There are a lot of good reasons to start your own health supplement company.  Among them are:

1. The costs of starting one have gone down considerably the last ten years
2. You’ll help people be healthy
3. It can be fairly lucrative if you find the right niche
4. The job market sucks and it’s just as good a shot as gasping for air at your brick and mortar employer that’s sinking like the titanic.

I started my own about 1 year ago, and it’s gone reasonably well, although I’m by no means a “big” player.  But Health Kismet is profitable and has fairly high margins despite low order volume.  It’s also primarily a one man operation with the periodic help of certain contractors.

The ins and outs of how to run a supplement company are beyond the scope of one blog post, in part due to their complexity and also because I have yet to master many of the finer aspects of the job.

To be frank, I’m pretty clueless when it comes to accounting, distribution, and the finer aspects of revenue optimization.  I am quite good at crafting business systems, analytics, and certain types of marketing.  I’m also good at doing things on the cheap.  I’ve made lots of mistakes but have always managed to screw up in a way that they have never caused me to change course.

Calling All Newbies

This post is primarily being written for two groups of people: Health Kismet customers who might be curious about how I approach the company and  would-be entrepreneurs looking for a little clarity on how to start their own business.  You can find blogs scattered across the internet on software startups, seo, and other digital moneymaking endeavors, but I’ve found the blogosphere is a meadow of crickets when it comes to the area of food and health supplements.

So please, allow me to fill in the void.

The Most Important Choices

For the most part, the skeleton of any supplement company will revolve around the following components:

1). What product you decide to sell

2). Who you choose to manufacture your product

3). Your choice of business model

All three are intertwined, but I want today’s post to be devoted to the initial seed of any food or supplement company: your initial product idea.

Debunking Myths

Most people overestimate how difficult it is to make a health supplement product.  In my experience aligning the peripheral business activities that must accompany your product is the much more sensitive and time consuming  task.  I’m well over a year into it and still picking up new things as I go along.

When it comes to actually making the product the whole process is automated and much of the thinking has already been done for you.  Any legitimate supplement manufacturer will already have a large variety of ingredients stocked and machines that can make the different categories of products: powders, capsules, gels, liquids, etc.

Most of the time they’ll already have a variety of stock recipes in place, some of which could be fairly close to your very own product idea.  If you want to go organic,  fair trade, non-gmo, or something else then they can pluck their ingredients from their stash that meet your criteria.  If they don’t have anything in stock they can simply order on your behalf and usually get.

So you don’t have to an amateur scientist who concocts zany potions in your kitchen, and you don’t have to know very much about ingredient sourcing to get started.  You just need to know what you want.

The Product Dilemma: Something New or +/- 1?

There are generally two directions you can go in with regards to products: you can do something that’s entirely novel or you can add your own twist to an existing product.

I prefer the latter approach.  It’ll likely have lower startup costs and more firmly established demand.  I make a greens powder, and those certainly aren’t new.  In one form or another they’ve been around for about 20 years.  If Health Kismet is in any way innovative (I don’t really think it is) it’s been in its ability to create a unique twist on something people are already familiar with and put it on top of a business model that’s fairly scalable with very low fixed costs.  But I didn’t invent the wheel when it comes to greens powders.

It is a great product, but mostly in that it has a uniquely good taste, all while delivering similar nutritional potency to comparable products.  It takes the concept of a greens powder and puts a “+1″ next to it.

Taking the “+1″ or (-1) approach is a good idea for first time entrepreneurs.  It’ll give you a higher chance of at least some success if you do everything else right and it’ll give you more flexibility with your choice of business model.

The Dangers of Being Too New

Many new people might have the impression that the best way to make inroads in the supplement market is to make a product that’s very novel.  Novelty has its benefits, but too much novelty can be a bad thing IMO.  For one it’s not all that necessary if you can find some other competitive advantage you have in the marketplace, and it’ll make your business less dependent on the most frequent cause of death of new supplement companies: trends.

I hardly shop at Whole Foods, but whenever I do I’m reminded of what I don’t want to do with Health Kismet.  I get the impression that at least 1/2 of the inventory was not there the previous business quarter.  As a consumer I get a quick buzz looking at the different mash-ups that ignite the buying impulse.  An a business owner I shake my head at the inevitable plight of 3/4  of the companies that risked their neck to make it in there.

Health food stores are as much about selling products that are different as they are about selling products that are healthy.  They have to reinvent themselves every 3 months to justify their higher prices.  The typical grocery store has profit margins between 1-3%.

If you connect the dot you can easily see that positioning yourself in grocery stores is a darwinian jungle that’ll most likely reward your years of hard work with a fleeting half year of shelf space before you get tossed out for the newest thing.

It’s not my style, and it probably isn’t yours either.

The Best-Seller vs the Back Seller

Lots of authors aspire to be on the NYT best-seller list.  They’re chasing false idols.  Like getting into a prestigious college or attaining some other hard to get form of validation, the NYT best seller list strikes me as little more than an empty vessel of status and vanity.  Getting on the list is just as likely to make you broke as it is to make you rich.  If you don’t have a large distributor you’ll likely have to front a huge portion of the printing  costs up-front and pray the book still sells once it falls off the best-sellers list.  Most of them don’t.

The real place to be as an author is on the back list.  Those are the books that sell year in and year out, even decades after they’ve been written. Here’s a good comparison of the best seller list vs. the back list.

You probably want to follow similar advice if you own a supplement company.  Being the first product to market with a new ingredient might give you a lot of initial lift, but does nothing for your long-term competitive advantage.

In other words, you don’t want to be the trendy fusion restaurant that’s opening downtown that’s frequented by the local aristocracy.  You want to be the plain looking Italian restaurant around the corner that has a bunch of fat hanging out at the bar waiting for their table.