From the March 2006 issue of Entrepreneur

The thrill of creating your own product, of being the only one in the world who has something--consumers love that sensation. With companies such as Cold Stone Creamery letting patrons choose a mix of flavors to suit any particular sweet tooth, people are primed for personalization. "We [as consumers] crave feeling special. We crave being able to get our creativity in our own product," says Wes Moss, author of Starting From Scratch:Secrets From 21 Ordinary People Who Made the Entrepreneurial Leap. "In any customization business, what an entrepreneur is really doing is empowering the consumer. You're embracing the consumer's creativity and helping it along."

You'll need tons of upfront preparation to launch a personalized business. Research whether there is a desire for your particular customized product or service. Moss suggests considering industries where there's somewhat of a luxury feel and offering products that customers are willing to splurge on. And manage the number of choices you give customers--a huge menu board with 150 options will overwhelm them. Says Moss, "Focus customers on several choices--[numbers like] 20, 10 or 3 are manageable." Then you can offer more options with ancillary add-ons.

One company all about manageable choices is Baby Donut Co. in Sherman Oaks, California. Founded in 2003 by Matt Massman, 21, the shop encourages customers to create their own doughnuts by choosing the type of doughnut, filling, icing and toppings. Baby Donut Co. offers more than 27 different elements to create a customer's perfect doughnut. Choices include strawberry or vienna cream fillings, chocolate or marshmallow icing, and toppings such as M&Ms or Golden Grahams. Massman also offers a favorites menu so people can try the most popular combinations--such as the glazed with chocolate icing, chocolate sprinkles and M&Ms. Still, even with subsequent annual revenue of nearly half a million dollars and a recent expansion into wholesaling, startup was a challenge. "Organizing it, getting it systemized is very difficult," Massman says. He started with a menu board that gave all the options at once, but found out that it overwhelmed customers. So he quickly developed a menu with clearly defined steps (step 1: choose donut, step 2: choose filling, etc.).

Customer feedback and market research are key to developing a successful create-your-own system. Susan Klein, a master certified coach and founder of Success Technologies Inc., a coaching business in Delray Beach, Florida, says, "Really understand who your customer is and what they want." A test period can help you refine your customer choices--keep close track of exactly how much of each element you're selling (some computer inventory programs can help with this). Also, you might seek the input of an outside eye, like a business coach, to help you get your system in place. Keep an eye on trends to possibly add to your offering, and realize that both you and your staff have to be experts in your product if you're going to divide it into interchangeable elements.

To get ideas, check out a few of the other create-your-own companies out there: LaNeige Purse lets customers customize the color combinations for their own purses, and handbag retailer 1154 Lill Studio offers design-your-own purses. True Jeans offers customizable jeans. And Baby Meets Family offers a line of customizable children's and family videos--customers provide photos and create educational and personalized videos.

Remember, says Klein: "Having a [create-your-own] niche really requires understanding and knowing your market and your customer."