At Pivot, we do more than help inventors develop and refine their products. We help those inventors become successful entrepreneurs.
Starting a product-based business is a bit different from starting one based on services. For one thing, you have to deal with manufacturers, a supply chain, and order fulfillment partners. For another, you have to be prepared to start developing your next product almost as soon as you’re finished with the first one.
This can make managing all the ins and outs of running a business even more complex, especially if you don’t have a large staff to divide up the tasks.
But that certainly doesn’t mean it can’t be done. Even if you’ve got just one or two people on staff, with the right knowledge and lots of dedication, you can make your product-based business into a success. Below are two of the most important components of product-based business development. For more, read our post Developing a Successful Product-Based Business – Part Two.
If you’re going to create a viable business, you’ve got to adopt a strategic mindset – and that means engaging in strategic planning.
Strategic planning is the process of defining your business’s strategy or direction, and allocating your resources to accomplish this strategy.
Think of your strategic plan as a roadmap for where you want your business to go. When developing it, you should try to answer these questions:
- What kind of business are we running?
- How are we offering value to our customers?
- What products and services have we chosen to include in our portfolio?
- What is the geographic scope of our organization?
- What markets do we operate in?
- What differentiates our business from competitors’ businesses in the eyes of our consumers?
- What are our organization’s strengths?
Doing so will dramatically increase your business’s efficiency and efficacy, as well as your ability to respond to market changes.
The goal of market research is to do two things:
- Verify that there is a market for your product
- Identify the characteristics of that market and your target consumer
Market research is too often overlooked in the rush to get a product to market quickly, but this is a mistake. In other cases, the research is done haphazardly or on a piecemeal basis. This can make the process very expensive and time-consuming.
Working with a firm that has expertise in market research, like Pivot, can help you streamline the process and accomplish the following goals:
- Identify target consumers. Market research will help you identify who your target consumer is, the expectations they have for your product, how much they’re willing to spend for your product, and factors that influence their purchase decision, among other things.
- Examine current market conditions. This will help you understand the market you’re operating in, including data like price trends for goods and services, technological shifts, consumer preferences, and other relevant industry information.
- Conduct consumer interviews and surveys. A market research team will also allow you to gain insight from actual consumers by helping you develop appropriate outreach materials, organize focus groups, and more.
- Analyze competitor products. When entering into a market, you have to know what kind of products you’re competing with. If there are similar products already available, entrepreneurs must know how they’re going to differentiate their product, whether through cost, features, branding, etc.
- Calculate an anticipated return on investment (ROI). This might be one of the most challenging aspects of starting a business, and it’s one that novice entrepreneurs often have the most trouble with. Creating a product is an expensive process, easily requiring tens of thousands of dollars in start-up funds – either from investors or from yourself – before you ever see a dime in profit. To know whether your business plan is viable, you have to be able to calculate how many products you’ll have to sell to recuperate your start-up costs. In general, if you can’t recoup those costs within a year the plan isn’t viable.
Developing a successful product-based business is a challenge, but having the right help can make all the difference. For more on business development, read our e-book “Turn a Great Idea into a Thriving Business.”