Section 3 // ●●●○ Quick Links: 1: Planning 2: Framing 4: Growing | Dashboard: Shopify Business Blueprint
Table of Contents
With an idea of what you want to sell, a view of the competitive landscape, and your ideal customer in mind, you’re ready to start developing your first product or service.
Below is an overview of different product sourcing options that exist for today’s entrepreneurs.
<aside> 🧑 Make it Yourself
Pros: Producing your products by hand allows you to control nearly every aspect of the product.
Cons: You have to create each individual unit. However you can eventually hire other producers or work with a manufacturer to scale productions.
Examples: Candles, soaps, knits, jewelry
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<aside> 🏬 Purchase from Wholesalers
Pros: Wholesalers offer quantity-based discounts on bulk orders to sell their products, which are usually already proven to sell well.
Cons: Wholesalers can also sell to your competitors so what you’re selling may not be that unique to the market. You also need to order and hold a large quantity to maximize profits.
Examples: Phone cases, housewares, specialty coffee
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<aside> 🏭 Work With a Manufacturer
Pros: Turn your idea into a physical product based on your specifications and lower your cost per unit by producing it in bulk.
Cons: This can be a much longer process as you’ll need to find a reliable manufacturer and develop a prototype which can take multiple attempts to get right. Most manufacturers also have a minimum order quantity you have to purchase to do business with them. This number can be anywhere from 10 to over 1,000 units.
Examples: Waffle maker, toys, stickers
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<aside> 📦 Use a Dropshipping Supplier
Pros: You don’t have to hold or ship the inventory yourself — your supplier does it for you. Some dropshippers, such as print-on-demand companies, also allow you to customize the products with your own designs.
Cons: The low barrier to entry means you’re competing with many other businesses selling similar products and you lose out on the quantity-based savings you get from other product sourcing avenues. Very limited product customization in most cases.
Examples: T-shirts, home goods, mugs
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<aside> 💻 Create a Digital Product
Pros: No physical inventory management. These products also allow for higher profit margins since there are no recurring production costs — you create it once and sell it endlessly.
Cons: Risk of having your content stolen and shared widely. Highly competitive given the prevalence of digital products on the internet.
Examples: On-demand video and music content, online courses
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<aside> 🛎️ Package Your Expertise as a Service
Pros: It’s easy to leverage your experience and knowledge to get started since you’re selling your skills.
Cons: You’re directly trading your time for money which limits your income, unless you hire others to do the work.
Examples: Freelance work, tutoring, house cleaning, car washing, music lessons, personal training
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<aside> 🔄 Recap: In the second section, you began to discover two important things; the main competitors in your field, and the ideal audience to target.
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<aside> 🌐 Bonus Content: Get more details about digital product sourcing here!
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Once you’ve thought about how you might source your product, planning it will involve the following considerations:
What costs are involved to produce a single unit of your product? In many cases, your cost per unit will decrease as you produce a higher quantity of the product, saving on raw materials and other expenses. If you’re selling a service, your time has a cost too. If you don’t know the exact costs associated with your product, a rough estimate or target cost will do. The point is that you factor this in when thinking about your selling price and profit.
What will you ask your customers to pay for it? Your selling price communicates the value of your product to your ideal customer and influences how much profit you stand to make from a sale.
How much profit do you expect to see per unit sold, excluding marketing and other business costs incurred? You can increase your profit per unit by raising your selling price or by decreasing the cost per unit (such as by buying your materials in bulk).
What features will you highlight or build into your product to attract your ideal customer?
<aside> 🧮 Use the Profit Margin Calculator to try out different pricing scenarios and see how much profit you can make! You can also use our online Profit Margin Calculator.
Fill in the Cost of Item and Markup cells below, and the calculator will do the rest!
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<aside> ⚡ Hot Tip: Use the info from researching your competitors as well as your features and target market to think about the price range you want to aim for. Think about the value you’re delivering to customers, then price your products and services accordingly.
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<aside> ⚙️ Here’s an example:
Product: Habañero Hot Sauce
Sourcing: Make it myself
Cost per unit: $5
Selling Price: $20
Profit per unit: $15
Features:
Fill out the following about your product:
Product
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How will you source your product?
[ ] Make it myself
[ ] Find a manufacturer
[ ] Use a dropshipping supplier
[ ] Curate from wholesalers
[ ] Create a digital product
[ ] Package my expertise as a service
Cost Per Unit
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Selling Price
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Profit Per Unit
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Features:
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You can repeat this process to develop each additional product you want to sell.
