Will a Feeder Business be Your Ticket to Greatness?

Image of CrocsSo, are you undecided about your next business venture?

Spotting a business trend or forecasting the next viable feeder business doesn’t have to keep you up in a cold sweat at night.

You also don’t have to leave it to the current brotherhood (A-Listers) to pave the way for you.

Look at what the big players in any industry are doing and try to spot a gap in the market that you can fill. So don’t go thinking you have to invent something the world has never seen.

You can build your next income stream around a product that’s already established. By doing this you’re building a feeder business; a business that exists and grows from an existing business.

1. What does a feeder business do?

Feeder businesses ride on the coattails of an established brand or product. They can add functionality, offer more parts for a product, add customization options, offer training or consulting on a product or countless other enhancements.

Let’s get to the next point to better illustrate…

2. What are examples of feeder businesses?

Here are a few examples:

  • Jibbitz This is a company that was acquired for $20 million by the shoe manufacturer Crocs™ founded in Colorado. Jibbitz uses rhinestones and other accessories to snap into the holes of Crocs footwear. It’s a business that feeds on the ecosystem Crocs™ created and it all started with a stay-at-home mom.
  • i-solditstores.com This company exists because people can’t be bothered to learn how to sell their “treasures” on eBay. What you do is gather up all your junk valuables and drop them off at an “i-soldit on eBay store” and they handle your auction and shipping for you. Without eBay, this business may not have ever been created. Maybe.
  • Hyperarts.com and their TabPress application. This company makes it easy for people to create Facebook Pages by using iframes (new Pages won’t use the old FBML format for tabs). Products and services like these sprout up to feed off of a large economic source like Facebook.

It isn’t limited to full-blown companies like some of the examples here. Solopreneurs do things like sell iPad and iPod accessories, cases or screen protectors on auction sites and on their own websites. So, let’s say the main product is the iPod. The feeder business is the individual with her homegrown operation selling screen protectors online.

Give it some thought, I’m sure you can come up with a few examples like these.

3. What can you do with a feeder business?

Start one and sustain it.

Use it as a marketable asset.

If you’ve been bitten by the serial entrepreneur bug then building these feeder businesses and selling them off could be for you. Now, I’m a fan of working for the long haul so I’d rather invest my time building one company (with diversified revenue streams); but to each their own.

If you read the article on Jibbitz that I linked to; I think you see the potential.

Do you fancy yourself the type to build and sell businesses?

This strategy will appeal to you if you’re particularly passionate about the business start-up and early marketing phase until it gains traction. But if you grow bored quickly afterward (and crave the start-up feelings again) then consider selling it off.

Your Input

With any luck you’re starting to see that to be a leader you don’t have to make the next iPad. You don’t have to create the next Facebook. You just have to lift your head up, look around you,  and study the road ahead.

Do you currently run a feeder business? Is there a business trend or new product you’ve spotted that you are going to dive into and make your splash?

Share your great thoughts and questions in the comments.

Photo: ryoichitanaka



26 Responses to Will a Feeder Business be Your Ticket to Greatness?
  1. Eugene
    April 6, 2011 | 11:20 am

    I’ve never heard of Jibbitz. $20million!!!! That’s crazy!!!

    I mean it’s not really crazy, good for her, but you know what I mean :)

    • Jon
      April 6, 2011 | 10:02 pm

      Eugene -

      Ha, I know exactly what you mean. I am happy for them but man I was just shaking my head. Crocs? C’mon. Accessories for Crocs? Get outta here. That’s the market for ya!

  2. Danny @ Firepole Marketing
    April 6, 2011 | 2:40 pm

    All things being equal, I’m not a fan of feeder businesses – it feels to me like in addition to the other risks that any new business faces, you’ve got the risk of putting all of your business on a fad… what if the winds had turned the other way, and people stopped caring about Crocs? Jibbitz would have been out of business.

    That’s all things being equal, of course. If you see a great opening in a market, then I say go for it, if you’re passionate and excited. I just wouldn’t say that they’re necessarily easier. :)

    • Jon
      April 6, 2011 | 10:09 pm

      Danny,

      You make a valid point about placing your aspirations squarely on a fad. It’s not typically a great business move but for the right people it can be a booming opportunity to get into and out trends as they emerge. It’s like the people that enjoy building sites, monetizing them, then selling them on Flippa. They do it because they don’t like to be bothered scaling a single site and nurturing a community.

      We’re all wired differently. It’s never easy remaining sustainable no matter which way you go. BUT it can be easier to get that warm and cozy feeling about your product or service idea if it’s linked to a larger entity with mass appeal.

      Thanks for the great feedback, Danny!

  3. Janet @ The Natural Networker
    April 6, 2011 | 10:49 pm

    Jon, aloha. Plenty of food for thought in your post. Though I have owned many different types of businesses over the years, I have never owned a feeder business.

    The reason for this is I don’t like to have to depend on another company to do something in order for me to market my product/service and make money. Even though we know that all businesses have ups and downs, I like to at least have the illusion that I am in control.

    That being said, if I recognized a Jibbitz opportunity I would certainly create the business with the intention of selling it-soon.

    One of the things I do know, Jon, is that opportunity abounds everywhere if people open their eyes, look and take action. Having long been an entrepreneur, I cannot imagine any other life. It is a life that is deeply satisfying for me–both the highs and the lows.

    Thx so much for another thought provoking post, Jon. Aloha. Janet

    • Jon
      April 7, 2011 | 8:59 pm

      Howdy Janet,

      Right – I believe in some cases with these types of businesses you’re safer getting in and out in short time. The idea is to capitalize on a trend or the trickle down economics of a large business. i-solditstores have had a good run and will continue to do well for as long as eBay is around; however, the auction world has changed quite a bit.

      It’s great to know that you fully appreciate the entrepreneurial world. If you didn’t have the lows you wouldn’t be able to identify and fully appreciate the highs. Thank you for your insight.

  4. Geek Face
    April 7, 2011 | 4:17 am

    Hey Jon,

    I have thought of a feeder business or certainly an add on service to Mark Lings Affilo Jet Pack which I purchased a year of so ago. They recently launched a new section in their forum which was to help others setup affiliate websites. Something I considered doing but haven’t had time to implement but it did get me thinking about the possibilities.

    • Jon
      April 7, 2011 | 9:03 pm

      Hi Geek Face,

      Today’s as good a day to take action as any! If you have the time and resources then pursuing it could be a positive learning experience and lead you through the next chapter of your journey. Are you thinking of contacting other forum participants to see if they’re having any luck using the new feature?

  5. Gregory McGuire
    April 7, 2011 | 6:14 am

    Hi Jon,

    This is the first I’ve heard the term “feeder business,” but the concept makes a lot of sense to me.

    I’m sure you’ve heard that those who made the most from the California gold rush wasn’t the miners themselves; it was those who sold picks and shovels to them. This feels like the same concept.

    I would think such a business would require versatility. Like others have mentioned; if you pin all your hopes on one product, you might be on shaky ground unless you have a strong plan B.

    Thanks for a very thought-provoking post. Talk soon.

    Gregory

    • Jon
      April 7, 2011 | 9:15 pm

      Gregory,

      Thank you for sharing. Hey that’s a great comparison with the Cali gold rush, how true!

      Yes, I agree. You’d have to be a fast-mover and quite versatile. It’s the type of business where early movers will benefit the most and capitalize off the novelty of the product/service before all the competitors and knock-offs come in. You’ll also want to have your exit strategy in mind from day 1 as Marlee said in another comment.

  6. Marlee
    April 7, 2011 | 8:11 am

    Hey Jon!
    Despite popular opinion in the comments, I like the idea of a feeder business. BUT, I think it’s only a good move for a certain type of person.

    The person who is a great candidate for a feeder business is someone who is relatively new to entrepreneurship and wants to get their feet wet.

    As a new entrepreneur you have a lot to learn and launching a feeder business gives you the opportunity to acquire more business acumen and skill while mitigating some of the risk. How so?

    Because your feeder business is built on another product or service, you have an established market to work with, you can tailor your products and service to that specific target market’s needs, and the kicker is…if your product or service ends up rockin’ the cashbah – you may be able to SELL your feeder business to the root business. So you’ve got an exit strategy if needed.

    I say all that to say, if you’re real desire is to build a business asset all your own and independent of any other business then obviously it’s not a way to go, but if you’re struggling with ideas or finding a market to serve I think this advice is GOLDEN!

    • Jon
      April 7, 2011 | 9:08 pm

      Hey Marlee,

      Super points here (by everyone really) and thank you, Marlee, for putting so much thought into your comment. You’re right; building a feeder business is a great way to learn the ropes. You already know there’s money being spent in the market and the target audience has been well-defined for you. For some, this is a great model.

      But there are those of us that want to blaze our own trails. We’d rather build something from scratch and not have our brand, product, or service tied to another larger entity. Once the momentum of the larger entity slows or stops; you will experience a drop in business as well.

  7. Oliver Tausend
    April 7, 2011 | 11:53 am

    Hi Jon,

    this post is definitely expanding my context because I’ve never thought of a feeder businesses, as obvious as it seems when you get the concept.

    I can see that it’s a great way to fulfill a great purpose and to make money.

    Thanks for some food for thought :-)

    Take care

    Oliver

    • Jon
      April 7, 2011 | 9:09 pm

      Hi Oliver,

      I’m glad to have given you some brain food. This is a great approach for some; particularly the fast-movers. Thanks!

  8. Jk Allen
    April 7, 2011 | 3:31 pm

    Hello Jon,

    I think a feeder business is a great idea. It’s what I refer to as a side hustle.

    I don’t think it should be anyones soul source of income, but it can certainly be a viable stream of revenue.

    I was going to into detail as to why I think feeder business can be great opportunities, I honestly think Marlee nailed it in her comment.

    I will say that I think this is a great concept you brought up to share Jon. Many folks aren’t familiar with this aspect of business and branching out.

    Thanks for keeping us compelled, captivated and informed.

    PEACE

    • Jon
      April 7, 2011 | 9:12 pm

      Jk,

      Yep, Marlee did a great job breaking it all down. Most folks have seen or heard of these types of businesses but may not have looked at the big picture. The big picture that reveals that you don’t have to be super inventive (the market is already warmed-up with the main product) and the companies built around existing products can become highly successful.

      Thank you for stopping in!

  9. Jym Tarrant
    April 7, 2011 | 8:59 pm

    Hi Jon,

    Great to have this concept defined. Of course I’ve seen it in action but never thought clearly about what a feeder business actually is and why they work.

    I’m certainly a supporter of this and since I show no signs of inventing either the iPad or Facebook, I’m open to looking into ways to utilize this kind of idea.

    I appreciate you putting this together, nice work indeed.
    All the best,
    Jym

    • Jon
      April 7, 2011 | 9:22 pm

      Hi Jym,

      Thank you for the appreciation. Yeah, I’m betting most people are familiar with the concept but perhaps didn’t really look at it for what it is. The opportunities are endless because there will always be the “next big thing.” With that, you’ll have the “next big thing’s consultant | next big thing’s accessory | next big thing’s paid tutorial” etc.

      Good to see you here, Jym.

  10. Jane | Find All Answers
    April 7, 2011 | 9:15 pm

    Hi Jon,

    I am with Danny and Janet. I personally am not into feeder business, because I really want it to be my business whatever. I don’t want to have control or stress from somewhere outside; that is why I started blogging as a business so that I can be my own boss.

    But it all depends on whom you are a client/outlet of. Not all big companies behave like “bosses”; there are nice and flexible ones around. It is great to work with those folks.

    Cheers,
    Jane.

    • Jon
      April 7, 2011 | 9:20 pm

      Jane,

      It seems many of the folks commenting can appreciate the feeder business but we have bigger fans of trailblazing here! That’s great, I like that many of you prefer creating your own brand and product or service.

      You’re doing great over at Find All Answers; enjoy being your own boss! Thank you for sharing.

  11. Devesh
    April 9, 2011 | 11:10 pm

    Hi Jon,

    AWESOME article dude. Hearing first time about term ‘Feeder Business’ & Jibbtiz. I like the idea of creating a feeder business.

    Thanks for sharing this awesome insightful post man.

    ~Dev

    • Jon
      April 10, 2011 | 3:57 pm

      Devesh,

      Thanks! When you come up with your “Jibbitz idea” just don’t forget all the little people you met along the way ;) See you again soon, my friend.

  12. Marcus Baker
    April 10, 2011 | 2:34 am

    Hi Jon,

    While I have certainly often admired businesses which have arisen to compliment another, I never knew that there was a term for these, so I’m pleased to have learned something new. :)

    The idea of starting one of these makes great sense since you really are leveraging off the ideas of someone else which means you don’t have to wait till you come up with the brand new idea from scratch.

    Thanks for the education Jon.

    ~Marcus

    • Jon
      April 10, 2011 | 4:14 pm

      Marcus,

      Yep, it’s an opportunity for folks that haven’t had their own big “aha!” moment just yet. Who knows, starting down that path could always inspire you to create something completely original down the road.

      Glad you enjoyed the article! Thanks for sharing.

  13. Ian Belanger
    April 11, 2011 | 2:02 pm

    Hey Jon,

    That Jibbitz example just shows you how even a small idea can turn into a huge bank account. Now with the internet it is possible for anyone to do what this stay at home mom did.

    In the past you would’ve needed lots of start-up cash to get a business off the ground. My how the times have changed things.

    Great post Jon! I know that I have a few ideas for feeder businesses and I’m sure other commenters do to. In fact, this post has made me think about what I could do to make some extra cash.

    Thanks for sharing Jon and have a great day!

    • Jon
      April 12, 2011 | 9:54 pm

      Ian,

      Stories like Jibbitz always intrigue me. Who doesn’t like cheering for the “little guy?” The internet is offers wonderful opportunity for most of us. The best part is what you mentioned: the lower barrier of entry into business. Times have certainly changed.

      I’m glad you have some new ideas. Enjoy your day and thanks for stopping by!

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