There is an old saying:
- $1 to those who came up with.
- $10 to the one who did.
- $100 to those who sold.
From it follows a simple, but at the same time one of the most important, formulas in business:
- 1*x – 1% – for the idea, methods, drawings.
- 10*x – 9% – on the means of production, manufacturing, salaries.
- 100*x – 90% – for packaging, packaging, logistics and actual sales.
Where *x is any number greater than one, depending on the appetites of business owners.
Note that this is a ratio, not an absolute number. Salespeople like to say that “an idea is worth nothing”. This is not always the case if the idea has a realization, and there is a demand for a product / service, then the “idea” costs at least 1/100 of the profit.
But do not fall into optimism™, overestimating the value of ideas. The “idea” that makes millions, is usually worked out with financial analysis, formulas and precise calculations, contains many pages of detailed documentation on how to produce, distribute, maintain “the results of an idea,” and much more.
Do not forget the main thing: No matter how much you spend on manufacturing of a product, its sales and distribution will require many times more money! Not necessarily 10 times, everything can be much worse…
- We do not run around with ideas like a like a chicken with its head cut off.
- We spend no more than 10% of time and money on manufacturing / production.
- All the remaining time and effort we spend on sales and customer acquisition.