If you've taken a product to market, please talk to me
davejames
Posts: 4,047
Hi All - this request is for those that have developed a product and taken it to market.
So, I'm getting close (closer?) to the point of demonstrating a couple of products that I'd intended to sell through my fledgling business, and I'm facing a decision:
1 - do I forge ahead and do it all on my own (fund, advertise, produce)?
2 - do I find another party that would be interested in the product and sell it off?
I would be very interested to hear opinions of those that have gone down this same path, and probably faced this same decision.
Thanks much.
So, I'm getting close (closer?) to the point of demonstrating a couple of products that I'd intended to sell through my fledgling business, and I'm facing a decision:
1 - do I forge ahead and do it all on my own (fund, advertise, produce)?
2 - do I find another party that would be interested in the product and sell it off?
I would be very interested to hear opinions of those that have gone down this same path, and probably faced this same decision.
Thanks much.
Comments
I like to THINK I can do it all, but my biggie idea is way to big for me to do myself, I'm searching for the right company in today's Smile economy.
"A man's got to know his limitations." Harry Callahan, Magnum Force
If you can't get the backers then maybe it wasn't a viable product anyway.
The other thing that I would say is be careful who you share stuff with. I read an article in Fortune Small Business years ago about a product designer. Everything he showed somebody, including sketchpad drawings, was signed and dated by the viewer. Maybe that's an extreme, but considering that somebody can have an idea today and in a week product is shipping from China, it might not be.
Have you ever heard of Groupon? A company that markets local coupon deals through email. For instance, you might buy a coupon for $10 that is worth $20 at a particular restaurant, so you double your money, sort of (unless you forget to print & use the coupon). But of the $10 you paid, the restaurant only gets $5. Groupon keeps HALF.
Pretty good payment for sending some emails, huh?
4 - Subcontract the manufacturing and wholesale the product to a company or companies that will promote it.
I've done it all four ways, so let's look at the advantages/disadvantages:
2. The advantage is that you will receive a big paycheck, the customer handles all the manufacturing, sales, and tech support; and you can move on to other projects. The disadvantage is that you receive just one paycheck, and that's it. If you need a big cash infusion, this is a good option. Just make sure not to surrender so many rights to your product that your hands will be tied designing new products for someone else.
3. Royalties are the gifts that keep on giving. As with #2, you will have to provide a lot of support to your customer in the beginning to get them set up manufacturing and testing your product; but after that life can be pretty easy, with checks coming in monthly, and eventually -- you hope -- adding up to more than you'd receive from a one-time buyout. Occasionally you may have to deal with discontinued components and may need to do some redesign work as a consequence. The downside is that the amount you receive in royalties is less than what you'd make from direct sales. Be sure to have an ironclad royalty agreement in writing that specifies things like how the royalty is computed, when it's due, what you're providing (e.g. exclusive vs. non-exclusive rights); and make sure you have clauses that give you audit authority over the customer's sales records and specify how the agreement can be terminated. Consult an attorney for this!
Mixed 2 & 3: Receiving an up-front fee in exchange for a smaller royalty can sometimes combine the advantages of both options.
4. By taking responsibility for the manufacturing, you can make substantially more by wholesaling your product than you would from royalties. Be sure to contract the assembly on a consignment basis, rather than turn-key to save cost. The downside is that you will have to invest in the component inventory yourself; but if you price your stuff right, that investment will be returned quickly. Also, make sure you pick an assembly house who can manage and insure your consigned inventory without sustaining significant losses. (Some single-digit percentage loss during manufacturing is acceptable, so plan for it. If you order 1000 units, make sure the assembler has enough parts to do 1050 units.) You can still do some of the work yourself, such as testing and packaging, to save money.
'Hope this helps! And I will be happy to answer further specific questions.
-Phil
@erco...I definitely know my limitations.
Oh - and to those that gave this thread mucho stars, thanks!
-Phil
And don't forget this: http://www.virtual-bubblewrap.com/popnow.shtml
Marketing is the truly the arena that will determine if you will suceed in the long run. The second hardest thing is just keeping up with paper work, taxes, insurance, credit card charges, managing your cash, etc.. You name it, it seems like you always have to pay for something!
However, nothing ventured, nothing gained either.... I enjoy the challenge of new things and the whole process. I've been involved with electro-mechanical contract manufacturing for well over 20 years now and it is still fun knowing that you can go from A to Z, and know that you were able to accomplish it! Now days it kind of seems like second nature to manufacture something.
If you ever get a chance to go to some trade shows, ask some of those there that are displaying their items. You will learn a lot!
I'd be glad to offer more if I knew what type of product you may be looking at?
Take Care
As already stated, your skill sets are important. In fact, they are paramount.
My product was unique and hugely popular. It got a lot of free press. Sales were very good. My wife, 12 year old daughter and 9 year old son were all heavily involved in production, shipping, and accounting. Checks came in the mail. Life was good.
But, we hit a ceiling. Not only did the kids have to go back to school, but we were producing and shipping all we could possibly handle. I am not a business man. I needed help. I found partners that contributed marketing, networking, and money, respectively. But, what we desperately needed was executive leadership.
After two years (approximate) of running the show in the manner above, we finally found some high level management. It was the key to success. I stepped back into the shadows and thought about stuff, which is my favorite past time.
The guy we took on as a partner and CEO was expensive. But, he had to earn (literally) his salary.
He did.
The moral of the story is that you can build a company around a good product if you recognize your abilities and limitations. You must be realistic. A good product WILL sell itself, but without all bases covered you may find, as I did, that you can only produce and ship a certain amount while you also attempt to do other things like marketing, advertising, financial planning/forecasting, accounting, networking, and executive leadership.
I hope this helps. It is not the only way, it is just A way.
--Bill
But it's better to know the details before being blindsided I guess.
Keep 'em coming, please. I'm reading each one with great interest.
Much thanks!
The products are..errrr..ummm..aimed at..uhhh..those that play..ahhh..hmm...electrifiedstringedinstruments.
Without saying too much, of course!
There are "holes" in existing product lines that I'm targeting. A different take maybe, value added absolutely.
Solering iron in hand,
DJ
http://www.inventone.com/invent_supportgroups.asp << Here is a list of local support groups.
http://www.nationalinventors.com/organizations.html
Don't bother with fee based outfits. They expect to profit from everything you pay out.
...um errr, no...uh (looking around shiftly)...nope...
But that might be a great product!
One comment above is particularly true - it can be invaluable to have qualified professional help in areas where you have little or no expertise. At this moment I have several friends who have specific inventions or new businesses under development. Each of them is having different kinds of trouble getting off the ground for various reasons: lack of accounting expertise; no formal marketing or logo creation; no web experience, lack of inventory management; inability to calculate return; shortage of investment capital. And these are capable people with positive outlooks, but they're proof that hardly anybody can do it all on their own.
All of these challenges could be addressed by assembling a mini advisory team - call it a "board" for lack of better name. Make sure the people on your advisory team have expertise in different areas that compliment what you offer, but with experience in your particular product niche. Use this group to develop effective feedback on your plan and approach. At times you will be discouraged, but you'll identify the right approach to all the pieces (manufacturing, engineering, marketing, accounting) much more quickly. Have them over to your house once a month, starting with your plan as you've defined it. Keep your options open to swap them out, making commitments low in the beginning in case you find you need a different team.
Depending on the size of what you're doing, this might be helpful too: http://www.sherline.com/business.htm. Sherline is a great little company in the machine tool business. Joe's book tells some simple truths about running a product business.
Ken Gracey
Thank you, Sir.
I guess that just about sums it up. The majority of responses have been on the order of "know your limitations", and surrounding myself with people who know how to get the job done.
I admit - I'm a "concept guy" and can only produce after much agonizing over the smallest detail...and getting pulled away by "shiny things" and feature-creep.
Ok, I've a couple of friends that I can begin to query for insight and possible assistance. It'll be difficult in asking for help, but my vision won't manifest without doing so.
Thanks all for the responses, tips, stories, and the like. I really appreciate your efforts in attempting to enlighten me.
I'm gonna mark this thread "solved".
Many Regards,
DJ
So much depends on where you are in your life. Professional help can be expensive -- especially if you can't afford it. If you're young and don't have much money, spend some time brushing up on the skills that you lack. Sweat equity and self-education are almost always better than cash for the dividends they pay down the road. A friend of mine had a saying that still rings true: "Time ain't money, if all you have is time!" So experiment, and learn big lessons from -- hopefully -- small mistakes.
-Phil
http://www.joelonsoftware.com/articles/DevelopmentAbstraction.html
Mr. Pilgrim - thank you. I'm soon to be 59 (ugh!) and looking at that end-of-tunnel, retirement thing. All this effort is to build something that will help cushion the financial state of the family when my corporate life comes to an end. And, since I never became a rock star, I was hoping to still make a small mark in the music arena.
So, I'm not young, but I'm continuing to brush up on my skills mainly now in taking some of the ideas I've had in mind for years and actually constructing them. This has involved learning (re-learning?) analog and digital electronics I haven't touched for a long time, and also learning VB2005 to create a GUI and serial communication between a PC and the flagship product (lotsa help from Unsoundcode on that one!).
What I don't have, and this has been realized through all the responses, is the administrative skills. Throw in the financial skills also. I can keep the family's finances running smooth, but have no clue about the business level.
Anyway, all this has crystalized some areas that I need to address when pressing forward.
Thanks again for your input.
Yes it was - thank you.
I especially appreciated the (long!) paragraph about the air conditioner.
A lot of good ideas are beyond the ability of the entrepreneur to control once popularity and recognition evolve. Asian countries are full of entrepreneurial pirates. I have worked with a few ideas that succeeded but never paid off. The most illustrious was the idea to promote rock n' roll music in T-Shirts. The outfit I worked for sold the idea to Warner Brothers to print. 10,000 T-shirts for the Grateful Dead Skeleton Rose album.
Warner Bros ordered from us after having someone inspect our factor. We delivered and they never ordered again. Instead, the went to Bill Graham and set up a duplicate factory under a company called Winterland Productions. They still print on Steadman brand T-shirts which was our original supplier.
More recently, I had an idea for an eyeglass box that would also have a partition for pen and pencil. Since so many people have reading glasses, it seemed logical. I turned to a commercial product development outfit on the web and submitted a disclosure agreement. But it never moved ahead as all they want is their fees and I am to provide all the capital outlay. I could just have a plastic box die made in Taiwan and run off 10,000 locally; but finding a good distribution channel would likely kill me financially. Others would redesign and copy before I ever got to market. It is still a good solid idea, but I am powerless to cash in on it. I suspect that providing 'give away' eyeglass boxes to an established national optician chain with their adware on it is the way to go. Not exactly a retirement income, but a lump of cash.
There are a lot of stories of loss of control. The 'Smile button' is one of the most famous and when it first got going there were about 20 different buttons out their with different claims of copyright on them. Some lawyers made money, a lot of pirates made money. The originator is on the web and has never made much.
You are wise to not post much about your idea in the web. We can watch and see if someone jumps on my eyeglass box now that I've posted it. Nonetheless, electronically amplified music instruments are a bit of a slow market these days, even for the big brand companies like Fender and Gibson. There are too many outfits that make good copies for less.