How much Money does it take to Develop and Launch a New Product?
The stark answer is it takes 3 buckets of money. This is a serious and blunt overview because everything is getting more and more expensive, and many new products and new businesses fail because they are underfunded, or simply run out of money. Certainly, you must have a great, feasible, unique idea with high potential demand and good to excellent margins, IP, etc. etc. However, we have seen many ideas over the past 30 years that meet these important criteria yet never get to first base. So let’s get to it!
Bucket of Money #1 – Development
- Your Idea needs to be technically and aesthetically Designed (Industrial Design)
- Your Design needs to be engineered by engineers (Mechanical, Electronic, Software etc.)
- Your Engineered Design needs to be validated and tested though Prototyping (Alpha)
- Your Alpha Prototype needs to be refined and evolved, and then another Prototype can be made and tested (Beta). You may need more rounds of prototyping.
- You need formal manufacturing documentation, a BOM, and 2D and 3D files to obtain production quotes and to select a manufacturer.
Bucket of Money #2 – Manufacturing, Packaging, Inventory
- Factory selection, auditing, and competitive quotes
- Custom Tooling & Molds, Factory Set-Up and Fabrication Fixtures = capital investment
- Engineering Liaison, and Quality Management Oversight – Client side
- Production Sample Making and Testing
- Pilot Production – hundreds to thousands of units
- Volume Production – many thousands of units
- Packaging (shipping and retail)
- Instruction Manual
- Certifications (UL, Safety, FCC, FDA, Etc.)
- Shipping and Trucking
- Customs and Duties
Bucket of Money #3 – Marketing and Selling your Product
- Marketing Plan & Marketing Budget – 2 years
- E-Commerce Website
- Public Relations
- Social Media
- Advertising and Promotion
- Videos, Photography
- and many, many others
Of course all new products do not need all of these things and many companies and entrepreneurs bring expertise and abilities and can do some of these things, maybe a lot of these things. But most of these areas need to be covered and budgeted for. And yes, there are ways to manage and reduce the gross amount of money in each of these different buckets, to some extent. Be prepared and know what is coming and plan ahead to make good business decisions, and make sure you have enough money!