|
"It's not about the product nor the technology. It's strictly a business decision."
Managing your business is no easy task, because at the end of the day it's not about marketing, customer support, or a terrific product. It's about making money. Never lose sight of the fact that money is why you are in business. Your ability to identify your organization's issues and evaluate your strategies relative to the bottom line is what will make you successful.
Return on Investment (ROI)
Evaluate your risks by asking yourself these questions:
1. What is my true cost of bringing a new product to market?
2. How many units of the product do I need to sell to off-set the cost of
marketing communications?
3. How much money does each salesperson need to bring in for me to justify his or her salary?
4. What is the total cost of the "whole product" solution?
5. Is it feasible to have direct sales force or will an indirect channel suffice?
6. What part of my business is more cost effective to farm out to a third-party vendor?
7. How much time and money will be required to bring the product to market?
You may have the perfect product and the perfect marketing campaign, but if it costs 2 times what your potential revenue is projected to be, then it's not the right business decision. Break the solution into pieces and determine which part will make the most revenue with the least cost. And farm the rest of it out.
"When the volume increases, clear business processes are what maintain net profitability."
Operations
What is the infrastructure within your organization? And what infrastructure is required to achieve your revenue goals? These are very basic questions that you need to answer before any financial resources are allocated. What is your cost of transaction? If you are selling a $100,000 product but it costs you $150,000 to process and your gross revenue shows that you are growing at 100% per year, there is no way that your net bottom-line numbers are not going to show that you are in the red. Painstakingly define your operational issues. Develop processes and automate those processes. And build infrastructure to support your revenue expectations, otherwise your business will suffer.
Buy, Build, or Partner
When an organization begins to evolve and the market shows product acceptance, most organizations decide to take their current product line and expand it. The key question from a financial perspective now becomes whether you should purchase the products, develop the products internally, or partner with another company for them. Ask yourself these questions:
1. What internal develop resources do I have?
2. What development resources will I need?
3. What is the time-to-market analysis?
4. What is the cost to support the product?
5. Is it more cost effective to support the product with external resources?
6. What is currently available in the market?
7. What percentage of the market share can I capture?
8. What will it cost me to capture this market?
9. Are there products in the market that I can purchase?
The key point is that the decision to develop products is a business decision, not a technology or market decision. You need to deliver the "whole product" in a cost-effective way that supports your business model and runs in parallel with your financial revenue model.
|