Home / Startup / Business Ideas / How to Start a Product-Based Business
product based business
A startup seller selling product online and focusing on product based business.

How to Start a Product-Based Business

Do you have an amazing product in mind and are curious about creating a product-based business? This article will tell you everything you need to know,

What Is a Product-Based Business?

A product-based business is a business that sells a physical, tangible product (like shoes, boxes, computers, etc.) to consumers. The success of the business depends on how well their products sell and whether or not their customers enjoy them.

While some may argue that selling a service is also a product, the main difference is that buying a service means you’re paying for someone’s skills (plumber, writer, etc.), whereas products are physical things that can be bought and taken home (or delivered).

Product-based businesses come in many forms as well. They can be physical brick and mortar stores, selling only to customers locally. They can be online stores with products being shipped worldwide (many of which are sent from someone’s home). Or they can be a combination of both.

How to Start with It

Starting a product-based business can be tricky. Below are a few steps that should serve as a guide:

  1. Develop a product and check it against similar products on the market. Of course, before you can have a product-based business you need to have a product. You’ve either manufactured it yourself, or you came up with the idea and had someone else build it.
    Once you have the product, check it against other competitors selling a similar product. The INC.com post will definitely help you here to fight with your competitors. How does your product stand out? Why would someone need your product about the competitors’?
    Also, don’t start with your original idea. Work on it and fine-tune it based on your research. Just like an author needs to edit a novel before it’s ready to be published, you need to make sure that your “great idea” is something that will sell well once available to the public.
  2. Figure out your product’s target consumer. You need to know who you plan to market your product to. For instance, if your product is a new type of baby shoe, your primary target will be pregnant women. Mothers with older children, or women with no children, won’t be as interested.
    Also, if this is something you plan to only sell at a physical location (storefront), decide if there’s a market for your product where you live. If not, you may need to consider moving to where there is a market for it.
    Even if your product is web-based (like WordPress or Shopify plugins), you still need to have a business plan in place to market and sell to the right audience.
  3. Register your business. You will need to register your business legally and choose a legal structure. For instance, are you a sole proprietorship (one-person business), or is it a partnership, LLC, or corporation? Do some research and decide which best fits your business. This is also a good time to obtain any patents, trademarks, or copyrights needed to protect your product, brand name, and logo.
  4. Obtain financing. It takes a while for a new business to start generating positive income, so you are going to be spending a lot of money in the beginning. Figure out where you will get that money, whether it’s from family and friends, the bank, investors, or your own personal savings.
  5. Make plans for business operations. Find suppliers and distributors for either raw materials or the full product. Design the product’s packaging to be appealing to potential customers. Decide how and where you will sell your product. What are your shipping operations and return policies, and who will you handle positive and negative feedback?
  6. Set pricing. How much will your product cost? You need something that is going to offset your production costs without being too expensive for your consumers.
  7. Develop other products. Starting with one product is a good way to gain momentum, but you will soon want to create new or follow-up products to keep interested in your brand up and gain more revenue.

How Much Finance Do You Need?

It may be impossible to determine this; some businesses are able to start with less than $5,000 invested, while others may require a million dollars. Be realistic as you make your plans and your cash flow projections. During the first few years, you may lose more money than you make. But if your expectations aren’t too high, and you don’t invest too much money, you should be okay.

It’s recommended to not borrow money through bank loans, if at all possible, at the beginning of your venture. While these can help you get started faster, you have to sell enough to pay the loans back. If your business flops, not only have you lost your own investment, but you have to find another way to repay the loans.

Product-Based Business Ideas

Examples of product-based businesses are:

  • Computers and other electronics (Apple, Microsoft, Sony)
  • Clothing and shoes (J. Crew, GAP, Old Navy)
  • Software (even if it’s downloadable)
  • Furniture (Ikea)
  • Household cleaning products (Mr. Clean, Lysol, Method)
  • Dishware and Cookware (Pampered Chef, Cornell, Pyrex)
  • Books (publishers, bookstores, or individual authors)
  • Jewelry (Zanes, Kay)
  • Drop-shipping (selling any physical product without inventory)
  • And many others

There are also what are called general product-based businesses, which are businesses that don’t just cater to one demographic but sell a large variety of products for different ages, genders, and interests. Examples of general product-based businesses are Walmart, Amazon.com, or any general retail store.

If you’re brand new to running a business and selling products, probably the best product-based business to start with is an e-commerce or drop-shipping business. Why? You don’t have to hold inventory, ship, or pay for manufacturing costs. You pay for and run the webstore, and then you receive a cut of the sales.

Second to that might be to sell your product through Amazon FBA (Fulfilled By Amazon), rather than your own store. However, you still have to go through the first few steps of the creation process: product idea, create a product, market research, business model, budgeting, etc.

However, instead of having your product delivered to you to sell, you arrange for it to be delivered to an Amazon fulfillment center and create the Amazon listing. They’ll do everything else for you, and you get a cut of the sales.

Can You Run It Without a Working Budget?

The consensus on this is no. If you want to be successful, you need to know where your money is coming from and going to. Only then will you be able to plan for the future and project sales to cover your costs.

Without a budget it will be impossible to know if you need to cut back on expenses, hire employees, expand, decrease advertising, etc. Too many new businesses fizzle out because they run out of money. If you’re not paying attention to what your money is doing, that could happen to you.

How to Scale a Product-Based Business

If your product makes a hit and is selling, that’s great! After a while, though, it can begin to feel like your business isn’t going anywhere, even if the product you created is still selling well. This can feel a bit like a dieter who plateaus at a certain weight.

Just as those dieters will change up their routine a bit to kickstart their weight loss again, so you can change something in your business to do the same.

Here are a few tactics you can use to do just that:

  • Launch a new product. We mentioned before that it is best to not stick with just one thing, but to eventually create new or follow-up products. If people like the product you already have, they may just like your new one. The new product can also bring in first-time customers to build your customer base with. 
  • Hire new staff. If you feel like you’re getting overwhelmed because yours is a one-person company, making smart hires to help you with marketing and sales can go a long way in scaling your business. Be careful with this, though. Don’t spend all of your money on employees. Instead, hire one or two amazing people that will help your business grow.
  • Consider additional financing. Now that your business is growing, obtaining a capital investment may be needed to handle the costs of expansion.

How to Run Your Product-Based Business from a Small Space

If you’re just starting your product-based home business, it is likely that you’ll be working in a very small space. Maybe you have the run of the basement or have a dedicated corner or room for your business.

The best way to run your product-based business from a small space is to stay organized. Organize the products you are selling, as well as all of your paperwork. Have a place for extra paper, shipping labels, packages, and printer ink/toner. The more organized your small space is, the more efficiently you’ll be able to run your small product-based business.


There are a lot of steps in creating a product-based business. Take your time and don’t rush your product business plan. Yes, you have to take risks, but don’t take any unnecessary ones that will cause you to fail before you’ve begun.

About Peter Lee

Check Also

how to start a mobile ultrasound business

How to Start a Mobile Ultrasound Business

Once you’ve successfully completed the education necessary to become an ultrasound technician, you will obviously …

Leave a Reply

Your email address will not be published. Required fields are marked *