Regardless of size, all businesses sell something. There is virtually no limit to the products and services that a small business can sell. At one extreme, people such as artists and craftspeople can produce and sell their own work. At the other end, sales agents and representatives will sell products manufactured by others. Today most businesses supply services, either to families and individuals or to other businesses and organizations.
Realistically, running your own business is not always fun or easy. There are many things about it that are really dull for most people. If you don’t love what you are doing, the boring parts—the parts that aren’t the main focus of your business but still need to be done—will drive you crazy. When deciding what you are going to sell, your challenge has two parts. The first part is to identify what you love doing; the second is to figure out a way to get customers to pay you for doing it.
Selling Your Own Work
Many manufacturing operations require too much capital or are too labour intensive to be viable options for small businesses. Producing large and expensive items such as automobiles and appliances requires a great deal of capital to support sophisticated manufacturing operations and skilled workers. Similarly, smaller items such as office supplies and kitchen accessories also require extensive capital and manufacturing facilities in order to mass produce low-price consumer goods and to market these items profitably. Whether expensive and sophisticated or low-cost and simple, the production of mass-market consumer goods is best left to large industrial organizations.
The production of unique specialty items, on the other hand, is ideally suited to small businesses. This would include such traditional artisan-type work as the design, production, and sale of clothes, jewellery, pottery, and other unique items. In each of these businesses, the quality of the work produced, and not the price, would be the unique selling feature. With effective marketing strategies, producers of these high-quality goods can be very successful.
Advantages of Selling Your Own Product
The big advantage to selling your own product is that you have total control over every step of the process, from design, through production and marketing, to delivery and the ultimate purchaser. This means that you can customize your product to meet your customers’ needs and wants, and that you can do this at almost any stage of the process. It also ensures a higher level of consistency between a product’s actual features and how the product is promoted to customers. Since you are producing and selling your work, the potential discrepancy between promotional claims and real-life features is eliminated.
Another advantage of selling your own product is the personal relationship that develops between producer and purchaser. To counter today’s anonymous mass-market world, many of us like to buy items directly from the people who produced them. This is as true of specialty foods and books as it is of arts and crafts. This connection between purchaser and producer adds a personal element to the item, which in turn increases the customer’s perceived value of what he or she bought. The perceived value is enhanced by the one-of-a-kind nature of personally produced items.
This illustrates another advantage of selling items that you produce yourself: They are unique. Unlike mass-produced standard items, there is nothing else exactly like them. Purchasers feel good about acquiring and owning items that presumably reflect their own unique personalities.
When customers feel good about a purchase, they will proudly talk about the item, and in doing so, will promote the producer to family, friends, and acquaintances. Customers who value what they have purchased are satisfied customers, the best asset any business can have. It really is true that word-of-mouth advertising is the best type of advertising.
Hot Tip
If you plan to sell goods that you produce yourself, focus on high-quality higher-priced items. This will help increase the marketability of your work and the profitability of your business. Customers seldom object to paying a premium for quality work.
Disadvantages of Selling Your Own Product
There are three major disadvantages of selling goods that you produce yourself. First, because time is limited, there is a limit to the number of items that you can produce. This in turn restricts your sales and revenue potential. It is, of course, possible to hire help and expand your operation. This involves assuming supervisory and management tasks, responsibilities that might not be a welcome addition to your burden. Further, when other people are involved in the production of your work, some aspects will become standardized in the interests of efficiency. This can reduce the uniqueness of your work.
The second drawback is that it is difficult to find repeat customers for the same nonconsumable items. In order to continue to sell to your satisfied customers, you must develop new items. Once they have one custom-made and personalized widget, they are unlikely to want or need more. You must then develop and produce gadgets, gizmos, or geegaws to sell to them.The third problem is common to all people who work alone. It is the result of having total control of what you do: You have to do it all yourself. From design and manufacturing, to marketing and customer service, you have to do it all. This can be a frustrating and onerous responsibility.
Selling Items That Other People Produce
Many successful independent businesses distribute products manufactured by others. Typical businesses fit into the distribution chain in a variety of stages of the process, from purchasing directly from the manufacturer to purchasing from subdistributors and selling to the consumer. Examples of the items produced in these businesses include cosmetics, jewellery, cleaning supplies, and a great variety of other products.
A franchise operation is a common method of distributing goods. Franchises have been described as the most successful marketing concept ever created. A franchise organization is in fact a contractual association between a franchisor (the manufacturer or wholesaler) and the independent franchisees who purchase the right to distribute the franchisor’s products.
An estimated 4500 franchisors provide a broad range of franchise opportunities in Canada. Many of the opportunities represent great potential for small business operators. Suitable service areas include beauty and health, business, computer, education, maintenance, photography, and publicity. Dozens of directories and handbooks are available in public libraries and bookstores that detail various franchise opportunities. These resources also outline what to look for and what to avoid when purchasing a franchise. The next chapter addresses the topic of franchising in greater detail.
Another growing trend is the use of multilevel marketing. As the name suggests, this involves a number of different levels of distributors. The manufacturer sells products to a high-level distributor, who in turn resells the products to the next level of distributor. This lower level distributor sells to yet a lower level distributor, and so on. The purchasing and reselling continues until, ultimately, the products are sold to the end user. Examples of companies that use this multilevel marketing approach are Amway, Mary Kay Cosmetics, and Tupperware. Contemporary advancements in communications technology and services—such as overnight delivery from factory to home—increase the attractiveness and profitability of these businesses. As with franchises, there are a number of resources available to provide guidance with respect to these multilevel business opportunities.
Yet another approach to distribution, suitable for the small business format, is the use of representatives or agents who represent specific manufacturers or producers. These people never actually own the products that they sell. They take orders for the manufacturer or supplier and are paid a commission on their sales. Unless otherwise agreed, commissions are payable when the supplier receives payment for the goods sold.
Growing nostalgia has given new life to the expression that everything old is new again. Collecting and reselling anything that is old— furniture, jewellery, books, newspapers, trading cards, clothes, and so on—has become a major source of revenue for many people. Trading in nostalgia is ideally suited for small businesses. Not only is a fixed place of business unnecessary to sell the products, it is often restrictive. Shows, fairs, and other exhibition locations can be found at the nearest shopping centre, at downtown and suburban hotels, and at flea markets everywhere. The stock-in-trade is hauled from home (or storage) to the show, where it is set up and offered for sale. Unsold items are returned to home base to await the next sale. The management and administrative work is usually completed in home offices.
Entrepreneur Beware
Importing goods for sale in Canada can be risky. You might get stuck with the extra time and expense involved in looking after warranty problems without being reimbursed by the manufacturer or supplier.
Hot Tip
The fact that we now live in a global village means that regardless of where products are manufactured— locally, nationally, or internationally— they can usually be easily obtained for distribution by independent businesses. As with trading in nostalgia, opportunities to import or distribute products manufactured by others can be found in virtually any classified advertising section of any newspaper. Business opportuni-ties can also be identified through leisure travel. Ideas and concepts that appear to be working effectively in distant locations can often be implemented domestically.
Advantages of Selling Items Produced by Others
By selling goods produced by others, you can avoid all of the manufacturing, and many marketing, responsibilities. Also, depending upon the agreement with the manufacturer, it might be possible to avoid responsibility for actually handling the goods.
Manufactured goods come with a guarantee. At the very least, the manufacturer guarantees that those goods are suitable for the purposes for which they are intended. Many manufacturers also guarantee the quality and performance of their products. In practice this means that if the goods are defective, they will be repaired or replaced at the manufacturer’s expense. Thus, as reseller of the goods your role is to involve the manufacturer in the process of correcting the defect.
Since it is the manufacturer’s goal to sell their goods, most provide some form of marketing support to businesses that sell their products. Typically, this support takes the form of national advertising and marketing communications.
In many cases, the manufacturer’s goods are shipped directly from their premises to customers. This means that although you might sell goods produced by someone else, you do not necessarily have to handle the goods. This can result in significant savings regarding the handling of warehouse and related materials.
Disadvantages of Selling Items Produced by Others
Although selling goods produced by someone else might free you of legal responsibility for defective or unsuitable products, you will not be totally free of responsibility. If and when there are difficulties with any products that you sell, your customers will look to you for help in correcting the problem. After all, they don’t know the manufacturer; they know you. Not surprisingly, you can find yourself caught in a dispute between your supplier and your customer. Regardless of who is right and who is wrong, this could well be a no-win position for you.
Supply Intangibles: Be a Service Provider
The service sector has experienced an extraordinary rate of growth over the past decade. During the last ten years, 94 per cent of all new jobs in North America were created by service industries: retailing, business and financial services, engineering and design, consulting, commercial education and training, communication, travel, and transportation.
Advantages of Being a Service Provider
The nature and delivery of services, especially those that are information-based, have changed dramatically with the advances and widespread availability of technology. We no longer need large factory-type office facilities equipped with huge computers to work with information. With laptop computers and cellular-phone technology, we can gather, process, analyze, or do whatever we have to do with information at home, at our clients’ places of business, or wherever we happen to be. This has greatly increased the flexibility of service providers.
For technologically oriented people, it has also opened up a broad and exciting range of new business opportunities, many of which didn’t even exist five to ten years ago.
If you have more than an average level of technical skill, undoubtedly there is a business opportunity for you. And unlike selling products, you do not have to worry about buying, storing, and otherwise handling inventory.
Disadvantages of Being a Service Provider
Attractive as it may be to provide services, there are several major disadvantages to consider. First, unlike consumer goods, services are intangible. The customer cannot see, taste, feel, hear, or smell them before making a purchase decision. Since many people traditionally make purchasing decisions based on their senses, service can be more difficult to sell.
Services are also perishable: They cannot be stored. This means that you cannot stockpile services in anticipation of future demand. Physicians cannot stockpile time so that they will have more of it to help patients in flu season. Accountants cannot put some of their unused summer availability into storage for use during tax time.
And finally, services are variable. The same service, such as hairstyling, varies from person to person. It also might vary depending on when it is performed. For example, if your stylist is sick or perhaps preoccupied, the work is unlikely to be as good as it would be otherwis
Families and Individuals Need Services
These services are defined by the personal needs, wants, and expectations of the person or group of people (such as a family) to whom the service is being provided.
Traditionally, personal services have included mainly beauty- and fashion-related services such as hairstyling and makeup. Now, many successful businesses profitably provide services such as housekeeping, caregiving, home maintenance, and gardening.
Today’s busy people often find themselves with more money than time. As a result, new service opportunities proliferate at a staggering rate
HOT TIPS
The small business format is ideal for providing personal services. Personal service businesses require a minimum amount of space and equipment and are based primarily on the personal skills and ability of the business operator.
And So Do Businesses and Other Organizations
Businesses and not-for-profit associations purchase services for one of two reasons. The first is the simplest and most basic: to meet their own day-to-day organizational needs, such as bookkeeping and other administrative activities. The second is to meet their customers’ needs.
Services of the first type would include obtaining and delivering inventory and supplies, running errands, taking messages, maintaining books and records, and cleaning. All businesses require these operations to some extent; few require them on a full-time basis. An example of the second type is an advertising agency that hires a graphic artist to help design a brochure for a client.
Who Will Buy Your Goods or Services?
Obviously, it is not enough to provide goods and services. Someone must buy what you are offering for sale.
For the sake of simplicity, it is possible to classify customers as either “consumers,” which include individuals, families, and other domestic arrangements, or “organizations,” which include all customers who are not consumers. More specifically, public-sector organizations (governments), private sector organizations (businesses), and not-for-profit organizations such as educational institutions, charities, and voluntary associations comprise the organizations category.
The table on the next page illustrates a simple method of matching what you will sell and to whom you will sell it. It also includes examples of goods or services that might be offered to each category of customer.
These are only a few examples of the kinds of goods and services you can offer to different types of customers. They do, however, help illustrate two important features of today’s small business world; that is, small businesses are service businesses, and some types of products and services are suitable for both classifications of customers.
Small Businesses Are Service Businesses
All small businesses are in some way service driven. Even though the first two categories in the table involve the sale of products, service is the critical element in each. There are two areas in which the service element can be found. The first is in the customization of products. Whether selling to consumers or organizations, people who produce the products that they sell can frequently customize these products to meet the needs andWants or to reflect the personality or characteristics of their customers. This is true whether the products are works of art, a craft item, or food. Large organizations that sell mass-market consumer goods—especially when those goods are produced by others— simply lack this ability.
Second, whether proving goods that they have produced themselves or were produced by others, small businesses can offer better and more personal service to their customers. This improved service usually results from a more personal relationship between small business people and their customers than is often possible with larger business organizations.
Some Goods and Services Are Suitable for Both Types of Customers
Clearly, some products such as arts, crafts, giftware, and cleaning products can be offered to both the consumer and the organization market. Similarly, there is nothing that makes services such as catering, home inspection, and landscape maintenance intrinsically more suitable for consumers than for organizations. What makes a difference is how the products and services are marketed. Part III, which deals with marketing issues, will help you develop appropriate marketing strategies for each of the market classifications.
Goods and Services Offered to Consumers
Consumers (individuals and families) | Organizations (public, private, and not-for-profit organizations) | |
| Goods that you produce | Arts, crafts, giftware Gourmet food products | Arts, crafts, giftware |
| Goods that others produce | Health and beauty products Household cleaning products and supplies Specialty products | Cleaning products and supplies Cleaning products and supplies |
| Services | Career counselling Catering Closet organizing Dating service Decorating Exercise/fitness coaching Financial planning Health and beauty services Housekeeping/maid service Home inspecting Image consulting Landscape maintenance Party planning Personal shopping | Accounting/auditing Administrative support services Computer consulting Education/training Human resources services Interior designing Janitorial services Legal/paralegal services Marketing services Mediating Meeting planning Photography/video production Public relations Space planning |
What Business Should You Start?
There really is no single business good for everyone. When considering what business is best for you, consider your interests and abilities. The most successful businesses emerge when customers pay you for what you love to do.
If your business is built on a passion, whether it’s computer programming, arranging flowers, or cooking, you have probably spent a great deal of time learning and doing it. It is reasonable to assume that you are good at what you love doing. It’s also reasonable to expect that you have a solid commitment to doing it.
Further, for most of us, running our businesses is more than simply a strategy to earn a living. Of course, we expect to generate a decent income. But we usually expect more than that. We also expect to enjoy our work.
Building Block
Small businesses are driven more by their owners’ love of what they are doing than by objective and stan-dard procedures, which are often borrowed from big business. If you genuinely love what you do in your business, you will find ways of coping with the aspects that bother you.
If you don’t love what you are doing, all of the many frustrations will be obstacles to your success
