Economics of your startup

Usually entrepreneurs describe their products & services as they see them. It’s important to describe them from your customers’ point of view. Look the difference between features and benefits of your product/service, and think about them. You need to build features into your product so that you can sell the benefits. You also need to think hard and strategize on what after-sale services you will be giving? Some examples can be delivery, guarantee/warranty, service contracts, support, follow-up, and refund policy.

Customers

Identify your targeted customers, their characteristics, and their demographics. The description will be completely different depending on whether you plan to sell directly to customers/end users or to other businesses. If you are planning to sell a consumer product, but want to do it through a channel of distributors, wholesalers, and retailers, you must carefully analyze both the end consumer and the middleman businesses to which you will sell.

Competition

You need to think and carefully answer the following questions for your startups. What products and companies will compete with you? Will they compete with you across the board, or just for certain products, certain customers, or in certain locations? Will you have important indirect competitors? How will your products or services compare with the competition?

You need to honestly think about your product/service weaknesses. Sometimes it is hard to analyze our own weaknesses. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener. And remember that you cannot be all things to all people. In fact, trying to be causes many business failures because efforts become scattered and diluted. You want an honest assessment of your startup’s strong and weak points.

Niche & Strategy

Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world. Consistent with your niche, you can outline a strategy for your startup.

Pricing

Develop your method of setting prices for your product/service. Does your pricing strategy fit with what was revealed in your competitive analysis? For most startups, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can under price you anyway. Usually you will do better to have average prices and compete on quality and service.

Sales Forecast

After you have laid down comprehensive information and plan for your startup in detail, it’s time to attach some numbers to your idea and prepare your sales forecast.  You may want to do two forecasts: 1) a “best guess”, which is what you really expect, and 2) a “worst case” low estimate that you are confident you can reach no matter what happens.

Do keep visiting our Blog for a specific post on Sales Forecast and a Free spreadsheet.