T-shirts first, then everything else
If I could start my music career over, I'd do t-shirts first, before I even had a CD.
I'm not kidding. If you're anything like me, you probably started playing shows long before you had a CD to sell. You were playing cafes and clubs, performing for your friends and working on your material. And like me, people probably asked if you had a CD for sale. And you probably said something along the lines of "well, I'm working on one, hopefully it'll be done by blah blah blah."
What I wish I could have said: "not yet, but we're selling these t-shirts to raise money for the recording fund. Would you like one? You'd really be helping us out."
It's funny how some artists have no trouble dropping $20K in the studio squirm over investing a few hundred bucks to make shirts. (One guy even told me, "I'm an artist, not a textile company." Whatever, dude!) There are a number of advantages t-shirts have over CDs as a merch item.
People love t-shirts. Fans who really dig music express their passion by wearing the band's t-shirt. It's a badge of honor. 'Nuff said.
They're advertising. Every time a fan reaches for their shirt, they'll think of you. Other people will notice it.
They're cheap to make. My advice: skip CafePress and Spreadshirt and find a local printer. You can usually find one-color silkscreened shirts for $5 each or less, usually in runs of two or three dozen.
They're potentially more profitable than CDs. Stay with me here, let's do the math by pulling some completely imaginary (but not entirely inaccurate) numbers:
If it costs you $10K to record and manufacture a thousand CDs, you'd have to sell over 830 CDs at $12 each to break even. More likely you'll sell them for $10 each, in which case you'll never make a profit.
If you spend $200 on 24 one-color t-shirts you'd have to sell 14 at $15 each to make your money back. Sell the whole run and you've made a profit. (Profit: money you didn't have before.)
Now, which do you think you can sell more easily: one thousand CDs...or 14 t-shirts?
Of course, it's not just about making money. You want to tap into the passion of your fans and reinforce it by offering something that says "I was there, at the beginning!"
And that's why, if I could go back, I'd do t-shirts first.