Yep, I agree with Dave - it's going to take your own insights and some trial and error.
Having said that, you can start by imagining what you want to happen.
- While imagining what you want to happen keep in mind your desire to have a "sustainable" business. That word/concept "sustainable" is really important and valuable. It can be a beacon and a benchmark for almost every important decision you make.
As you imagine and build your vision work toward crystallizing the vision with clarity. You can do this by answering some key questions:
How many devices would you sell the first year, the next year, and the year after? For how much per device? Put these numbers month by month in a spreadsheet. This line is your revenue line.
(At first you can put in rough numbers; chop with an axe at first, later you can measure with a micrometer. But this line is critical. After you put in the unit price and the volume of sales you can imagine, multiply the price times the volume. Does it add up to enough to trip your trigger? Can you believe someone would pay that price per unit? Probably. How many units do you have to sell in order to achieve some meaningful annual revenue? This is where reality is going to start to sink in. If the revenue line doesn't make sense - if it is too small to be meaningful, or if the volume required is too large to be plausible, you might not have to continue with the rest of the process. If the revenue numbers are looking "sane and attractive" you might be on to something good.)
Next figure out what costs you will incur to sell these, month by month for the 3 years.
- How much for a web site, how much for anything else related to "Sales, General, & Administrative" (any marketing costs, accounting or legal costs, etc.). This is your SG&A line, subtract it from your revenue line.
Next figure out what your cost of materials and labor will be for your shields or other products. This is your Cost of Goods (COGS) line.
Subtract the COGS line from what is left over after your SG&A. This remaining line is your Profit or Loss (month by month over the 36 months). (If everything makes sense for 3 years you might take a look at 5 years.)
Any negative months (losses) will be cash out of your business (out of your pocket). Any positive (profitable) months will be enjoyable if the time it took to do all this was worth the positive amount of cash.
All you will have at this point is a spreadsheet and your actual business might or might not work like the "proforma" income statement you have just made. But the beauty of this approach is that if you lose money in the spreadsheet it doesn't cost you anything other than the time it took to make the spreadsheet. If it looks feasible while making the spreadsheet you will probably surface some ideas and questions that you need to examine further to make the plan as practical and as optimized as possible.
If the proforma income statement looks good then you can move on to making a surrounding business plan (in text and diagrams that can envelope the spreadsheet). Take the time to write down:
What is the problem or opportunity the product addresses?
Who has this problem or opportunity - who are the customers likely to be? (Have you ever met such customers? If not you might want to find a few and see what they think are their problems and opportunities along these lines and then see how enthusiastic they would be about purchasing the products you have in mind. As a next step you might let a few customers try your product and see what they say. After that you might sell a few to see how hard it is to sell them for the price you have in mind and to see how happy the paying customers are vs. the customers who might have lower expectations for the free version.)
By now you will probably know why customers will pay what you are asking for the product.
How many of these potential customers are there (what is the size of the addressable market)?
How many of these potential customers can you get to buy the product (what percent of the market can you capture/what per cent of the market do you need to capture in order to make the revenue numbers in your proforma income statement)?
Who are your competitors?
What percent of the market do they currently own?
How different is your product vs. each of the leading competitors' product?
Why is your product better than each of the leading competitors' product?
How are you going to catch the attention of the potential customers?
What is your marketing communications (promotional) plan?
What is your sales plan?
How will you take orders and collect payment and ship products? And support customers before and after the sale?
How much time will such support take on average per customer?
How fast can you build the products? How many parts and products will you keep in inventory?
Can you build your own web site and have an automated ecommerce capability or will you outsource the design and/or operation?
How will you keep your accounting books? Do you need an accountant to help with taxes or anything else?
Do you have a legitimate business with a legitimate name? Where will it be registered? Do you need an attorney?
Can you get a web site URL that makes sense / is consistent with your company name and product line?
Do you have a plan for search engine optimization? If not, how will people find you on the web?
Will you have a telephone number for the business? Who will answer the phone? During what hours? What will the mailing address be for the business?
Etc, etc, etc.
If you get the business going will you have the resources to adjust and improve your products as your competition starts to mimic your business? Or what is proprietary or so difficult that the competition won't be able to copy you business? Do you have any "barriers to entry". If not, why will you be able to out run the competition? What is your key differentiator?
Most of these questions will have answers that will feed the assumptions and numbers in your proforma income statement. Some of the costs you identify will be one-time startup costs, others will be yearly, monthly or more often. Just remember, costs are important but revenues are critical.
The key is to:
1. Accurately forecast how many products you will sell at what price month by month.
- Most businesses fail because the revenue doesn't occur as expected
2. Identify ALL the costs that you will incur while selling, making products, and running the businesses
- Forecasting costs is much easier than forecasting revenue (because you control the costs but you can’t control the customers), but make sure you surface ALL the costs during the planning stage and update the plan with real costs as you operate.
In summary, make the first simple spreadsheet and then write down the answers to all the initial questions (and subsequent questions); then adjust the spreadsheet accordingly. If the numbers still make sense - if it shows a sufficient profit (vs. the time you will put into this vs. the time you have to spend on the rest of your life and vs. anything else you might like to do with your time) then you might want to start such a business.
As you operate the business you can enter the numbers in your actual income statement month by month to see how they compare to the projections in your proforma (planning) income statement (and to make sure you are prepared to file income taxes). If you are ahead of plan or on plan you will probably be making decent progress vs. your expectations. If you are behind your plan you might have to adjust either the plan or your actual operations.
If all this sounds like "too much" then you could still make your products and see if someone buys them and for how much and how often, etc. It wouldn't take much if any planning and you could just see what happens - this might work or it might not and if it doesn't you could chalk it up to learning or maybe just trying to earn a few extra $ to feed your hobby - but it would be a hobby more than a professional endeavor. This would be ok but it's probably good not to confuse a hobby with a profession/career.
Someone might reply and say "nonsense, all this planning is for established companies; it's not for entrepreneurs." Well, successful entrepreneurs need planning to be successful entrepreneurs (because it costs less to make mistakes on paper than with cash). In fact, the definition of an entrepreneur is someone who undertakes something such that if they had had any clue as to what they were undertaking they would have never undertaken it."
You could of course just start operating the business and see what happens but as Yogi Berra once said "unless you know where you are going you might wind up somewhere else."
Seriously, being an entrepreneur can be a fantastic experience (and basic planning will generally help any entrepreneur). The real answer is that if it is something you believe in, and if you have a clear vision of where "there" is, and if you are confident and passionate about getting "there", then go for it. Envision, plan, operate, adjust, refine/improve the vision, replan, operate.
