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@jkentjnr
Last active May 24, 2017 00:42
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My Rules for Product Development - Software

My Rules for Product Development - Software

Does the product make less than $10K per customer annually?

If so, you need a large marketing budget - think seven digits. And probably read no further - find someone else who has been successful in this space.

Do you have expertise in the industry you are developing a product for?

Short answer: you need to know what you are working with and need an expert and/or a trusted identity in the space you are developing a product.

OK, how are you going about sales?

If you answer does not include direct sales, then retry.

Do you have your first customer locked down?

Always have one or more founding customer lined up before you build anything!

Do you know what cost per customer acquisition is?

More importantly, have you determined what this is?

There are heaps of potential customers and I will be able to get in front of them. It will take me three to five meetings to close a deal. I will close around 33% of these after qualification. Some will have costs like flights. I can qualify a customer at half a day and expect to disqualify 75% of opportunities. At $500 per day and with some costs, each customer acquisition will cost: (3 disqualifications ($750) + 1 successful qualification ($250)) + ((4 meetings inc prep ($2000) + $500 misc costs) * 2 unsuccessful meetings) + ((4 meetings inc prep ($2000) + $500 misc costs) * 1 unsuccessful meeting) = $8,500 per customer acquisition. Doesn't factor in overheads and marketing costs but also is likely number of meetings might be lower, etc. Anyway, it is an informed finger in the air.

If you have a rubbish number, be honest ... does this work?

Can you break even after an achievable number of clients?

I reckon I can get 2 customers a month. This will equal 24 customers in a year. Let's be realistic and say you get 2/3 of these - 16 customers. At 16 customers with an accquisition cost of $8,500 and a licensing cost of $16,000 per year plus setup / consulting services of $10,000 ( $256,000 licensing fee + $160,000 setup / consulting services - $136,000 accquisition costs = $280,000)

Do you have costs to deploy? Overheads, marketing, staff, etc. What happens if you only accquire 1/3 or 1/2 the expected (read: 'ideal') number of customers?

Will you make money?

Pretty simple but often overlooked ... does this make sense? For all the effort and lost opportunity, if I hit the targets, is this worthwhile?

Great, so let's get started!

Maybe ... are you doing this because you want something fresh and exciting? Sit down, have a Coke and spend the next 6 hours talking about this and then 6 hours tomorrow crunching numbers.

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