Hardware startups take a long time before they begin generating significant income. Because of this, most people find it necessary to keep their nine to five job to support themselves, their families, and their start-ups during the early years.
Unbeknown to most hardware entrepreneurs, there is a better way!
Did I mention this strategy also significantly increases the chances your product will ultimately succeed?
This article was originally published on PredictableDesigns.com. Download their free cheat sheet 15 Steps to Develop Your New Electronic Hardware Product.
NOTE: This is a long, very detailed article so here’s a free PDF version of it for easy reading and future reference.
Benefits to Quitting Your Day Job
If you’re truly committed to your startup’s success, it’s advantageous to quit your day job for many reasons.
- You don’t have to put up with a job you may despise. First and foremost, you may be in a position where you dislike your day job and are counting down the days until you can quit. If that’s the case, quitting your day job will provide much needed relief.
- It opens more time in your schedule to focus on your startup. Having a typical nine to five job doesn’t give you a lot of time to work on your startup, especially if you also have a family. That’s going to mean many late nights and weekends filled with startup-related work.
- Your schedule will be more compatible with others’ in the industry. When working a day job, the time that you do have available (nights and weekends) isn’t compatible with the daily functioning of your startup.
If you need to make calls to suppliers and other businesses, for example, they are usually only available during normal business hours
The typical strategy followed by most entrepreneurs is they keep their day job and work on their startup as a side hustle until they eventually reach profitability.
Keeping your day job is a safe strategy, and one I commonly recommend. However, it’s also a very slow strategy.
Marketing Must Be a Top Priority From Day One
One of the biggest mistakes I commonly see new entrepreneurs make is they wait until their product is fully developed before they give any thought to marketing.
That is a huge mistake!
It is utterly critical that you start marketing your product while you are still developing it. Development and marketing need to occur simultaneously.
You do have a website for your startup, right? If not, then you need to do that as soon as possible.
Are you building an email list of people that could be potential customers for your product? If not, you should being doing that as well in parallel with developing your product.
The point is marketing need to be done in parallel with development. Both are equally important, and both activities take a long time to complete. So why not speed things up and perform both at once instead of sequentially?
With this strategy, once you finally complete the development of your product, you’ll have already built up a sizeable audience of people interested in purchasing your product.
This audience can also kickstart your crowdfunding campaign if you decide to go that route.
Building your audience simultaneously while you develop your product is one of the best things you can do to increase your chance of success.
So the goal is to find an intermediate solution that will quickly generate income, and allow you to begin marketing your business at the same time.
If done correctly, this marketing effort can help you generate income in the short-term, and also generate revenue for your startup once you have a product ready to sell.
Option 1: Start a Service Business
The first option is to start a service business that is related to the hardware product you’re planning on developing. This option has some advantages and disadvantages that are important to consider:
The main advantage is a service business is one of the easiest businesses to start. You can begin selling your services from day one and generate an income.
There’s also no huge upfront capital required. You just usually need a computer and any necessary software.
The downside of a service business is that it’s very difficult to scale. It’s very rare that you could ever scale a service business to the potential size of a hardware company.
For comparison, hardware businesses are hard to start but they have tremendous potential in the long term. Service businesses are easier to start but don’t have nearly the financial potential of a hardware startup.
Freelancing, Coaching, and/or Consulting
Some broad examples of service businesses to consider are coaching, consulting, and freelance work.
Freelancing is quick, easy, and allows for flexibility in your schedule. Freelancing is beneficial in that it allows you to begin working immediately. Whatever your skills (software programming, marketing, hardware developer, you name it), there is a good chance you can find freelance work available now.
I recommend signing up for Upwork.com, which is a platform for freelancers where you can begin to sell your services right away. This is how I started before I founded Predictable Designs.
Websites like Upwork will allow you to begin generating a freelance income before you even have your own website. But you still shouldn’t delay getting your own website up and running so you can begin building your audience.
If you hate your job, are sick of your commute to work every day, and/or are tired of being stuck in a cubicle all day then freelancing is a quick solution. Escaping my cubicle was definitely a high priority for me when I quit my corporate job almost ten years ago.
Freelancing is likely your easiest route to more freedom.
There’s a good chance the freelance work you do won’t be directly related to your product, but at the very least it will allow you to get out of your day job and still produce an income.
Another benefit to freelancing is that it allows for more flexibility in your schedule. As mentioned previously, if you’re working a day job, your time is restricted and you’re missing out on the ability to interact with other important individuals/businesses during regular business hours.
Freelancing allows you to work on your startup during the day, and to do your freelance work at night if need be. While freelancing doesn’t open up more time in your day (in fact it will likely consume more of your time initially), it does give you more flexibility.
Dual Purpose Marketing
It’s best if you can offer a service that’s related to your product, which will allow your marketing to have the dual purpose of selling your service and selling your future hardware product.
However, it can be challenging to find a service that’s related to the hardware product you plan on selling. Though difficult, it is possible. Here are a few examples:
Finding a service that’s related to your product allows you to begin marketing while also developing your product. Your marketing will essentially be the same as the service you’re offering.
- Pet-tracking collar. In this case, your focus needs to be on the pet industry. You could start by offering services related to pets, such as dog walking, pet sitting, or mobile grooming. While most of these options might be on a local basis, the principle still applies.
- Child safety device. If your hardware product is a child safety device, then your service business could be child care, tutoring, or consultations with parents on different safety-related tracking devices.
- Music-related product. Say your hardware product is designed to teach someone how to play the piano or the guitar. Your service business could be teaching people how to play musical instruments.
- Fitness-related product. If the product that you’re developing is fitness-related, then you could offer a service business where you’re coaching people on fitness and how to be healthier.
Then you can start collecting email addresses and building up your audience of people that are interested in what you have to offer.
You’ll initially be selling your service to them, but once you have your product ready you can begin selling it to the same group of people that you already know are interested.
The biggest downside to the service business strategy is that performing the actual service is going to take away from time you could be spending on developing your startup.
Granted, part of that time is going towards marketing which is beneficial for your startup, but the time spent performing the actual service is time not spent working on your product.
One way to get around the problem of a service business taking up your time is to move towards a productized service model. A productized service is packaged as a product with very standardized features and a clearly defined set of deliverables.
Yes, such a productized service is still customized for each client. But you’re able to set up operating procedures, tools, and other optimizations that streamline the processes versus doing everything fully custom for each customer.
The advantage of this model is that it’s much easier to optimize a productized service than a service that’s fully custom for every customer. This optimization should free up more time for you to focus on your startup.
This is a much easier business model to scale, which frees up more time to work on your startup. A productized service business is a great intermediate step between a standard service business and a hardware startup.
Option 2: Start an E-Commerce Business
A second, and even better option than a service business, is to start a related e-commerce business. Essentially, this involves buying and reselling products related to yours, or even related to those you will be in competition with.
One big advantage of this option is that unlike starting a service business, it’s much easier to find an e-commerce business that’s directly related to your product.
It’s possible to start an e-commerce business selling products similar to just about any new product or idea.
For example, Allen Walton is the founder of SpyGuy.com, a popular e-commerce website that sells spy equipment such as miniature cameras, hidden cameras, audio surveillance equipment, and other related products.
Through his experiences, Allen developed a great understanding for his market and gained a huge following built around this e-commerce business.
Now he’s transitioning into developing his own custom products (for which he started with my Predictable Hardware Report service).
Migrate to Your Own Custom Product
One of the downsides with an e-commerce business is that your profit margins are typically low.
You’re simply buying and re-selling, so you are forced to compete with everyone else out there who is buying and re-selling the same product.
Migrating into your own custom product will generate much higher profit margins than what an e-commerce business typically would be able to achieve.
By starting with an e-commerce business, you’re not wasting time doing service work like you would with a service business. All your time is spent building your audience, selling products, and learning what people want and will buy.
You’ll learn a lot about your audience which helps ensure your product is successful.
Starting first with an e-commerce company related to your new product idea is a beautiful strategy for building a successful hardware startup.
There are many things to consider when deciding whether to start a service or e-commerce business as an intermediate solution.
Overall, an e-commerce business won’t typically generate income quite as fast as a service business, but it will still generate an income much faster than a hardware start-up.
The downside is that an e-commerce business takes a bit more time to set up and requires more upfront capital than a service business.
You will also have to buy inventory and ultimately generate more revenue than a service business. This is because your margins are going to be much lower than they would be for a service business where you’re essentially keeping all the revenue as profit.
Both options allow you to begin building your audience with a dual purpose. You start by building an audience to sell your services or e-commerce products. Then eventually you will sell your hardware product to the same audience.
It’s always best if you take lots of smaller steps toward your ultimate goal, than taking giant leaps of faith. Using a service or e-commerce business as an intermediate step is a move in the right direction.