The most fundamental question a new business has is what it is going to sell, and how?
Many companies start with some kind of innovation – an invention, or new business concept. It might seem easiest to simply sell what you already have – perhaps in the form of a license or franchise. But it can be challenging to persuade customers to buy when they need to do most of the work to commercialise your ideas.
Providing an example product design can help you license your technology more easily, especially if this includes all the necessary details of components, assembly, and software etc. In this case, your customer might be an ‘Own Equipment Manufacturer’ (OEM) who already has a supply chain and route to market. You will need a carefully written contract to give the OEM rights to produce a product from your design, and perhaps limit their applications and geography. The risk is that they could become the dominant business partner and might prevent you from accessing new markets or even exiting your business.
Making your own physical products is an even greater challenge, but potentially more worthwhile. You can outsource production to reduce investment costs, but this will need monitoring to assure quality. Complex or novel products might require in-house assembly to develop new manufacturing processes and achieve good yield. But gathering the people and processes required will need much more effort.
Many investors look for recurring revenues which can boost business valuations. These come mostly from consumable products and value-added services. Manufacturing a new material, chemical or pharmaceutical can generate impressive gross margins. But the scale required can also need huge capital investment. Earning royalties can generate ‘consumable’ revenues more easily, but also needs careful contract design and strong partner relationships.
Services based on consulting and customer support tend not to scale well, as they rely on finding enough talent to keep growing the team. But automating these with good IT Systems and perhaps AI can enable revenue expansion at lower costs.
Your company’s Brand can embody much of its value. Building a good reputation in a new market can give your products credibility with new prospects. Your Brand’s story should connect with your customers’ journeys, as they discover and use your products and services. Defining your company’s purpose or ‘Organising Idea’ helps build the narrative which informs your Brand design and communications.