ASSESS THE MARKET
“The thing that’s most heartbreaking to me is when somebody builds a product that has a tiny, tiny potential set of customers,” Pieri says. “I can see their life potentially being dedicated to something that will never be big enough to provide them a livelihood. People fool themselves into thinking something small will be easier. It’s not. It’s just as hard to build a really teeny business as one that has some opportunities to be profitable.”
Instead, she recommends being honest with yourself about whether you see a large opportunity with a lot of potential customers. Use simple online market research tools: look at the volume of Google searches for keywords related to your product concept. See if there are similar products on Amazon.com. If so, what are their reviews? What are the flaws in those products? If the reviews are positive, “then you shouldn’t start this product because somebody else is already doing it well,” Pieri counsels.
On the other hand, don’t be discouraged if nobody is searching for or already making your product — if you can identify a large core market opportunity. “Every single day we see ‘Why didn’t I think of that?’ products that are viable businesses,” Pieri says. “It’s more about, ‘Are there enough people out there that have the same problem?’”
DON’T WORRY IF YOU’RE NOT ALREADY AN EXPERT IN THE FIELD
“Sometimes people have a great hidden advantage because they work in one industry or profession that uses a technology or a material that hasn’t been used somewhere else,” Pieri says. “One of our Grommet makers was an ER nurse and she transferred some of the technology she used in that capacity to a home product. That’s a cool route to innovation.”
After interviewing 100 makers in 2015, The Grommet learned that only one-tenth of them had any professional experience in the arena of their product. Rather, 90 percent were entering a new field; “That’s an advantage for a maker,” Pieri says.
“It’s just as hard to build a really teeny business as one that has some opportunities to be profitable.”
HAVE A STORY
“It’s super important to our community that the company represent more than an interesting product,” Pieri says. “They want to know what the business practices and values of the company are.”
Have a clear picture of why you exist in the world and what values distinguish you. If you’re an underrepresented entrepreneur — under 20, over 80, a woman, a minority, a veteran, etc. — don’t forgot to mention that. “People actually really care,” Pieri says. “They want to know who you are and maybe some obstacles you had getting here.”
Similarly, be clear if your product is made in the USA, is creating jobs in an impoverished area of the world, supports a sustainable lifestyle, is made sustainably, is crowdfunded, or has a lifetime guarantee. “These things are right next to features and price” in terms of what customers look for, Pieri says. “For us, a product can’t become a Grommet unless there’s more ‘there’ there — an interesting set of values or business practices behind it. It’s not just the NPR crowd or the crunchy crowd who care about this anymore. Most Millennials and most Baby Boomers are organizing their attention, resources, and budgets around these things. It’s the first time I’ve ever seen two generations collide around big value sets in that way.”
BE REALISTIC ABOUT MARGINS
Figure out if the cost to produce the product aligns with the price you can sell it for. Pieri’s rule of thumb: “Can you hold that product in your hand — literally own it, packaged — for one-fifth the cost that it would be at retail?”
Why such a large margin? “A lot of people think they’re doing fine because maybe the product costs them $50 to make and they can sell it directly to consumers for $100. They’re making what they consider to be a 50 percent margin, but they’re not anticipating having partners down the road.”
However, Pieri says it would be unlikely that you could build a large business, either locally or on your own website, without massive marketing dollars. So that means you’re immediately going to need retailers, and retailers need to make their own 50 percent margin. Then add the costs of the logistics: you’ll pay somebody to ship the product, you’ll pay somebody to put it on the shelf, and you’ll pay somebody if it doesn’t sell and you have to take the return.
Bottom line: “Be aggressive about setting prices as well as creating a cost structure that will give you a real business down the road,” Pieri advises.
PAY ATTENTION TO PACKAGING
“We love to look at products before they’ve been launched,” Pieri says. “We see them when they don’t have packaging yet. But too many companies live in that state.” For example, one of The Grommet’s most successful products in 2015 shipped in a plastic baggie for a few months. But stores — which still account for 93 percent of retail sales — need packaging to keep the product clean and safe and explain what it is. “It’s surprising how people don’t think about that as fast as they should, and it holds them back,” Pieri says.
Before diving into trying to reach a national audience, it’s a great idea to make sure you’ve fully worked out the kinks within your own community. “That can mean, literally, the classic thing of door-to-door selling to the local Main Street retailers in your area,” Pieri says. Start with small mom-and-pop stores: “Their entire business is having differentiated products, and local, new product is the most differentiated of all,” she says. In addition to local businesses, Pieri recommends checking out Whole Foods or Ace Hardware (a cooperative of locally owned stores), each of which expect up to 10 percent of the products in each store to be local. “They’re dying for people to show up with local products,” she says. “It distinguishes them from their competitors.”
Don’t forget farmers markets, even for products that are manufactured or unrelated to foods: “Even if you’re building something that might literally be manufactured in a large factory someday but you’re starting out small, you might get some initial traction there.” By aligning yourself with the customers who shop at farmers markets, you’ll piggyback on the popularity of the markets themselves.
Finally, check out independent bookstores. “I don’t think of booksellers as books-only anymore,” Pieri explains. “A lot of Grommets do really well in bookstores because it’s sort of a sensibility. If you’re the kind of person who shows up for books, you probably would enjoy well-made products that have nothing to do with books, but are really great gifts or good household items for yourself.”
LEVERAGE OUTSIDE SERVICES
“Don’t forget, there are something like 16 different things you need to do well to pursue a business,” Pieri says. “The product is just the first thing. For the next 15, from creating packaging to legal services to funding to logistics to research, often you can find a partner or a service that can be very efficient and a lot less expensive than you building it yourself. These are mostly technology- or internet-driven resources that weren’t available 20 years ago.”
For example, Pieri recommends a company called Shipwire that provides enterprise-level logistics and shipping services for small companies. “You might ship one product a month,” she says. “But they give you an easy entry point.” (For more ideas, check out Pieri’s SlideShare on the topic at bit.ly/launch_slides.)
PROTECT YOUR PRODUCT
One of the downsides of a transparent, connected world is how quickly the competition can come in and counterfeit or copycat good ideas. To protect yourself, do thorough research around trademark and patent protection. A good place to start is the US Patent and Trademark Office (uspto.gov).
EXPECT SUCCESS AND INVEST IN IT
That means get help. “Founders almost always wish they’d hired people faster than they did,” Pieri says. “The one-armed paper hanger thing is good for the very beginning — let’s call it six months — when you really have to do all the jobs to figure out what they are and what matters. But founders often say that they stayed in that mode too long. We can see when it happens. They can’t respond to the success we create. They literally can’t ship as fast as demand is created, or they’re always behind on ordering new inventory, or they’re capital-constrained. Some of it is a vicious cycle. If you can’t ship the product, then you can’t get the revenue and then you can’t hire people. You have to invest in the business ahead of today’s reality.”