“You can have any color you want – as long as it is black” – Henry Ford
That quotation has probably become one of the most iconic lines of all time, when it comes to the subject of manufacturing, consumer choice, supply and demand. Vehicle manufacturer Henry Ford knew the economies that could be achieved by producing a single product, with a single specification, and then supplying it. He understood that the concept of a single design, which could be reproduced easily en masse, was a more effective way of generating revenue than providing a bespoke service where consumers selected different specifications for their preferred product.
Obviously, this business model can only be effective in certain situations.
If you were to go to a restaurant and you were told that there was one single dish available for everyone, you may think twice about visiting the place again – especially if you happened to dislike the dish they served!
Similarly, when it comes to retail, a range of options (such as a choice of clothes in different colors or sizes, or a grocery store stacked with different products) is usually the best way to net high volume sales.
Here’s the thing.
When you run your own online business, it simply isn’t viable to provide your customers with endless choice of products, at different specifications. To succeed online as an entrepreneur with limited resources and budget, it makes sense to carve a niche with a few high-quality products, rather than inundating your customers with a huge range of choice.
Let’s use an example to show what we mean.
If you have a website which you run part-time, in addition to your regular day job, you probably have at best a few hours a day to keep things ship-shape for your business. Imagine someone who runs a site selling home-made jewellery. They have found a way to create a handful of beautiful products – necklaces, earrings and bracelets – using a single, simple design. They can change the color without impacting the time and expense to produce the items. They offer (let’s say) six different variations.
If they keep the design and colors within a relatively narrow range, they benefit in three ways.
Firstly, they can gain bulk discount for purchasing materials in the same shade and design to their product.
Secondly, they know that they can make the items swiftly, based upon a tried and tested technique.
Finally, they are not inundated with requests from picky clients who want to know if items can be made to a different size, shape or color. Either customers want the jewellery as it is displayed on the site, and make a purchase, or they don’t.
When we have limited time, budget and resources for our online venture, Henry Ford’s statement becomes extremely relevant to our business model. We cannot afford the luxury of creating bespoke products or services for every client who requests it. This limits our capabilities, by taking up time which we simply don’t have.
So the key to effective, efficient start-up for your business is to choose one product, and reproduce it. Your customers know what to expect, and you can streamline the production process, enjoy economies of scale by reproducing in bulk, and shepherd requests for tailored products by making it clear that what you offer, is what the client will get if they make a purchase. You manage expectations, conserve your time, and keep things simple.
Choose products that you only have to spend a finite time developing, and can then reproduce again and again. Passive income relies on the fact that you can create one item and then sell it many times. Keep things simple, streamlined, and efficient, and your online business will grow.
Let your niche product work for you, rather than spending all your time working on the product. As sales increase? We can talk about scaling up your range, or providing bespoke products. But for now, leverage the power of passive income to find ways of selling products and services which you create once, and then sell many times.