You’ve been scooping nickels into a bucket for hours. Sweat’s running down your back. Scooping and scooping. Clink clatter clink!
You stop, wipe your brow, and look in the bucket. The nickels are barely covering the bottom- where’d they all go?
Then you notice the hole… and the stream of nickels rolling away down the street.
If you’re in a service business, the bucks stop here.
Sure, you may work uncounted hours for your clients. You may struggle with charging what you’d like. You may want more clients or revenue than you have.
But, when money does come in, your business doesn’t ask for much. Your phone line. Some ink and paper for your printer. A new computer every three years or so.
The profit-margin on a service business can top 80%. Meanwhile, the business owner next to you is having a heart attack.
A heart attack over that extra 75%.
See, I grew up in a retail business. When you walk into a store and think, “wow, high prices here” you aren’t seeing behind the scenes. In retail, the profit is in the volume, because often the profit margin is a mighty slim 5%.
Paying employees, maintaining a physical location, inventory, power, etc, etc, etc… the owners are lucky to see 5% of the revenue as profit. An extraordinary operation might top 10%.
When you create a product, you’re in a new world.
Suddenly, everyone wants something from you. There’s a designer who wants to be paid to make your product look snazzy. There’s your web developer who wants to be paid to make your website work with the shopping cart. There’s graphics software, audio software, microphones, and editors, all with their hands out.
And, if you decide to actually put a physical product in someone’s hands, there’s printing. There’s shipping. And there’s the loss from products that get damaged and can longer be sent.
Plink. Plink. More nickels rolling away.
It’s okay. It’s the business you’re in.
Don’t let me scare you. It’s still worth it. Having products helps put your business into momentum, and it helps your clients in ways you just could never do on your own. All while bringing you the joy of passive income.
But, you don’t want to end up wearing an empty bucket by the time you’re done. With a slimmer profit margin, it pays to pay attention. To what? And how?
Keys to Profitable Products.
• Start small and imperfect and messy.
If you’re just starting out with products, don’t go big and flashy. Don’t spend gazillions on fancy designers. For one, you don’t know how well your product will sell. And two, the first edition ALWAYS has mistakes.
Save the fancy-shmancy upgrade for after you’ve proven that they sell, and when some income has arrived to pay for it.
Don’t get me wrong- you need SOME design to make it look decent. Just go with the down-home choice, instead of the Ferrari.
• Insource as much as possible.
You may not realize this, but your business represents a community. Your clients, your colleagues, your friends are all connected, at least in part, through your business. And, in a community, people naturally want to help and be of service.
Ask for help. Ask for volunteers. Ask for editors, designers, you name it. Surprise yourself and find out how much they like to help.
And, you can always be generous and give volunteers free copies of your product, and mention on the gratitude page.
• Make like a squirrel with winter approaching.
I always advocate pre-selling while you’re in the final production phase. Instead of taking the money that comes in to Nordstrom’s, squirrel it away into a side account for production expenses.
You’ll find that you want to order extra copies to gift to friends, supporters, and reviewers. You’ll notice some mistake at the end and need to reprint/reproduce part of it. Your editors will tell you it needs more work, and you need more help and support to get it done.
There are always unexpected expenses. Squirrel away the initial revenue for those expenses.
It may seem like producing a product is a sweaty, expensive, labor-intensive process. And, it can be. But, once it’s done, the profit margin on subsequent sales goes way up, and you get to enjoy all the vaunted benefits of having products. As long as you’re prepared to make it through the production process.
Be fearless and make your products. But, be smart, and you’ll survive and profit from the experience.
