“Ten Rules for Maker Businesses” by Wired’s Chris Anderson — Rule #3

Buy smart.

The real difference between a hobby and a business is that businesses don’t buy retail. Just as you’ll be selling wholesale to other stores, you’ll need to buy your components wholesale to keep your products affordable. That means buying in volume, and the discounts typically get a lot better in units of thousands than in hundreds.

In the case of electronics components, that means buying reels or at least long tape strips rather than bags. Fortunately, there’s a pretty good secondary market for unused electronics parts, so if you really get your forecasting wrong, you can recoup a fair bit of the money by reselling them.

Likewise for laser cut products, where you can sometimes buy material in bulk or negotiate a volume discount with the service bureau. But for those, you can’t resell what you don’t use, so don’t bankrupt yourself shaving a few cents off a part and ending up with boxes of parts you don’t need.

As for your other components, almost everything you can find retail, you can trace back to the manufacturer or wholesaler. It’s worth the search—the price savings can be be astounding (we pay less than twenty cents for motors that sell retail for $3).

And these days, more and more wholesalers and manufacturers will work with small companies and even individuals. They either don’t care who you are as long you’re buying in volume, or will easily set up a wholesale account with some minimum order sizes.

Check sites such as Alibaba, which are a consumer-friendly window into the world of Chinese factories. You’ll be amazed how many things you recognize from the store shelf, available straight from the manufacturer at a tiny fraction of the price. And rather than insisting on bank transfers and purchase orders, they increasingly take credit cards and even PayPal.

#1 Make a profit.
#2 It takes lots of cash to stay in stock.
#3 Buy smart.
#4 Basic business rules still apply.
#5 You get no leeway for being a maker.
#6 Be as open as you can.
#7 Create a community to support and enhance your products.
#8 Design for manufacturability.
#9 Marketing is your job.
#10 Your second most important relationship is with your package carrier.

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