Some general rules apply to every product category. For example, if your widget is destined for the supermarkets and your estimated annual national sales are less than $20 million, you have a problem. You probably would not be able to maintain distribution, because your small sales would not warrant space on the supermarket shelves. Besides, 15% of $20 million is $3 million, and that's on the low side of what you would need for advertising and promotion. Likewise, 15% would be needed to support a national sales organization. Again, $3 million isn't that much when you consider you must pay the broker and/or representatives between $1 million and $2 million (depending on the product), and you'd need all the rest for your internal sales force.
If your widget is a specialty item that can be sold through a K mart or a department store, the annual sales requirement may be much less, even as little as $3 million or $4 million. But the lower the volume, the higher the commission would have to be to interest a broker or representative, and the less you would have left for all the other requirements, including profits and your salary.
You are still a thousand miles from success, but you have evidence that your product does answer a consumer need, and you have a general idea as to the share of market you may expect. If everything looks good, you probably owe it to yourself to take the next step, but not without professional help. You now need someone to design a marketing plan for you that includes a national rollout. Find someone who has had some experience in marketing products similar to your widget. If you don't know anyone, go to the Yellow Pages. If you can't find someone in your hometown, go to the nearest big city. If that doesn't work, run an ad in one of the many marketing publications or call up a couple of advertising agencies and ask them to recommend someone. A retired marketing executive from a widget company would be ideal.
When you find the right person, negotiate a firm price -- it will probably be far less than you expected. The expert will study your questionnaire and the results of your Rube Goldberg test. With that information, along with all the other information available to him or her, a professional can tell you how much money will be required for what and when; how slowly you can roll out your product or how fast. By analyzing the competition, he or she can also suggest whether you can go market by market, which is the best of all worlds because you can use the profits from the first market to help pay for the second, and so on. The rollout plan will also determine the level and types of media for advertising and promotion, and it will establish the necessary introductory allowances. It will also tell you how much product will be required, and when. With the expert's help, you can prepare a total business plan, including forecasts and financial requirements. When your marketing and business plans are complete, it's time for another go or no-go decision.
If it's no go, you'll feel terrible, and your savings account won't feel so good, either, but you still have your job and and a place where you can lay thee down and bleed awhile until the next idea gets you up again. If it's go, I pity you and envy you, because the moment of truth is at hand. Now it's time to raise money. From the beginning of time, entrepreneurs have been faced with money problems, and I predict that you will be no different. But you own 100% of a product that has proven that it will sell against competition, and you have some indication of the final results. You also have a marketing plan prepared by a professional and a business plan that clearly shows your charted course, and you can project the kind of profits that can be anticipated. In short, you have done your homework. Maybe not quite as the professional would do it, but you are not asking an investor to take a shot in the dark -- into the clouds, maybe, but total darkness, no.
Start your fund-raising as close to home as possible, with yourself. You must be willing to commit everything you own. Ask every family member who is still speaking to you to invest. After all, you're about to found a new dynasty for your children's children's children. If you are not willing to make this kind of commitment, then know with absolute certainty that investors will be hard to find. Although investors are being asked to invest money that they probably don't need, they will expect you to invest everything you own. It won't be easy, and you'll learn some new definitions of frustration, but if you are willing to make a total commitment, chances are that you will find someone who will fly with you.
If you can't get enough money to go all the way, be content to start the first market. Things get easier and easier as you prove the marketing plan. When you have raised the start-up money, its time at last to quit your job, and sell your house and anything else you own.
Let me leave you with a thought: as you walk down the aisles of a supermarket or department store and see all those products on the shelves, stop a moment and think. At some time, way back when, there was another person, just like you, who was faced with the same situation. The name might have been Heinz, or Procter, or Gamble, or Goodyear, but at some point in time that person was you.
Have fun -- I wish you luck.
