and happy with where I am with my job and life right now. I don’t want to ruin it.
Paul, thanks for the advice. Yes, I agree I need to be 100% confident that the product is functional and works. If I’m not, then I’ll keep trying to improve it until I am. But even if I’m 100% confident the product works, that doesn’t mean it’ll sell. That’s why I think it’d be great to start out small, gauge interest and viability, and scale up if things go well. Like you said, I might run into legal or other issues. I’d like to encounter them before I’ve spent my savings. Another thing is if I can start out small and show that there is lots of interest, that could be evidence that it will succeed I could point to when/if I decide I want to try to find investors or get a loan.
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