Products
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This is the screen where you define the products and services your new company is going to sell. One of the first business strategy decisions entrepreneurs make is what product(s) will be sold, and in what “unit of sale.” Say, for example, that you have recognized that an unfilled demand exists in small communities for clean, local, public transportation, and you have access to a manufacturer of low-cost, low-maintenance, electric buses. Now, it might seem simple to assume that your product is going to be an electric bus, right? Not necessarily. Many diverse business strategies might work. For example:
- You could purchase buses wholesale and sell them retail to communities. In this case, the “unit of sale” is a bus.
- You could purchase buses and lease them to communities for five-year terms. In this case, the “unit of sale” is a 5 year lease.
- You could purchase buses and provide complete bus service to communities. In this case, the “unit of sale” is, perhaps, a year (of complete bus service to the entire community at some fixed price).
- You could purchase buses and provide complete bus service to communities. Passengers pay a fare. In this case, your customer is the passenger (not the community), and the “unit of sale” is a fare.
- You purchase buses and sell working hours of bus service to communities. During the period of time of the contract, the community can order as many or as few buses or routes as they wish, and they pay for only those hours during which you provide reliable service. In this case, the “unit of sale” is a bus-hour.
Here is another example. Suppose you have developed a software tool that you believe customers want. Once again, you have choices:
- You could sell the software on a per-download basis. In this case, customers pay you a fee and in return you grant them the right to download one copy of the software from your server to their own computer. The “unit of sale” is a license or a seat or a download.
- You could deliver the software's functionality using SaaS (Software as a Service). In this case, customers pay you a monthly recurring fee for as long as they wish to have the right to access your software's functionality on your server over the Internet. The “unit of sale” is a month.
- You could give a reseller (or distributor) the right to sell/distribute your software to customers. The “unit of sale” is a license.
Here is one more example. Suppose you have a patent for a new mousetrap.
- You could manufacture and package mousetraps into boxes and palettes containing 14,400 mousetraps for sale to distributors. The “unit of sale” is a palette.
- You could manufacture and package mousetraps into individual boxes for retail sale. The “unit of sale” is a mousetrap.
- You could license the patent to a third party who will then use it to manufacture their own products. Each time they use your patent, they provide you with a royalty payment. The “unit of sale” is a royalty payment.
Here is what the screen looks like:
The assumptions you record about each product on this screen include:
- Name of product. This is a name that you can use to help you remember the product about which you are recording information.
- Unit of sale. In what unit will the product be sold? See examples above.
If you are selling many products, you need not enumerate every one for planning purposes. For example, if you are starting a grocery store, you might consider listing a product category as “fresh produce”, along with a unit of sale of “average customer purchase.” If you are opening a bookstore, do not list every book title; instead, you might want to list “children's book”, “gift book”, “fiction paperback”, and so on.
No need to enter the number of units that you will sell on this screen. That comes later. Here, just enter the name of the unit that will be sold.
Additional Questions:
Which do I define first? Products? Markets? Prices? Or my sales technique?
What are the various 'units' that Offtoa asks for?