Explore > Financial Viability
Why
Sometimes there is a gap in the market becuase there's no market in the gap - Irene Bejenke Walsh
Products can have a good value proposition with an appealing message. If the product can’t sell enough to cover expenses and make enough profit to sustain the business in the long term, there’s a considerable risk in pursuing it. Carry out financial viability assessments for each product idea to select the best one.
How
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Addressable market size: This should be big enough to have customers to generate revenues to make the business scalable. Identify the potential volumes that can be sold in this market. Factor in economies of scale considering the cost per sale.
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Breakeven Analysis: Do a detailed Breakeven Analysis to determine viability based on the market size to decide product price that covers the costs/reaches breakeven. E.g: if the breakeven price is already higher than the closest competitive product, it’s challenging to sustain the business in the long term.
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Does ROI compensate for the financial risks involved? Two aspects to consider are the time and money invested on the product against the compensation mode. In terms of money what’s the expected return and how long will it take to reach breakeven and make profits.
A good way to verify your assessment based on the three aspects above is to identify a few comparable product companies, work out how these businesses reached their breakeven point, and how long it took.