Lesson #1 — However long you think it will take, it will take longer
Bringing my own product to market, as well as developing numerous products for both startups and big tech companies, I’ve learned that everything always takes longer than you think it will.
Even large companies with lots of resources and experience, still have trouble accurately forecasting how long it will take to develop a new product and get it to market. But this is especially true for anyone developing a product for the first time with very limited resources.
NOTE: This is a long, very detailed article so here’s a free PDF version of it for easy reading and future reference (includes printer friendly version).
It’s human nature to overestimate what you can accomplish in the short-term. On the other hand, most people also underestimate what they can accomplish in the long-term.
Many entrepreneurs make the mistake of overcommitting on when they can deliver their product. This is especially common with crowdfunding campaigns.
You’ve probably seen crowdfunding for hardware products that fail to deliver the product by the promised date. The delivery date is a moving target that just keeps slipping. When you fail to deliver on time, eventually your customers will lose confidence in your abilities.
This is why professional investors will immediately dismiss any startup that has completely unrealistic expectations for how long it will take to get their product to market.
Lesson #2 — Find a manufacturing partner, not just a manufacturer
A manufacturing partner truly believes in your product and is willing to invest their time, money, and resources to help the product reach the market.
For my product, I started by purchasing a list of manufacturers that already produced similar products. This doesn’t necessarily mean similar in functionality, but instead similar in regards to the manufacturing technologies required.
I focused primarily on U.S manufacturers that also have factories in China. This strategy gave me the best of both worlds. I was able to communicate mostly with their U.S. based team, yet was able to get the lower cost manufacturing possible in China.
I then reached out to a few of those manufacturers. Fortunately one of them was immediately excited about my product. They told me they get pitched products all the time, but dismiss 99% of them. However, they felt my product and the progress I had already made warranted an exception.
Keep in mind, at this point I already had a good prototype of my product that was close to being ready for mass manufacturing. Perhaps more importantly, I already had a large retail chain express interest in the product. These early successes were absolutely crucial for getting a manufacturer excited.
My manufacturing partner funded the cost of the high-pressure injection molds required to mass manufacture my product’s custom plastic parts. They invested around $100,000 to purchase these molds.
This of course wasn’t free money, but instead was a loan where they amortized the cost of the molds over the first 100,000 units. That meant for the first 100,000 units manufactured, they charged me $1 extra for each unit until I had paid them back entirely.
This manufacturer also helped solve my cash flow problems. Instead of paying them upfront as is typical, I was able to pay them 90 days after they manufactured the order.
This gave me time to get paid by my customers before I had to pay the manufacturer. This simple arrangement essentially eliminated my startup’s cash flow issues.
From my experience, finding a manufacturing partner was one of the most critical things I did right to help get my product to market.
Lesson #3 — Don’t rush to scale your company
As soon as you start growing your company, then any hidden issues or problems will also grow. This is why it’s always best to take small steps. Make sure that any problems are solved before you begin growing quickly.
For instance, I first tested my product in a couple of local retail stores (at the time I lived on the island of Kauai, Hawaii so my choice of local retailers was quite slim). Sales were good so I immediately focused all of my efforts on expanding to more stores.
However, later we realized there were some problems with the retail packaging. Consumers weren’t grasping the purpose of the product quickly enough. The retail package wasn’t grabbing their attention. This needed to be fixed as soon as possible.
By that point, I already had the product in about a hundred stores, and I had a decent amount of inventory. So it took me quite a long time before I could actually make these necessary packaging improvements. This process was slow and difficult because I had scaled too quickly.
Don’t rush to scale or take any big leaps forward. Instead, always choose to quickly take lots of small steps. That way, if there’s a problem, you don’t have to back up very far.
Lesson #4 — The only feedback that truly matters is sales
You can have everyone in the world tell you how great your product is, and that it’s going to sell like crazy and be a home run. But the honest truth is they don’t know if it will sell. No one knows if a product will sell well, until its actually on the market.
Anyone who confidently claims to know if a new product will sell well is lying to you or lying to themselves. This is true regardless of their experience. Obviously, the more experience you have selling products, the better you are at judging a product. But, ultimately, it doesn’t matter.
For example, you could present your product to a merchandise buyer for Walmart. The buyer could love the product and think that it will sell well.
Obviously, an experienced merchandise buyer for Walmart has a lot of experience and data on what types of products are going to do well. But still, even they don’t know for sure that something will sell.
That’s why their first order is going to be a test size order. They’re not going start with a large order since they don’t know for sure if it will sell until they try it. They’ll start with a test in a store or two, and then if successful slowly expand from there.
Don’t place too much confidence in what other people tell you about your product until you have actual sales. Unless someone is spending their own money, their opinion really isn’t a truthful indicator of how well the product will sell.
Someone can tell you that they will buy your product once it’s available. But when it finally is available, they won’t spend their hard-earned money to purchase it.
This is why I found surveys asking people if they would buy my product to be of only limited use. But, surveys are better than nothing and definitely better than just feedback from your friends and family.
Obviously, having positive early feedback is much better than everyone telling you they hate your product. But negative feedback can also be an unreliable predictor of sales.
Again, no one knows for sure if a product will sell until they test it in the market.
All of that being said, upfront market research is still absolutely critical to determine if a market even exists for your product.
Lesson #5 — Retail success is all about reorders
Getting an order from a retailer is a big accomplishment. I still remember how excited I was when I landed my first few retailers. But I have to caution you — don’t let your excitement overshadow reality.
You have to remind yourself that retail is a two-step sales process. First, you have to sell the retailer on your product. This means you’ll need to sell a decision maker at the company on your product.
But don’t forget the retailer has to turn around and sell the product to their customers. Ultimately, these are the sales that matter.
If a retail chain tests your product and it ends up selling poorly, they’re not going to order more product from you.
Don’t consider any sale a success until the retailer places a second order with you. Once you start getting reorders, then you’ll know you’ve got a real success on your hands!
Lesson #6 — Build an audience immediately
As soon as you finish reading this article, you need to get a website and start building an audience of people that are interested in your product!
If you have any desire to do a crowdfunding campaign, then you definitely must have a sizeable audience beforehand.
Do you think you can just start a Kickstarter campaign and everyone’s going to see it and invest? That doesn’t happen. Trust me. I tried it. I didn’t have an audience so of course my campaign didn’t reach the funding goal. No one saw it, and no one invested.
You’ve got to be the one to get the ball rolling. You do that by having your own audience. No one wants to ever be the first few people to invest in something, especially if they have no history with the founders or startup.
You need to get the people that already have a relationship with you to make the initial investments in your campaign. That will get the momentum going and then you’ll be able to get other people to invest.
Not only is an audience needed for crowdfunding campaigns, but it’s also one of the best ways to help you build a product people actually want to buy.
Don’t make the mistake of keeping everything inside your head, or feeling that you know what everyone wants. You can’t develop a product completely in your own mind and expect it to succeed.
You need to constantly solicit feedback. The best way to do this is by building an audience as soon as possible.
Building an audience is a slow process so you need to do it in parallel while developing your product. Waiting until you finish development before you begin thinking about how to sell or fund the next steps is a major mistake.
Lesson #7 — Sell it before you make it
The best way to drastically lower the risk of developing a product that no one wants to buy, is to first pre-sell it.
Pre-sales are the best thing about crowdfunding. Obviously, the money earned is important, but the market proof is the best benefit of crowdfunding.
Pre-sales are the best type of market proof you can get without actually having the product available to purchase.
Too many startups go through the entire process of development before they actually try to sell anything. By then it may be too late. The product could be a complete bomb yet you’ve spent tons of money and years developing it.
Lesson #8 — Focus on minimizing your risk and upfront costs
The lean startup philosophy is to keep things simple. You want to get your product on the market as fast and as cheap as possible. Later, you can focus on improving the product and optimizing your profit margins.
Sometimes this may mean selling your early units at a loss. You don’t have to make a profit at first, you just need to find out if you can eventually make a good profit.
I always recommend that you begin understanding your manufacturing cost as soon as possible. But never increase your upfront costs in an effort to lower your manufacturing cost.
For example, let’s say it’s your first production run and you have two options. You can either order 1,000 units at $10 each or you can order 10,000 units and only pay $7 each. That quantity discount is appealing, but is often a trap for overly confident entrepreneurs.
Always focus instead on minimizing your cost to get the product to market.
Lesson #9 — Cash flow is your biggest barrier to growth
Once you start selling your product, you’re going to learn that cash flow is your biggest barrier to growth. Cash flow is a concern for any business but especially for physical product companies.
You are going to face cash flow problems for many years, most likely for the life of your company. So you need to focus on strategies that help you optimize your cash flow.
Let me give you an example of why cash flow is so important for hardware startups.
First of all, retailers are going to require payment terms of at least net 30. This means your customer pays you 30 days after they receive their order. Even if you choose to sell your product online it will still take you at least that long to sell all of your inventory.
Net 30 is the most common payment terms for retail chains, but many larger chains require payment terms of net 60 or even net 90. This means your customer (the retailer) won’t pay you for 60 or 90 days. The time between filling a customer order, and getting paid by that customer, can cause cash flow issues. But that’s not the worst of it.
The manufacturer that’s producing your product will most likely require full payment upfront (unless you’ve followed lesson learned #2 and have a manufacturing partner). Their payment terms can improve as your relationship develops, so perhaps they will eventually only require 30–50% be paid upfront.
Let’s assume it takes a month to manufacture the order, then another month for it to reach your domestic warehouse (assuming it ships from China to the U.S. via sea cargo). Once you factor in the payment delay from your customer you’re looking at 3–5 months of funding the entire order yourself.
Lesson #10 — Prepare for an emotional roller-coaster
Bringing a new product to market can be incredibly exciting, but there are also going to be really low moments.
In my experience, I couldn’t wait to wake up each day and start working on getting my product into more retail stores. It was just exciting to think about what was possible each day. But there were many highs and lows.
Getting an email from a Vice President at Blockbuster Video (they were huge at that time) expressing interest in my product was a really high moment for me, but there were also plenty of low moments.
I remember the first sample that I sent to Blockbuster Video after they had expressed interest in my product. Upon receiving my sample the Blockbuster Video buyer was quite blunt with me. He told me he thought my product was awkward to use!
It was a devastating moment for me and I was depressed about it for days. His feedback just didn’t make sense to me, because I had never heard anyone tell me the product was awkward to use.
Fortunately, it wasn’t a deal killer and I was able to quickly figure out the problem.
The sample I had sent him was only an early prototype (which he already knew upfront). Instead of being injected molded, this prototype was 3D printed using a resin that wasn’t very tolerant of heat.
It was a hot summer day when I shipped the sample, and it partially melted during shipment. It didn’t melt enough to be obvious to the buyer what had happened, and it took me a few days to figure out what had happened.
So be prepared for a roller coaster ride that makes life both exciting but also at times more stressful.
Personally, I’m not the type of person that likes when every day is the same. I suspect if you’re an entrepreneur, you’re probably looking to escape that type of life too.
Bringing a new product to market will definitely eliminate boredom from your life! Hopefully you can avoid some of the mistakes that caught me by surprise on the journey to bring my product to market.