Business assets are things you’ve built that continue to produce income for you. Rather than having to work every month for money, wouldn’t you rather it come in automatically?
It’s tempting to try to start building assets as soon as possible. But assets, like products, require up-front investment to acquire. It takes time, money, and effort. When you’re just starting out, you typically don’t have the money or time to build assets. The very first thing you should prioritize is cash flow. Start generating revenue by doing work for clients to make money.
Start with client work, get some cash, and then invest that money into products. Cash first, then assets. When you start with a focus on cash flow and building up capital, you earn freedom. Freedom is your first asset. The freedom that comes from the asset of cash in hand provides you with the time and availability to work on investing in other assets.
For Your First Sale, Don’t Focus on Profit
Products are a longer-term investment. With client work, you do a project and get paid. With products, you need money first to put in, and then you have to wait before you get something out. In most cases, it will be a while before you’re profitable. Even when you’re profitable, you’ll need to reinvest your profits into more products if you want to continue making money.
Since you’re already going to reinvest your profits to create more products, the biggest mistake you can make is trying to squeeze as much profit out of the first sale you make. Profit is important, but where the real money comes from is repeat business. It’s much easier to sell to an existing customer than it is to acquire a new one. What’s the easiest way to get a customer? An amazing offer.
For a time, I had laser-engraved, wooden ampersand keychains available on my store. I designed the ampersand and used it as my logo. This keychain was not cheap to produce, even when manufactured in bulk. It was a premium item, but not many people will pay a ton of money for a keychain. Typically, a keychain is an impulse purchase.
Instead, I didn’t prioritize profit this time. After all, even if I marked it up, we’re talking about a keychain here: at best, I’d make a couple of dollars on each sale. The money wasn’t going to change my life, so I calculated the expenses for manufacturing, bags, stickers, keychain hardware, packaging, and shipping, and sold it at cost. This is known as a loss leader. A loss-leading product is intentionally priced low to draw in customers and stimulate sales of more profitable goods and services.
The keychain was a premium item at a no-brainer price, and, as you might have guessed, they sold out. They sold out very quickly. Then they sold out again and again.
Why did I sell a product for an amount equal to what it cost me to produce? Simple: I wanted to create an experience.
“A beautiful, custom, laser-engraved, wooden ampersand keychain with a custom bag and sticker—and shipping is included in the price?! Of course I’ll have one!”
I ate the cost of shipping because it’s a more pleasant experience for the buyer. I gave them something incredible at an amazing price. I sold it at cost because I was playing the long game. Think about it: they have my logo on their keys which they see every day! That will cause them to think about my brand. It may be the single thing keeping me top of mind for them. It may be the reason they buy a T-shirt from me, or a course, or a membership, or attend the seanwes conference.
There’s nothing wrong with profiting on your first product—by all means, make a profit—but don’t worry too much about maximizing profit on the first sale. Think instead about the customer’s lifetime value.
For Your First Sale, Craft an Unforgettable Customer Experience
Can you remember a time recently when you had a great customer experience? Maybe you bought a new device with attractive packaging and the unboxing experience was effortless and fun. Maybe you needed to return an item and the customer-support representative was friendly, helpful, and made you feel at ease. Are you inclined to do repeat business with that company?
When you purchase a product, open it, return it, and get your money back, you’re costing companies money. It costs money to pay the salary of the support representative who took the time to handle your return. Whether that was in person or on a call, that person is being paid for their time. If you opened the packaging on an item and you return it, that costs the company money. When they give you your money back, they’re in the negative for that sale. Your return has put them at a loss. You may not even purchase a similar item as a replacement. You may often simply leave the store with your money.
Why do companies allow full refunds when it means they’ll lose money? Well, not all do. Such companies take two approaches:
- Give the customer their money back in full and eat the cost.
- Charge the customer a restocking fee.
A restocking fee is legitimate: you cost the company money. Just because you changed your mind or purchased the wrong item without first doing your research shouldn’t mean the company suffers. They’re a business after all. And of course, many companies do have a policy that requires you to pay a restocking fee. But have you noticed how few to none of the companies we truly love do this?
The companies that don’t charge a restocking fee are indeed losing money, but they’re focused more on your lifetime value. They’re banking on the fact that if they create a smooth and positive experience, you will return some day in the future or recommend them to your friends.
Stop thinking about your first product as a way to make money. Your first product should be an experience. Your second product is where you make money. There’s no second sale without a first experience.
I remember getting a free T-shirt from an email service provider. There was no contest or anything. They simply announced that they were giving away T-shirts. All you had to do was enter your address. It seemed almost too good to be true.
Sure enough, a few days later a super-comfortable T-shirt printed with water-based ink arrived in the mail. It was made of a high-quality, tri-blend fabric, so they obviously weren’t cutting corners. And it was totally free!
Can you imagine how much this cost them? I wear that T-shirt all the time. Actually, I wore it this morning when I went on my run, and I didn’t know I’d be writing this chapter today. The experience created a lasting positive connotation with their brand for me.
But I didn’t buy anything from them.
Was their offer of a free T-shirt all for nothing?
Two years later, I started an email newsletter. As you can imagine, the first company I thought of was the company that had given me the free T-shirt. I became a paying customer for the next three years. I moved to another provider only because my business outgrew their services, but during the time I used them, I was a huge advocate. I told all my friends.
They got way more out of me than what that T-shirt cost. That loss leader earned my loyalty. It’s relationship marketing 101.
When Creating Products, Focus on Every Detail
Remember the keychain that was a “break-even” product for me? What I didn’t tell you is that it was worse than that. The first batch the manufacturer created came out wrong. We had to reproduce the entire run. This wasn’t a department store where you can just return all of the products and get your money back. When you do a large run, it’s high stakes. We tweaked the material design and I had to pay for another run.
I learned my lesson: always request a sample. Whenever possible, ask for a sample product or do a test run before committing to ordering a large batch of your product.
Pay attention to how the manufacturer communicates. Are they friendly? Are they helpful? Do they let you know what to expect?
It’s hard to find a good manufacturer. It takes time, and, as I experienced, it can be a costly endeavor. It’s a process you need to take seriously and dedicate some time to. Good manufacturers are going to be on the pricier side, but it’s worth investing in quality materials and good customer service now to avoid costly problems in the future.
Let’s say you want to sell a T-shirt with your design. Debut it at a compelling introductory rate to bring people in and give them a great experience with your brand. You can afford to do this because your client work is a source of capital you can tap into whenever you want. Make sure people know the debut price is an introductory rate and that they’re aware of what the full price will be when you launch new products.
Not every one of your early customers will buy your second product at full price, but some will. That first impression is key. Because you’re overlapping from client work, you don’t need any of the money you make from products to pay your bills. You have two choices:
- Continue making a very small amount every month from your one product, or
- Reinvest all of your profits plus some money from client work back into the production of new products. Eventually, you’ll have something substantial that can actually support you by itself.
This is a slow climb. You’re starting to see why products are not the best to start with, but if you’re in it for the long haul, product creation can eventually become a solid source of revenue for you.
Don’t be discouraged that it takes a lot of time to build up a physical product brand. We’re aiming for long-term sustainability here. Sure, you could constantly run discounts and try to drive sales for a short period to get as much revenue as possible, but then what do you have? You have a chunk of change, a dry spell ahead of you, and a discount brand. That’s no good! It’s much better to build it the methodical way that will allow you to create a premium brand with a loyal fan base of regular customers.
Start with a Single Product and Ensure Demand
In the beginning, it’s tempting to try a bunch of different products. It’s fun and exciting to launch new things, but hold onto the reins and start simple.
Start with a single product. If you have a lot of capital to invest, you can try launching with three or four variations of that one product. Either make it clear you have one product to buy—and make it simple—or give people enough options that they feel like they have a choice.
When I launched my first T-shirt, I started out with a single option. It has since sold out about half a dozen times. What made it so successful?
A lot of people get started with products because it sounds fun to sell something. The problem they run into is discovering there’s no demand. People don’t actually want your product and they’re not asking for it. You just made it because you wanted to sell it.
You must first ensure that demand exists.
Don’t just make the T-shirt you want to make. All that’s going to guarantee is that you have forty-eight copies of it in your closet and you won’t have to do laundry for a long time.
My first shirt was in response to a tremendous amount of feedback I received on a particular design from people in my audience. I wasn’t asking them if they wanted to buy it—they were going out of their way to tell me they wanted to buy it on shirts!
I didn’t sell products until I’d been drawing daily for more than two years. If you want people to actually buy your products, you have to give them what they want. How do you know what they want? By listening. By observing. What things have you made that have received the greatest response? What’s working? Do more of that! What are the products people are asking for? Make those!
Are they not asking? Create more work! Keep going. Remember, this is getting into a longer-term, more-advanced strategy for creating diversified sources of income. Don’t worry if you’re not getting requests for products if you’re just starting out. Keep showing up and keep creating.
If you want to sell products, you must commit to it for the long haul. Expect it to be something you pour money into, not get money out of. Physical products are a place to invest and not to get quick cash. Don’t expect it to be a source of significant revenue for at least three to five years because you’ll have to reinvest your profits if you want it to last.
Before Launching Big, Start Small
We talked about loss leaders earlier in this chapter, but that’s just to get things going. The point of business isn’t to break even or give everything away for free. We’re only starting that way to draw a crowd, get some attention, and create a positive experience for our first buyers so they’ll come back to buy again and again. The real revenue is on the other side of the first product. The next step is to maximize revenue by launching a flagship product.
Your flagship product will be something with good profit margins. This is something you’ll invest a lot of time into—maybe six months or possibly even two years. You really want to go all out. Do your research and find out what people want. This product will become the cornerstone of your sales for years to come. The profits from this flagship product will fuel all of your other ventures and make everything else you want to do possible.
Before you get to the flagship product, you have to start small. Don’t fret about the fact that you don’t have hundreds of orders right now. You’re about to learn why it’s good to be small. It’s awesome if you received four orders in the first week. Do things well, take your time on the packaging, and make sure your product arrives well and the customer is happy. If you’re selling a digital product, go through the process of purchasing from yourself. Order the product and actually use your credit card. Pay close attention to the checkout process and how the delivery experience goes. Imagine you’re not the creator of this but someone who just purchased it. How was your experience?
Your first product isn’t about revenue; it’s about the process. You’ve got to flesh out your process. To “flesh out” is to give something substance. You want to define and refine your process. If your process is not written down, you don’t have a process. The reason you start small with your first product—and the reason it’s okay if not a lot of people purchase—is because you’re doing this to prove to yourself you can ship. You’re doing this to figure out what your process is, experience the problems you’re going to experience, and make the mistakes you’re going to make at a small scale.
You’re going to make mistakes. Your manufacturer will make errors. You’re going to price things wrong. You’re going to ship packages to the wrong person and accidentally swap labels. You’re going to have to deal with returns and customer support. You’re going to have to figure out payment processing and order receipts. It’s better to make all of these mistakes at a small scale, so don’t complain when you don’t get a lot of sales right off the bat. These sales are your testing grounds, and they’re setting the stage for greater success later on. Your first product is not about profits; it’s about process.
Maximize Revenue by Launching a Flagship Product
Once you’ve gone through the process of selling something and have worked out the kinks, now it’s time to start thinking bigger. The next thing to launch is your flagship product—that’s what is going to be lucrative and actually make you some real money. This big product needs to be something people really want, creates a tremendous amount of value, and can have a more premium price tag.
Now, before you invest a lot of time and money in creating your product, you need to think about what type of product you’re creating and who it’s for. Consider this product spectrum with two general types of products you can make, each of which represents opposite ends of the spectrum:
- Money-making products
- Nice-to-have products
There are a lot of ways to make money, but some are easier than others. You can make anything you want, but if you want to make money, you must be strategic.
In addition to the wide range of products you can make, there’s also a range of people you can market to. There are people who have money and those who don’t, and there’s a wide range in between. You must think about the type of product you’ll create and the type of person to whom you’ll sell.
If you create a product that makes money for the people who buy it, it’s going to be easier to sell.
If your product is a nice-to-have product—in other words, it doesn’t make people money—it’s going to be harder to sell.
Think about who you’re trying to reach. If you sell a money-making product to a person who has money, that’s going to be really easy to sell. Selling a nice-to-have product to someone with money is also relatively easy. People with money often buy luxury items or things they don’t need but make them feel good. Selling a money-making product to someone who doesn’t have money is also doable but not as easy. Where you’ll have the most trouble is selling nice-to-have products to people who don’t have money.
Douse House Fires
If you want to make money the easiest way, look for house-on-fire problems. If your house is on fire, are you just going to sit around and finish watching the latest episode of your favorite show? No! You’re going to fix that problem. You have to.
The closer you get to house-on-fire problems, the easier it will be to make money. When you’re further away from a house-on-fire problem, people can take or leave what you’re offering. You’re fighting an uphill battle to make money and generate cash flow for your business.
What problems will people actually pay to make go away? What problems are they currently paying to solve?
Open your eyes and look at the world with the intent to find and identify problems. Most people don’t look for problems. They don’t go out of their way to concern themselves with the problems of others. They only care about themselves and their own problems. These people are not entrepreneurs.
Watch people and observe what they pay for. Listen to people and hear what they complain about. Find real problems by observing. Don’t guess at them. Take notes at all times and study. Write down what you observe.
Take notes of the problems you see and hear everywhere you go. There are so many opportunities. The reason you don’t see them is that you’re not opening your eyes to them. They’re all around. When you walk outside your house with your eyes open, you’ll see lawns that aren’t mowed, windows that aren’t washed, dogs that aren’t walked, leaves that aren’t raked, and weeds that aren’t plucked.
People pay for time. We all pay for time. People don’t want to wait for shipping. They don’t want to wait for a car. They don’t want to wait for coffee. They don’t want to wait for food. People will pay to get their time back. If you want to make money, find ways you can save people time.
Strategically Target Your Customer
Let’s revisit the product spectrum. If you’re selling nice-to-have products to people who don’t have money, don’t expect to make a lot of money. You have to respect the market.
Maybe your passion involves something that doesn’t solve problems or you’ve created a nice-to-have product. Well, you can’t just demand that the market pay you. The market decides what is valuable.
If you have money, you can do whatever you want. There are no rules. You’re not limited to selling only money-making products. But if you don’t have money, you have to be strategic. If you start with a money-making product and sell it to people who have money, it grants you the freedom to create whatever else you want for whomever else you want to market to regardless of whether you turn a profit. When you start by selling products that make money to people who have money, you’ll make money that enables you to do anything.
Really think about this. Start with the person: Whom are you serving? Does your product make money for this person directly or indirectly? Does your product solve a house-on-fire problem? Can this person afford to buy your solution?
Let’s look at the different product/person combinations in descending order of ease:
- Sell products that make money to people who have money.
- Sell products that are nice-to-have to people who have money.
- Sell products that make money to people who don’t have money.
- Sell products that are nice-to-have to people who don’t have money.
If you’re going to sell a nice-to-have product, you probably want to sell it to people who have plenty of money to spend on something that’s a luxury.
Focusing on creating money-making products and selling them to people who have money is the quickest way to set yourself up with the ability and freedom to create whatever kind of products for whomever you want.
If you have a soft spot for a certain subset of people who don’t have very much money and you really want to help them, first think long and hard about whether you’re operating a business or a charity. The context of this book is business. Both businesses and charities need money to survive. You have to take care of yourself and your business first before you can help other people. Once you get your money right, then you can help anyone you want.
Something else to also keep in mind is that it’s easier to sell nice-to-have products when you have fans. If you don’t have fans and want to sell your first product, you’ll have a better chance launching something that solves a very specific problem people have.
- It takes time, money, and effort to build assets. Prioritize cash in the beginning: start with client work, get some cash, and then invest that money into products. Cash first, then assets.
- Your first product should be an experience. Your second product is where you make money. There’s no second sale without a first experience.
- Always ask for a sample product or do a test run before committing to ordering a large batch of your product.
- If you want to sell products, you must commit to it for the long haul. Don’t expect to make a quick buck from your products.
- The easiest way to make money is to solve “house-on-fire” problems for people who have money.
- If you’re selling nice-to-have products to people who don’t have money, don’t expect to make a lot of money.