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How Much Does it Cost to Launch a New Product?

I'm thinking about creating products such as sprays, shampoos and creams. What factors do I need to consider in terms of expenses? How much will it cost to create these products and bring them to market?
Brad Sugars answered May 12, 2011
URL: http://www.entrepreneur.com/answer/222308
Numbers are the language of business. It is critical to "know your numbers" on the expense side before plunging into any business venture. You're talking about starting something literally from scratch, meaning you'll need to find the lowest cost source of ingredients for your products.

You also need to consider costs for packaging, shipping, storage, marketing, as well as any fees related to legal advice, licensing and any retail and/or wholesale permits you may need wherever you may be operating.

My advice would be to do some research initially and go to an accountant, or even a manufacturer, distributor or wholesaler in your industry and ask about costs and fees. You can also do a lot of this type of research online.

Be aware there are a lot of "hidden fees" and costs that start to creep up on you, and you'll most likely only get an idea of what these are by asking people in the industry. Some can be as simple to quantify as the merchant fees on credit card purchases. Others, such as gaps in cash flow between the time people order from you and when you actually get paid, will be harder.

You'll also need to consider your own salary in your expense calculations because you will want to be rewarded for your efforts.

Additionally, you'll need to consider all your office space, utilities and supplies. My take on these is to keep them as low as possible, working from home for as long as you can. Generally, you'll want to "guesstimate" what your revenues from your venture will be, then cut this by 30 percent.

Then, make a list of all the costs you can determine and increase that number that by at least 50 percent. Why? Your sales are never as big as you think they will be when you first start out, and all those "hidden expenses" start adding up from places and sources you never originally planned for or expected.

In the end, this exercise in determining your costs should build a solid foundation for your business. You'll have real knowledge of the cost of your own operations few owners truly possess.

Related: From Concept to Market in Ten Months
Related: How to Find Product Sources

Brad Sugars is the founder and chairman of ActionCOACH. As an entrepreneur, author and business coach, he has owned and operated more than two dozen companies including his main company, ActionCOACH, which has more than 1,000 offices in 34 countries.