A. Industry analysis
-Is the industry growing?
-Who are the major competitors?
-Where are the opportunities in the industry?
-What are the trends & patterns of change in your industry?
-Are there successful and young companies in the industry?
-Are there any threats to the industry?
-What are the typical gross profit margins in the industry? (Revenues-cost of goods sold= $ left over to pay overhead)
B. Market Analysis
-Competitive Intelligence: Look at the following of your top competitors:
1. Management style of the company
2. Current market strategies
3. Unique features & benefits of their products
4. Their pricing strategy
5. Their customer mix
6. Their promotional mix
– Check information on public companies with Hoovers Online, Us. Securities & Exchange Commission, OneSource.
C. Customer Analysis
-Questions to answer your potential customers:
- What are their demographics?
- What are their buying habits?
- How do customers hear about your product? Do they buy based on TV ads, magazines, Internet advertising, word-of-mouth, referrals?
- How can our new product meet customer’s needs?
Manufacturer Distributor Retailer Consumer
-The easiest way to identify the customer is to find out who pays you-follow the $
-You need to know as much about the end user as you do about the customer because you must convince the distributor that a market for the product exists and that the end user will buy enough products so that the distributor and retailer will profit. Thus, conduct the same research on the end user that you do on the distributor.
- Why will you buy this product? If not, why not?
- Why do you purchase in these locations?
- What would it take for you to purchase this product?
D. Forecasting Demand:
– Use substitute product to gauge
– Interview customers & intermediaries
– Go into limited production with a test market
E. Product Development Analysis
Design Preparation/Prototype Building & Testing/Initial Test Production/ Ramp-Up & Mrkt Intrdctn
-****Make sure your exact product and your business name is not already patented (both can be verified on http://www.uspto.gov/trademarks/index.jsp or you can hire an intellectual property attorney to advise you on patents and trademarks in existence that could be problematic)***
– It is best to involve all parties in the process from the beginning:
- Customer: By providing info on the product design and functionality you ensure they get what they need.
- Engineering: Uses comprehensive product info. To design the product correctly the first time.
- Finance: Follow production costs and warns developers if they are choosing a component or cost that will be too costly in the final product.
- Manufacturing: Makes sure a viable process for producing the product exists.
- Marketing: Keeps tabs on the marketplace to ensure that the product is well accepted when it is launched.
- Purchasing: Establishes reliable relationships with vendors to ensure that they deliver parts on time.
The feedback that you want to solicit from all these parties is:
– What makes the product better & easier to manufacture?
– What does the marketplace think of the product?
– What improves the product, its components & the way it is built?
– How reliable is the product? Are any parts less reliable than others?
– Are customers satisfied with the prototype?
– How will you service the product?
– How will you handle complaints?
– How will you get positive publicity for the product?
- Suggestions For Overcoming Scarce Resources:
– Begin with the product that will bring you the greatest ROI.
** Focus your energies on what you do well & outsource everything else **
– Don’t try to manufacture products that others already do very well.
– Purchase off the shelf parts and components, when possible
– Research job shops that work with entrepreneurs regularly and use them.
- Designing Correctly
-Start with a good product definition
-Ask customers what they need, expect & want
– Deploy quality function
– Design for manufacturability:
-Minimize the # of parts (and electrical cables)
– Simplify components & use common or standard parts
– Design parts with symmetry
– Make parts independently replaceable
– Eliminate adjustments of manufacturing equipment, fasteners & jigs
- Sourcing Your Materials:
– Materials & costs account for about 50% of total manufacturing costs.
– Best to purchase 80% of your parts from main vendor & 20% from a backup.
-Questions To Ask When Looking For The Best Vendors:
– Can this vendor deliver what I need when I need it?
– How much will freight cost using this vendor?
– What services does the vendor provide?
– Is the vendor familiar with the product lines I am using?
– What are the vendor’s maintenance & return policies?