• Cons. There are often high start-up costs as owners rent or lease a space, as well as purchase merchandise to sell. Small retailers also face big competition from chain stores that can undercut them on prices. Owners must differentiate themselves to remain competitive, Butler says.
Creating your own merchandise. Imaginative producers can come up with everything from a better-tasting peanut butter to more-entertaining iPhone apps, then sell those creations online, at retail outlets or to wholesalers.
Some folks produce goods themselves. For instance Oldsmar, Fla.-based Toni DeFrancesco started her company, The Tile Mural Store, by making her own decorative tiles and selling them. Jessica Marquez of Brooklyn, N.Y., creates embroidery art.
Others opt to outsource: Austin-based entrepreneur Tom Nall found a Mexican distillery to make his all-organic tequila, and the Texas-shaped bottle that it comes in is made in China.
And some entrepreneurs work between the two: Jan Sneed, co-founder of Badgley/Sneed Designs in New York City, initially strings together the stone necklaces she sells, then takes the wired necklace to a professional to complete the process.
• Pros. Owners get to be creative in designing and producing their products. They have control over the quality of the goods that they produce.
• Cons. Can be labor-intensive if someone is doing the work themselves. If the product is outsourced, entrepreneurs have to worry about cost controls and quality management.