Here are some guidelines of things to think about when starting to develop a product or deciding what products to sell:

 

  1. Listen to your customers.  I put this as number one. I have found customers have the best ideas of things they want.  What you are looking for is multiple customers coming up to you asking for the same product or product lines.

 

  1. Slight modifications of products you already know sell well.  Use the data you have on products you already have to create broader product lines or adjacent products that work well with your other products and product lines.

 

  1. Use what you have.  Reuse, Recycle and Waste management.  Let’s face it creating products creates waste.  Hauling away scrap pieces in itself can incur a cost of space, time and labor. Creating new products from current waste improves your bottom line. In retail, a dead item is one that doesn’t have any turnover. It is important to identify dead items and sell them for whatever you can get out of them.

                   

 

  • Use what you know.  Use what you know….there are products and product solutions you make for your own company that may solve issues for other businesses.  For example, when developing software make sure you broaden your scope wide enough to be helpful for multiple businesses. This not only will likely make your product more productive for your own business growth it will make it a valuable product for others if you choose to sell your software.

 

 

 

  • Product Pricing. Pricing of a product can be very complicated.  

 

      1. First you need to understand what the perceived value of the product is in the current market. Then you need to understand the dynamics of what is going on in that market that would cause price changes in the near future (next 3-4 months for products priced $100-600 or under). For larger priced items you might need to make it 1-2 years. For making products this would be understanding the material cost involved too.
      2. Money cycles….. How quickly will you be able to get a return and profit for the products you buy or make.  PI (Profit Index) is the (ratio of future cash flow / initial investment).  You can research what PI is typical for your type of industry.  What the PI shows is that items that sell slower need higher margins and items that sell faster can have lower margins to be profitable.  Figuring out exactly the perfect price so that you can cover your initial investment, be price competitive, and have a profit.  
      3. Space has a cost. Many times the prices you set will be dependent on how quickly you can get get your product in from your vendors or how quickly you can make a product. Along with how quickly your process is for getting products out the door. It is great to get a price incentive for quantity breaks from your vendor but you always have to make sure that still makes sense for the volumes going through your company because there is a cost to the space a product takes up in your physical building and the labor of moving materials around.  All your products are taking up space in your warehouse and you have to decide how much room you will give to each product.

 

  • Waste Percentage and Cost Value Changes. Along with all the other items listed above most physical products have a waste percentage. Over time you maybe able to decipher how much of you material goes bad over time and it is important to add this percentage to your product cost. Over time all products cost change and it is important to understand what is going on in the market.