Is your new business venture based around a new product? If so, beware. Statistics show that less than 3% of all new products fail to gain $50 million in sales in their first year, the benchmark for a new consumer product.
Even the largest companies have a hard time reaching that goal. Studies show that the predominance of most households purchase the same 150 items which make up 85% of their everyday needs.
If you’re forming a corporation or LLC based around a product, you have to increase your odds of success. Like most failures, many mistakes happen because of simple mistakes that are easily avoided.
Can’t Keep Up
In all of your plans, don’t forget to plan for success. Your product was a big hit but what do you do when you have to ramp up production to meet national or international demand? Have those plans in place before launch. Don’t go out of business because you couldn’t keep up with increasing demand.
It had Better Work
Before you make big claims, make sure your product can measure up. Think for a minute about all of those revolutionary fat loss products on the market. Pop this pill, use this exercise device or rub this cream on yourself and the fat will melt away. The only thing that really melts away is the profitability of that LLC you formed thinking you would get rich.
If it doesn’t work, people will quickly find out. Then, they will head to Facebook, Twitter, and every chatroom they can find to let people know. Make sure your product does what it says it will do.
Basing a Product around a Fad
It may be tempting to try and cash in on something everybody loves right now but that is rarely a good idea. Angry Birds is a game that first appeared on mobile phones and Facebook and has become part of American language but that’s right now. If your reading this article sometime after 2011, you may have never heard of this game.
If that’s the case, all of the businesses who have designed products to leverage the popularity of this game may already be out of business. Even the actual Angry Birds franchise may have already disappeared.
Fads come and go and a business often takes a few years to operate profitably. That may be long after one of those short-lived fads disappeared and another took it’s place.
You Don’t have the Money to Teach
As a new business owner, you’ve heard conflicting advice. On one hand you’re told to make your product revolutionary but on the other, it needs to be easy to use. Convincing people to change their lifestyle to use a different kind of product is exceedingly expensive. Strike a balance between innovative and mainstream. People don’t like to change.
Before you form your LLC around a new product, do your exhaustive research. “Anecdotal” research isn’t enough to satisfy an investor who is placing real money in your product. This may seem obvious but according to one firm who assists with new product launches, this is the most common problem they see.
Forming a business around a product is appropriate and can result in a highly profitable venture if done correctly but it’s important to complete all of your research and product refinement before taking it to market.