It's always summer on the Internet
By this stage, I had a much better idea what it costs to manufacture my product. It had taken a lot longer and had cost more than I expected. I thought it would take me about eight or nine months to get my first customer. I am already fifteen months in and I do not yet have my first real customer.
If you have gotten to this stage without having given up your day job, you are in a good position indeed. You have completed the task of creating a salable product and are close (I hope) to getting your first customer. Assuming you have a cost structure that makes a sale profitable, you have many choices open to you.
When I got to this stage, my first product run cost about three times more than I had hoped, which put enormous pressure on me to raise the price I would sell my product for. I did at least know that in the future I could bring that manufacturing cost down by remaking two of the molds with a far higher cavity count. Right now, though, the immediate objective is to get some sales and to learn about product issues that need to be addressed, so I decided to keep the product price to a level that made sense for the long term, rather than just try to recoup the costs of an expensive, early production run.
From my practical tests, I knew the product could be installed, and that it worked better than I expected it would. That is a good start, but in the hands of customers, issues pop up like mushrooms in a monsoon, so I am bracing for a small wave of new product requirements.
Most of the addressable market for my new product lives in the northern hemisphere, which means my product will not sell fast as most people do not work on their pond in the winter. However, we live in a time where, for an increasing number of products, the world is your market. So, from the beginning, I have made it possible to buy my product no matter where in the world you live.
Walking on dry ground again
At the earliest stages, being in your own startup is like living in a cardboard box under a bridge. It’s rough for much the time. No one is paying the rent and you alone must solve every problem that arises. When your project fails, it is not enough to shrug your shoulders and move on to the next project your employer offers to you. You simply have to make it work. On top of that, you don’t have any supporting infrastructure like you do when you are working in a large organization. Sometimes you need a little of that comfort.
I decided to go back to regular employment. As I pushed my resume onto the job market, I worked feverishly on getting everything in place for my product to sell online when I did eventually have to take on that full-time job. Once I take up a full-time job, development of my business will slow down a lot. Still, working full-time at this stage will ease the financial pressure, most particularly in reducing the need to make a profit within a few months.
End of chapter exercise:
· How long can you afford to pursue your product plan without being paid? _____________________________
· How much of your cash savings are you prepared to invest in your product idea? _____________________________
· How much money are you prepared to borrow to invest in your product idea? _____________________________
· How many separate pieces of plastic do you expect to see in your product? _____________________________
· Assuming none of your parts has an undercut, multiply the last answer by $7,500 _____________________________. (This will give you a rough estimate at how much your molds might cost).
· How much will it cost to manufacture one complete unit of your product? (not including mold creation costs) _____________________________
· Multiply the last answer by 2 to get the rough cost of selling it and cost of manufacturing it combined: _____________________________
· How much do you expect a customer will pay for one unit of your product? _____________________________
Cost of this stage: $0. Costs so far: $77,800
No comments:
Post a Comment