Section 3 // ●●●○
Quick Links: 1: Planning 2: Framing 4: Growing | Dashboard:
Shopify Business Blueprint
1. Develop your product
With an idea of what you want to sell, a view of the competitive landscape, and your ideal customer in mind, you’re ready to start developing your first product or service.
Below is an overview of different product sourcing options that exist for today’s entrepreneurs.
2. Sourcing Options
Make it Yourself
Pros: Producing your products by hand allows you to control nearly every aspect of the product.
Cons: You have to create each individual unit. However you can eventually hire other producers or work with a manufacturer to scale productions.
Examples: Candles, soaps, knits, jewelry
Purchase from Wholesalers
Pros: Wholesalers offer quantity-based discounts on bulk orders to sell their products, which are usually already proven to sell well.
Cons: Wholesalers can also sell to your competitors so what you’re selling may not be that unique to the market. You also need to order and hold a large quantity to maximize profits.
Examples: Phone cases, housewares, specialty coffee
Work With a Manufacturer
Pros: Turn your idea into a physical product based on your specifications and lower your cost per unit by producing it in bulk.
Cons: This can be a much longer process as you’ll need to find a reliable manufacturer and develop a prototype which can take multiple attempts to get right. Most manufacturers also have a minimum order quantity you have to purchase to do business with them. This number can be anywhere from 10 to over 1,000 units.
Examples: Waffle maker, toys, stickers
Use a Dropshipping Supplier
Pros: You don’t have to hold or ship the inventory yourself — your supplier does it for you. Some dropshippers, such as print-on-demand companies, also allow you to customize the products with your own designs.
Cons: The low barrier to entry means you’re competing with many other businesses selling similar products and you lose out on the quantity-based savings you get from other product sourcing avenues. Very limited product customization in most cases.
Examples: T-shirts, home goods, mugs
Create a Digital Product
Pros: No physical inventory management. These products also allow for higher profit margins since there are no recurring production costs — you create it once and sell
it endlessly.
Cons: Risk of having your content stolen and shared widely. Highly competitive given the prevalence of digital products on the internet.
Examples: On-demand video and music content, online courses
Package Your Expertise as a Service
Pros: It’s easy to leverage your experience and knowledge to get started since you’re selling your skills.
Cons: You’re directly trading your time for money which limits your income, unless you hire others to do the work.
Examples: Freelance work, tutoring, house cleaning, car washing, music lessons, personal training
Recap: In the second section, you began to discover two important things; the main competitors in your field, and the ideal audience to target.
3. Considerations
Once you’ve thought about how you might source your product, planning it will involve the following considerations:
Cost Per Unit
What costs are involved to produce a single unit of your product? In many cases, your cost per unit will decrease as you produce a higher quantity of the product, saving on raw materials and other expenses. If you’re selling a service, your time has a cost too. If you don’t know the exact costs associated with your product, a rough estimate or target cost will do. The point is that you factor this in when thinking about your selling price and profit.
Selling Price
What will you ask your customers to pay for it? Your selling price communicates the value of your product to your ideal customer and influences how much profit you stand to make from a sale.
Profit Per Unit
How much profit do you expect to see per unit sold, excluding marketing and other business costs incurred? You can increase your profit per unit by raising your selling price or by decreasing the cost per unit (such as by buying your materials in bulk).
Features
What features will you highlight or build into your product to attract your ideal customer?
Profit Margin Calculator
Use the Profit Margin Calculator to try out different pricing scenarios and see how much profit you can make! You can also use our online Profit Margin Calculator.
Fill in the
Cost of Item and Markup cells below, and the calculator will do the rest!Item
Cost
Markup
Sale Price
Profit
Gross Margin
Hot Tip: Use the info from researching your competitors as well as your features and target market to think about the price range you want to aim for. Think about the value you’re delivering to customers, then price your products and services accordingly.
4. Put it all together and watch your product come to life!
Here’s an example:
Product: Habañero Hot Sauce
Sourcing: Make it myself
Cost per unit: $5
Selling Price: $20
Profit per unit: $15
Features:
- Less spicy than the market-standard habañero hot sauce
- Family recipe
- Fiery and fruity flavor
Fill out the following about your product:
Product
How will you source your product?
Make it myself
Find a manufacturer
Use a dropshipping supplier
Curate from wholesalers
Create a digital product
Package my expertise as a service
Cost Per Unit
$
Selling Price
$
Profit Per Unit
$
Features:
You can repeat this process to develop each additional product you want to sell.
1. Manage your money
The goal of any business is to make money, but it also costs money to run your business effectively.
These costs can include everything from buying inventory to hosting your website to spending money on marketing. There are two types of costs you should be aware of:
Variable costs fluctuate based on your sales volume, such as the cost of producing one product versus the savings you gain when you order 1000 in bulk. Marketing is also often variable as you scale.
Fixed costs fluctuate based on your sales volume, such as the cost of producing one product versus the savings you gain when you order 1000 in bulk. Marketing is also often variable as you scale.
Take a look at the example below:
3. Break-even analysis
With all your costs listed out, you can do what’s called a Break-Even Analysis to figure out how many units you need to sell to “break even,” cover production costs, and begin making a profit. For this exercise, We’ll use an average unit price of $20.
To calculate the break-even point, use the following formula:
Example:
The break-even point for the hot sauce business is 67 units. That number could be lowered by raising prices, and finding ways to lower variable and fixed costs. Once you’re up and running, this is something that can be revisited with monthly recurring costs to understand your monthly break-even point.
4. Now calculate your break-even point:
You can use the following formula, or fill in the first three cells in the table below.
______ / (______ – ______) = I need to sell __ units to break even.Revenue
The money generated from operating your business before subtracting operating costs.
Operating costs
The money generated from operating your business before subtracting operating costs.
Profit
The money you keep after subtracting your operating costs from your revenue.
Cost of goods sold (COGS)
The direct expenses involved in the production of the products you’re selling.
Profit margin
Expressed as a percentage, this represents how many cents in profit is generated for each dollar of sales. A 50% profit margin means you’re generating 50 cents for every dollar.
Economies of scale
A concept that describes the savings you gain as the scale of production increases. In other words, as you produce more products to sell, you can expect your COGS per unit to decrease proportionately.
Bonus Content: Check out this story on Break-Even Analysis to try out different pricing scenarios and see how quickly you can break even!
Hot Tip: As you start your business, prepare to not make a profit right away. Most businesses take a few weeks to a few months to make a profit. Look at this period as an investment for finding your product-market fit.
1. Build your brand
Your brand is how people recognize your business out in the world.
It’s your logo, your business name, your website, your color palette, and also how you present yourself to the market and speak to your ideal customer.
So start putting together all the pieces of the brand that will become the embodiment of your business.
Your business name
Your business name is the most visible feature of your brand. It’ll be part of your website domain, on your packaging, and what people will Google to find you online.
It’s also where a lot of people get stuck when starting their business. The perfect business name doesn’t exist, but many exciting, engaging, and effective options do. Here’s a checklist to help you find a name that you can feel good about.
2. Business name checklist:
Is it unique? (Check possible domains here)
Is it simple and memorable? Is it easy to pronounce and spell?
Is it too specific, preventing you from expanding your product line or pivoting in the future?
Hot Tip: Don’t worry about coming up with the perfect name for your business. You can always revisit your business name if need be. Lean on the following exercise and online resources for inspiration. Check out this guide for ideas and tips.
3. Feeling stuck? Time to brainstorm!
- Write out nouns that relate to your business.
- Write out adjectives that may represent your product or service (words that describe the nouns).
- Try to combine them in interesting ways.
Here’s an example:
Nouns
- Pepper
- Chilli
- Heat
- Fire
- Blaze
- Fruit
Adjectives
- Spicy
- Tangy
- Hot
- Savory
- Snappy
- Fiery
Name ideas and combinations
- Jay’s Spicy Sauce
- Snappy Pepper Hot Sauce
- Tangy Jay’s
- Fiery Fruits & Peppers
- Fire & Heat
- Something Savory Hot Sauce
Now try it out with your business:
Nouns
Adjectives
Name ideas and combinations
Bonus Content: Still having trouble coming up with a name? Take some of your name ideas to the Shopify Business Name Generator and level up your name game.
4. Your brand’s voice
So far, you’ve done the work to establish what your brand looks like. But what about what it sounds like?
When you start marketing, whether it’s writing your website copy or posting on social media, your brand voice helps you stay consistent and resonate more deeply with your ideal customer.
Let’s take our hot sauce brand Tangy Jay’s as an example. It’d be interesting if we gave it a brand voice not nearly as spicy as the sauce itself — a voice that was quite straightforward and witty.
Delicious hot sauce doesn’t need to set your mouth on fire. Tangy Jay’s sells flavorful medium hot sauce that responsible spice-lovers can enjoy every day with their favorite meals. We’re not the world’s hottest hot sauce and we’re proud of it.
5. To start, pick three adjectives you would use to describe your brand voice:
Here are some descriptors for inspiration:
- Bold
- Creative
- Spontaneous
- Funny
- Serious
- Professional
- Savvy
- Charming
- Witty
- Sarcastic
- Playful
- Adventurous
- Cute
- Motivational
- Trustworthy
- Fiery
- Ambitious
- Straightforward
- Sassy
- Warm
- Empathetic
- Supportive
- Caring
- Conversational
- Sophisticated
- Loud
- Energetic
6. Feeling creative?
Try selling your own product below using the brand voice you created above:
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