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It is worth it? Running the numbers to determine profitability

Before you start on your quest to move the world with your hot new product – run the numbers to see if it’ll be worth it. It seems like a really obvious thing to do, but you’d be surprised at how many people skip this step and then look shocked when it turns out – there’s no market, or the market won’t pay, or the market doesn’t care enough to buy – yeah, that there’s no market.

Do this:

1) Size the market.
2) Assess the competition – if there is none ask yourself why.
3) Don’t forget your biggest competition – “do nothing.”
4) Assuming there is a market determine how much is spent and how.
5) Eliminate markets that are out of reach; above or below your price point, overly complicated or with overly simplistic needs – in short, narrow it down, smaller is better if it’s more effective. Bigger is not better if you can’t get traction.

With these in mind consider several other factors – price per unit, sale cycle, attrition and figure out how long it will take you to cover your basic monthly costs, how many units you need to pay back the start-up costs and cover your monthly expenses.

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