To Launch or Not to Launch...? A Guide in Determining Feasibility of Your Next Big Idea.

     Ideas.  They are everything in today's "the world is flat" economy.  Our intellectual property is even more valuable than ever before but for all of those great ideas that end up on the market, over 95% never make it to the shelves.  In fact, studies show that the proportion of products that successfully survive the entire process from creation to successful product is only 4.75%.*  That is both a frightening and empowering statistic, meaning if you have a new product idea, the odds are against the success of that product but at the same time, if it is successful, you have beaten the odds.

     In my experience, the marijuana industry is full of dreamers.  This is not a negative connotation because if it was, I would be insulting myself, because I am myself a dreamer.  But I'm a dreamer that has had business experiences that has lead to this layman's "litmus test" of feasibility for products or the next "big idea". Just as important as it is to get new products and new technologies or methods to market, it's also important, and smart, to know when an idea should just remain a hobby or small-scale garage project.   So I share with you a basic guide to help with knowing and feeling confident about your next big idea.

     Determining a product success can be a bit arbitrary, especially in the marijuana industry where companies are not public, sales numbers are clandestine and only now are tax revenues starting to track sales.  At the same time, there are empirical consistencies across all industries that can be used to help determine product feasibility.  For instance, timeliness to market.  If you are 25th to market with your product, do not expect 50, 30 or even 20% of the market share.  More than likely, it will be closer to 5-8% of market share and your projected sales should reflect that.  But if you are first-to-market, you can expect to have over 50% of the market share just purely from the fact that you were first-to-market.  And other basics, which will be used can help estimate costs and other figures that will help you out.  But let's start with a basic question, is the product a "good product"?

     What determines a "good" product?  I like to look at the product quality, product definition and the time to market .  Product quality, while self-explanatory, is not only speaking of the quality of your product, but also the quality of your future competitors.  Customers eventually, in all industries, want the best for the best price, so where does yours stack up?
Product definition is answering the question of what your product does.  Does it solve a problem?  Is a big problem or minute?  What are the inputs into making the product, are they readily available, need to be manufactured specifically for this new product or crazy expensive?
And lastly, what does the playing field look like for this product?  Are there no competitors in a new industry, is this changing the industry or exceptionally different and if there are competitors, how many and how big are they?  Most products don't make it past this qualitative test, so if yours does, cool, let's move on.

     After you can say confidentially, yes I have a kick-ass product! Let's dig more and see how it will fair it might fair in the market.  These are just a few activities that help with determining marketability, or if it will sell.

• Initial screenings via surveys, focus groups and individual feedback.  Whichever method you use, the goal is to obtain empirical data that shows you have a winner in the eyes of soon-to-be customers.  At minimum, use surveys and speak to people you will be marketing to so you can receive feedback.  Sometimes there are small tweaks that are discovered that will help you.
• Market assessment and studies.  What you're trying to determine is if this market is too saturated, where are the hot-spots of activity, what are the cycles of the market, is it booming or diving, how does the economy affect this industry and any additional data that helps you form a picture of the industry and where the product would be best positioned for launch.
• Appraise your product.  What is the value i.e. what can you sell your product for?  $5.00, $9.99, $10,000?  The best and easiest method is check the online marketplace and see what similar products or products that solve similar problems sell for.  It's better to be conservative.
• Complete a quick SWOT analysis or risk analysis.  Here are a couple links to assist.
• SWOT http://deepingilbert.blogspot.com/2015/11/how-to-complete-swot-analysis.html
• Risk http://deepingilbert.blogspot.com/2015/10/a-diy-of-risk-management-i-promise-this.html
• Complete an initial financial analysis to see if the idea "pencils".  Here's where the rubber hits the road because numbers don't lie.  Here's the steps:
• Determine the margin or profitability of each unit sold.  Take the determined price point and subtract the direct costs or cost of goods sold (COGS).  The costs should include materials, packaging, labeling and shipping costs per unit.  Subtract that from the retail price and baam, write that number down, that is your gross profit per unit.
• Next, estimate the number of units to be sold.  Remember, stay conservative.  
• Now multiply the gross profit per unit to your number sold.  Hey, there's your gross profits!
• Next, calculate cost for research and development, consulting fees, legal costs including patent and trademark(s) and 20% for taxes.  Subtract that from the gross profit and now you have a net profit.  How's it look?  Scary, exciting...do tell!!!  Any room for advertising or salaries?  
• Trust your gut.  All of these numbers and data are only guides and not the final word.  Trust your instincts but don't lie to yourself at the same time.  Like old school, keep it real.

   So do you have a winner?  Time to go back to the drawing board?  Whatever the outcome, at least you will now have the confidence to either move forward or set this idea aside and work on another project.  But whatever you do, never give up and don't ever lose the faith.  Much love!

Keep growing,

Gib

Resources:

*Cooper, R.G. and Kleinschmidt, E.J. (1998), "Resources allocation in the new product development process", Industrial Marketing Management, Vol. 17, pp. 249-62.