How To Start & Grow Your Business

Chapter 3: Know Your Product

When you distill your business down to the basics it is first and foremost a product or service. Either you sell a cola; or provide legal services; or sell nutrition bars online; or make shoes etc. Then you may distinguish the cola by its low-calorie content; or the legal service by a tax-related specialty; or the nutrition bar by organic ingredients; or the shoes by a unique design. In this way you develop what is unique about your product and in turn the market you serve. For this reason, we say that it is imperative that you know your product or service as we look at it from every angle. In Chapter 3, we are going to do just that!

Create a list of key product details

What is it for?
A product or service is made up of many different elements or components. To offer a wedding cake service, for example, you need ingredients, cookware and the equipment to bake, decorate and deliver it (in one piece!). If you provide services, you need skilled people to carry out the service and you may have to empower them with tools or equipment to do the job. Listing all key product elements ensures you have everything in place to make the product, deliver the service and truly understand the costing – not a trivial task.

What to do:

  • ‘List key parts needed for the product or service
  • Include information on size, specification, quality and quantity
  • Highlight the elements that are critical to performance or difficult to source
  • Attach a cost to each component and indicate any that can be replaced by alternatives

The impact of product development on stock price

Source – Yahoo Finance

Research sources for your product or service

What is it for?
To obtain your product or service components, you must identify suppliers who can provide them at a quality and cost that meets your targets. By developing a list of trusted suppliers, you can ensure parts are available when they are needed and that you can maintain control over quality and costs.

What to do:

1) List potential suppliers for each element and include:

  • costs
  • delivery and lead times
  • discounts

2) Where possible, list alternative sources to reduce the risk of disruption if a supplier has problems.

Tip from an Expert

craig-wortmannCreate a one-sentence description of your business. Sounds simple, but it’s not. Starting a business means telling everyone you know (and many you don’t) what you do. And it should not be “consultant” or “designer.” Start a sales conversation by a clear, descriptive, and short sentence about what you do. The purpose of this sentence is simply to pull people in to a sales conversation by creating a very small foundation on which to build. Here’s mine, as an example: What do you do? I run a company called “Sales Engine, where we help companies build and tune their sales engine.”

Craig Wortmann, Author, Speaker and Professor

Create a comprehensive price model

What is it for?
Creating a price model that includes all the elements needed to develop, produce, market and deliver a product ensures your prices will be accurate and include sufficient margin to generate profit. The model also allows you to identify potential cost savings if you need to reduce prices in line with market conditions.

What to do

  • List the costs of all key suppliers and materials, including potential volume discounts.
  • Calculate marketing and distribution costs, including promotional campaigns, logistics and discounts to retailers and wholesalers.
  • Create a gross margin plan from which to calculate your pricing model.

Did you know?

Coca-Cola was originally invented as an alternative to morphine addiction, and to treat headaches and anxiety.

Understand your Features and Benefits

What is it for?
Every product or service has features and ultimately benefits. Features enhance the product or service. They make it unique and stand out from the competition. The cupcake shop may sell beautifully decorated cupcakes. That is a feature. They may be delicious. That is a feature. Benefits are what brings value to the customer. Lowest prices for 1 dozen cupcakes is an economic benefit. Open until midnight 7 days a week is a convenience benefit. It is very important to know what your features and benefits are.

What to do

  • Create a list of each feature of your service. Only then can you communicate them to your potential audience.
  • Create a list of benefits your customer will receive when when buying your product. This is critical in determining your product value and potential competitive edge in the marketplace.
You need a very product-oriented culture. Lots of companies have great engineers and smart people. There needs to be some gravitational force that pulls it all together.Steve Jobs, late chairman of Apple
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