By Don Debelak
Question: I'm getting ready to sell my consumer product. The packaging supplier will sell me 5,000 packages for just twice the price of 500 packages. I don't have much cash, and I'm wondering if it would be worthwhile to purchase the larger quantity.
Answer: You need to consider all your sales efforts to be test marketing until you've successfully sold your product through distribution channels such as stores, manufacturers' representatives or mail order catalogs.
When test-marketing a product, you must conserve your cash. You can't be sure your idea will sell, and you may need to make product or packaging changes before you can market your product on a larger scale.
In the test-marketing phase, expect to lose money on each product you sell because you're forced to buy low quantities of supplies. That's OK; that's what test marketing is for. Too often, inventors are swayed by their own optimism and try to make money in the test-marketing phase. The result is usually that they invest heavily in inventory and don't have money left to make product adjustments.
Stick with the 500 packages, and don't be concerned about the per-unit price at this stage. Your goal for now is to preserve as much cash as possible.