New Business and Inventory

[fjimp]

I would like to pose a question for those far wiser than I. Assume for a moment that today is the day you decide to open your new business. You have invented a new system for extended table tops. They have T-Slots built in at the most optimal positions. Then have multiple new design features that allow them to be adapted for use on every piece of equipment currently manufactured for saws and routers. These tables are truly space age, you can stand them on end or hang them from the ceiling. They automattically assume and angle you suggest and remain locked in mid air until ordered into a new position. They are so advanced there is no way you can be injured using them. There is no question that your invention will totaly change the future of woodworking and be the hottest selling item of the year. You dress up in your finest Sunday go too meeting suit and pay your local banker a visit. In fact you contact every known lender. These financial wizards are all reading the financial news of the day. Millions of folks laid off, major corporations going out of business and worst of all the stock market has taken another huge hit. What do you do? Burn your plans so no one can steal them? Patent them and put the palns in a safety deposit box of the local shaky bank? Perhaps you decide to make a modest inventment from your own savings and begin building these units and advertising them on internet discussion groups. Yeah that should work, why not. So how many do you build, how big an inventory do you want to have on hand of this great invention? Do you suppose that just maybe well established companies are operating with that level of concern today?

If you doubt me let me tell the story of ordering computers. My business buys computers from Dell. In November I had an expensive desktop curl up it's toes. It was nearly five years old and we ordered a replacement. Admittedly we purchase top of the line with the biggest hard drives, the most places to plug in accessories and the greatest amount of memory. In the past a computer like this would ship to me in about three days maximum. In December it took two weeks. We found a laptop had died two weeks ago and ordered it's replacement. We were told not to expect it for at least three weeks perhaps longer. Why Even huge companies like Dell are finding it more difficult to get parts on a timely basis.

I for one would likely build a hand full of any new item and test the market. Then hopefully go nuts trying to fill orders. fjimp

[JPG40504]

Send Dick Patee (ss forum userid Miterset) a PM and ask HIM how HE got off the ground. For an instant, I thought you were referring to him with your miraculous device description!:D

[Ed in Tampa]

I think your scenario is typical of what most businesses faced before people started giving credit to every Tom, Dick and Harry that came along and lead us into the situation we face today.

Before the wide spread use of credit inventors and people with fantastic ideas either had to rise the capital themselves (usually by working 2 and 3 jobs) or finding partners to buy into their idea and finance it. Needless to say not an easy task but one that insured more ideas/plans were sound and carried a high likelihood of potential success.

This was also before the days of bankruptcy and if your scheme didn't work you might have your legs busted or try swimming with concrete shoes. :eek:

I think the first thing someone in this position needs to do is well document and possibly patent any invention. Most certainly have everything documented down to the point there is no question should you need to defend your idea as being yours in court.

Then you need to decide whether you want a partner, stockholder or whether you would rather raise the cash your self. Once that is decided you need to put that plan in play.

The biggest problem is going to be cash flow. Yes you can make a handful and sell them and take a zillion orders but unless you have the money to build a zillion more you are stuck. Most cash flow requires you being able to totally finance youself, your project, supplies and production costs for at least 90 days and that is cutting it to the ragged edge. You really need enough cash to go 6 months to a year at full production.

I have seen excellent businesses slowly spiral into destruction, not because they didn't have a great product, not because they couldn't sell it, but because they simply ran out of cash. In today's world most suppliers want their money today and not more than 14 days. However most customers want at least 30 days to pay you. Add to that the time to process the order, production time, and shipping you might be looking at 60 or 90 days before you get your money. The time between when you had to pay your supplier and the time you actually receive payment from a customer is the problem.

CASH FLOW scarey!!!!!!!!!:eek:

[paulmcohen]

I would like to pose a question for those far wiser than I. Assume for a moment that today is the day you decide to open your new business. You have invented a new system for extended table tops. .

...

I for one would likely build a hand full of any new item and test the market. Then hopefully go nuts trying to fill orders. fjimp

This is a complex question, I have 10+ patents they cost between $5K and $25K each to get and no one has directly made a dime on any of them but they have tremendous value (millions or more) to large companies for defense. So I don't recommend you patent anything unless you can afford to defend it in court (think millions).

The second question is channel, how are you going to sell the product and how long will customers wait. Dell builds to order after they have your money but requires a lot of inventory to make the delivery times reasonable (chassis come from China by boat).

I spend 25+ years in marketing addressing these kinds of issues, give my a call (or PM) if you you want to discuss further.

[fjimp]

I believe this is a good time to close this discussion. My sole intent here was to get folks thinking about the stressors of marketing a product in todays economy. Everytime I read a post picking at shopsmith or any other vendor for back orders or not making enough of a new product immediately available, I find my head shaking.

No I am not beginning a new business and no I am not the least bit interested in marketing any products other than those with which I have earned a living for the past quarter of a century. In fact within five years I plan to retire from even that business.

I do wish we all could be a bit more forgiving and a great deal more understanding of those hearty souls who market goods in such turbulent times. fjimp

[charlese]

Well said -all!!! An Excellent and yet short- understandable thread!:D