Top 5 Questions to Answer Before Launching a New Product or Service
1-Is my business already on a solid foundation?
If your systems, processes and personnel are not ready, efforts to expand will overload your capabilities and set you up for failure. Make sure you are ready to handle the orders, deliver the product or service and collect your money in a systematic and timely fashion.
Also, make sure you have one or more strong indications that there is a market for what you plan to offer. Strong past $ales of something similar or a part of what you are expanding are usually a positive sign. Be careful you don’t fall in love with an idea and disregard the warning signs that the market won’t support it.
2-What is the size of the market?
Do a competitive analysis (see checklist at http://primestrategies.com/companalysis ). How is what you plan to offer filling a market need? What will be your position within this market? Who is your target market and how will you reach them? You want to reach the conclusion that your efforts have the potential to pay off. If you are offering the same product to a new or broader market the same principles apply.
3-How should I price it?
Pricing is an important consideration. When you do your competitive analysis you’ll learn how similar products or services are priced. You want your price to be attractive enough to sway people to buy; unless you’re pricing a luxury product and the higher the price, the higher the perceived value. The option for prospects to keep their money and not buy from anyone is always one of your competitors.
4-How much revenue can I expect to generate within a specified time period (usually one year)?
This is an important question and is dependent upon the actions you take to generate sales. You’ll need to think through your Marketing Plan in order to come up with a realistic projection of how many widgets you can sell at $XX within a specified time period. Analyze your sales history to help you know what has worked in the past. If you have a long lead time for sales, that should be taken into consideration. This may mean hefty upfront expenses with corresponding delayed revenue income. To be conservative make your revenue projections and then knock off 30%.
5-What will it take to realize this additional revenue and profit?
What additional resources will you need? Do you need to hire more people, buy more supplies or inventory, etc.? That additional cost must be taken into the equation. These may be in the form of fixed or variable costs.
Consider what the competition is doing and what market insights and trends you can utilize that will generate sales. Select one or two actions for your initial campaign and test on a small scale before committing major dollars.
At best, making a financial revenue and expense projection is always a guesstimate. Gathering and analyzing pertinent information is the key.
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