As an entrepreneur and a “maker,” I’ve always worked on the assumption that the catbird seat belonged to the one who created the thing being sold.
Now, I’m not so sure.
Until recently, in all of my professional endeavors, I’ve been the one who created the experience other people sell. In part, because I love that part of the process. But also because I just assumed that’s where the greatest opportunity lay. And the greatest control over your destiny.
But that may not be entirely true.
In the brick & mortar world, when you look at the margin from manufacturer to ultimate retailer, it tends to increase the closer you get to the customer. So, the manufacturer or creator maybe makes a 10% margin, but on very high volume. The distributor makes 15-30% on a medium volume and the retailer or person who sells to the ultimate consumer makes 50-100% margin, but on a relatively smaller volume.
That gives the person with direct access to the ultimate consumer the potential for the greatest profit.
In the online world, we’re talking about the difference between being an affiliate or a product creator. If the product is purely digital, the affiliate generally earns around 50% commission on sale. Smaller commissions are paid on lower level commitments, like obtaining emails or leads. And for hard-goods, the commission can drop down to 6-30%. So, if you structure it right, affiliates or people who are one step away from the consumer, have the potential to make just as much as the product creator.
Hmmm, this is getting interesting.
When you’re the creator or manufacturer, you’ve got your product or products. It can take a lot or work and money to create something new. And you often need to rely on others (distributors, affiliate, retailers or sales people) to sell them for you. If people stop liking your product, it’s game over. Time to create something else. More money, more time, more risk. That can cause a lot of pain and cost a lot of money.
When you’re the person with a direct link to a large community, list or gathering of like-minded buyers:
- IF you’ve built that community by adding value to the process AND
- Generated substantial trust along the way,
You can choose from any number of relevant solutions to “introduce” your community to. If one solution dries up, there will always be others. Your job is to vet the best ones, continue to build value, trust and rapport with your community and introduce them to solutions and experiences you believe they’ll benefit from.
Over the last few months, I’ve been experimenting with all of this.
I’ve got to say, I have just as much fun building relationships, community and trust as I do creating solutions. And both have become viable sources of revenue.
Which has me exploring more of a blended business model.
Being both a creator, and an introducer. Because doing so gives me options. At any given time, I can ask my communities what their pain points are and then do one of two things, create my own solution or source, analyze and share high-quality solutions from others.
If you’re looking to build a business, give some serious thought to whether you’d rather own the list or the product.
And give even more serious thought to doing both. Doubling down on both the product and direct-access to customers tends to happen far more naturally in the online world, but in traditional business, it’s often the result of a more concerted decision to proactively gather a community and create ways to engage with them beyond whenever they choose to stop by the shop.
If you’re the creator, at a bare minimum, find a way something with enough value to offer prospective clients that they’d be willing to give you permission to contact and engage with them directly in the future. And, if you’re the list or community builder, explore ways to not only offer other peoples’ solutions but potentially build your own.
You may have to spread that effort out over time, because simultaneously tribe-building and creating solutions can take a massive effort. But in the end, the effort can really pay off.
Curious, what about you?
Would you rather own the product, the list or both? Why?
And what’s been your experience on either side?
Join our Email List for Weekly Updates
And join this amazing community of makers and doers. You know you wanna...