5 Questions That Must Be Answered Before Attempting to Fund or Launch Your Consumer Product

5 Questions That Must Be Answered Before Attempting to Fund or Launch Your Consumer Product

I am constantly amazed at the naivety of first time entrepreneurs and inventors when it comes to the due diligence they must conduct in order to get their idea, concept or prototype to market. Even with the amazing information tools at hand in the 21st century, so many still try to fake out the marketplace by taking shortcuts. This is the equivalent of death by neglect.

There are 5 questions that must be organized and perfected before a new product can be considered ready for preparation of a fully documented, well-crafted, customized Business Plan.

Question 1: Do you have a production quality prototype built, a unit that can demonstrate the full functionality, features and benefits of your product?

This provides the base template of everything that must follow in pursuing accurate assumptions on which to base your strategy for investment, marketing strategies, sales model and financial projections.

Question 2: Have you assembled and distributed Release Packets to multiple manufacturing/production sources?

The Release Packet is the blue print and content map that producers will utilize to conduct proper time, assembly protocols, manufacturing standards required, and estimate production costs for your products build out.

Question 3: After choosing the factory that provides best service, lead times and quality control, have you been given a dead-net Cost of Goods to produce your item in mass production volume?

Dead-net Cost of Goods means cost to produce, package, handle, ship (by ship and container if off-shore production), freight-customs-duties, local freight from port of landing to your destination for product fulfillment, all inclusive. This is the real Cost of Goods that is the first and most crucial element necessary to create an exciting, well-documented Business Plan.
Question 4: Have you created a Sales Model that works for your enterprise, and for all up-channel re-sellers of your product?

Different Consumer Product categories must utilize Sales Models that factor many variables into the pricing equation. Some product categories require heavier Sales promotion budgets (Cosmetics, Skin Care, Toys, Games, etc.). Others require strong levels of store support for display, co-op advertising and point of purchase signage (food, drinks, oral care). Limited distribution, exclusivity models are built on a low volume, high retail model.

Question 5: Why is the Sales Model so important, and why do so few Entrepreneurs devote enough time, energy and research to perfecting this crucial building block of their Business Plan?

The second half of this question is easily answered: Some do not know how to detail their Sales Model, some do not want to put in the effort, and others do not understand the process required to achieve investment, licensing opportunities, partnerships or sales traction in a brutal marketplace.

The Sales Model (based on Question 3: Cost of Goods) is so very important because it is the “alpha” assumption that supports every declaration built into a Business Plan. If the cost to produce, and thus the selling basis for a product cannot be torturously defended every other element and assumption included in the plan will fall of its own weight. Investors will see this immediately and bail.

I write this after a particularly busy month of reading and hearing elevator pitches for projects that have been almost uniformly under-vetted. Some of the concepts might have even been commercially viable. However, when I ask these 5 questions and hear crickets on the other end of the phone line, I know I am not dealing with a serious, committed, driven entrepreneur, and I am not alone. Every other investor, venture capitalist, licensee and buyer I know experiences the same disappointment when exposed to plans built on quicksand.